Legislature(2001 - 2002)

02/27/2001 09:04 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 27, 2001                                                                                    
                              9:04 AM                                                                                         
SFC-01 # 26,  Side A                                                                                                            
SFC 01 # 26,  Side B                                                                                                            
SFC 01 # 27,  Side A                                                                                                            
CALL TO ORDER                                                                                                               
Co-Chair Dave Donley convened  the meeting at approximately 9:04 AM.                                                            
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Gary Wilken                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Lyman Hoffman                                                                                                           
Senator Loren Leman                                                                                                             
Senator Donald Olson                                                                                                            
Senator Lyda Green                                                                                                              
Senator Jerry Ward                                                                                                              
Also  Attending:     NICO  BUS,  Administrative  Services   Manager,                                                          
Division of  Support Services, Department  of Military and  Veterans                                                            
Affairs  and  Department   of  Natural  Resources;  KAREN   REHFELD,                                                            
Director, Education  Support Services,  Department of Education  and                                                            
Early   Development;    KEN   BISCHOFF,   Director,    Division   of                                                            
Administrative   Services,  Department   of  Public  Safety;   DEVON                                                            
MITCHELL, Debt  Manager, Treasury Division, and Executive  Director,                                                            
Alaska Permanent  Fund Corporation,  Department of Revenue;  KATHRYN                                                            
DAUGHHETEE,   Director,   Division   of  Administrative    Services,                                                            
Department   of  Law;  REMOND  HENDERSON,   Director,  Division   of                                                            
Administrative   Services,   Department  of   Labor  and   Workforce                                                            
Development;   PAUL   GROSSI,   Director,   Division   of   Workers'                                                            
Compensation,   Department  of  Labor  and  Workforce  Development;                                                             
BARBARA   RITCHIE,   Deputy  Attorney   General,   Civil   Division,                                                            
Department of  Law; KURT PARKAN, Deputy Commissioner,  Department of                                                            
Transportation  and  Public  Facilities;   JANET  CLARKE,  Director,                                                            
Division  of  Administrative  Services,  Department  of  Health  and                                                            
Social   Services;  BOB   LABBE,  Director,   Division  of   Medical                                                            
Assistance, Department of Health and Social Services.                                                                           
SUMMARY INFORMATION                                                                                                         
SB  73-SUPPLEMENTAL APPROPRIATIONS/AMEND APPROP.                                                                                
SB  74-FAST TRACK SUPPLEMENTAL APPROPRIATIONS                                                                                   
The  Committee heard  details  regarding  budget requests  from  the                                                            
Department   of  Military  and  Veterans   Affairs,  Department   of                                                            
Education and  Early Development,  Department of Natural  Resources,                                                            
Department  of Public Safety, Department  of Revenue, Department  of                                                            
Law, Department  of Labor and Workforce  Development, Department  of                                                            
Transportation  and Public Facilities  and Department of  Health and                                                            
Social Services. The bills were held in Committee.                                                                              
HB 117-SUPPLEMENTAL APPROPRIATIONS: FAST TRACK                                                                                  
This bill was scheduled but not heard.                                                                                          
     SENATE BILL NO. 73                                                                                                         
     "An Act making supplemental appropriations and making and                                                                  
     amending other appropriations; and providing for an effective                                                              
     SENATE BILL NO. 74                                                                                                         
     "An Act making supplemental and other appropriations; and                                                                  
     providing for an effective date."                                                                                          
Co-Chair Donley announced  that no amendments would be taken at this                                                            
meeting, but the  Committee would begin consideration  of amendments                                                            
to the fast-track supplemental budget the next day.                                                                             
The  following  items  are  included   in  SB  74  in  the  sections                                                            
Department of Military and Veterans Affairs                                                                                   
     Section 5                                                                                                                  
     Department of Military and Veterans Affairs                                                                                
     Disaster Relief Fund Budget Request Unit (BRU)                                                                             
     Core services funding not provided in base budget and 50.0                                                                 
     increment for satellite imaging to assist in search and rescue                                                             
     $680,000 general funds                                                                                                     
NICO  BUS, Administrative   Services Manager,  Division  of  Support                                                            
Services,   Department  of   Military  and   Veterans  Affairs   and                                                            
Department  of Natural Resources,  testified  that the past  several                                                            
years the Division  of Emergency Services  has been funded  from the                                                            
disaster relief fund and that fund source is almost depleted.                                                                   
Co-Chair  Donley  noted this  supplemental  request  is an  on-going                                                            
operating cost.                                                                                                                 
Mr. Bus  affirmed and added  that supplemental  budget requests  for                                                            
this division  have  been submitted  for the past  several years  as                                                            
part of the funding process.                                                                                                    
Co-Chair  Donley asked if  this is a replenishment  of the  disaster                                                            
relief fund.                                                                                                                    
Mr. Bus  explained that  the appropriation  would be deposited  into                                                            
the disaster  relief fund  then drawn from  that account to  pay for                                                            
operating staff and imaging expenses.                                                                                           
Co-Chair Donley wanted  to know if this request includes funding for                                                            
staff in the upcoming fiscal year.                                                                                              
Mr.  Bus  affirmed  and  explained  that  this  is  the  method  the                                                            
department  has  been  directed  to  take  by  the  legislature.  He                                                            
commented that  the department would  prefer to include this  in the                                                            
regular operating budget.                                                                                                       
Department of Education and Early Development                                                                                 
     Section 6(a)                                                                                                               
     Department of Education and Early Development                                                                              
     Foundation BRU                                                                                                             
     Use balance in foundation program resulting from October                                                                   
     student count to offset shortfall in pupil transportation.                                                                 
     -$1,913,100 general funds                                                                                                  
KAREN REHFELD,  Director, Education Support Services,  Department of                                                            
Education  and Early Development,  stated this  is an adjustment  to                                                            
the actual  school count and the amount  school districts  spent and                                                            
received in federal impact aid.                                                                                                 
     Section 6(b)                                                                                                               
     Department of Education and Early Development                                                                              
     Pupil Transportation BRU                                                                                                   
     Current estimate of projected shortfall for pupil                                                                          
     $2,111,400 general funds                                                                                                   
Ms.  Rehfeld testified  the  department  underestimated  the  amount                                                            
necessary  to reimburse  school districts  for pupil transportation                                                             
costs already incurred in the current fiscal year.                                                                              
Co-Chair  Donley asked if  the $1.913 million  is a "moving  target"                                                            
and if the amount could change.                                                                                                 
Ms. Rehfeld replied  this is the amount estimated  at this date. She                                                            
noted that after the March  1 deadline for receipt of federal impact                                                            
aid, a more accurate figure would be available.                                                                                 
Co-Chair Donley asked when the updated figure would be known.                                                                   
Ms. Rehfeld answered  the calculations should be completed  within a                                                            
couple of weeks after the March 1 deadline.                                                                                     
     Section 6(c)                                                                                                               
     Department of Education and Early Development                                                                              
     Child Care Assistance and Licensing BRU                                                                                    
     Increase federal Child Care Development Funds                                                                              
     $5,500,000 federal funds                                                                                                   
Ms. Rehfeld  informed  this request  is  for the  Division of  Early                                                            
Development. She  noted that these funds were incorrectly  accounted                                                            
as excess inter-agency  receipt authorization  and added  that there                                                            
is an  increase in  the amount of  federal funds  available  for the                                                            
Child Care Development Funds.                                                                                                   
Co-Chair Donley  again questioned  the reason this item is  included                                                            
in the  supplemental since  the funds would  not be expended  in the                                                            
current fiscal year.                                                                                                            
Ms. Rehfeld responded  that of the $5.5 million, approximately  $3.4                                                            
million relates  to the fund source. She explained  that this amount                                                            
is reflected  as inter-agency receipts  because up until  this year,                                                            
the Department  of Health  and Social Services  was the lead  agency                                                            
for the Child  Care Development Fund  and the federal authorization                                                             
is included  in that agency's  budget. She  continued that  when the                                                            
budget  transfer of  these funds  was made  in the  FY 01  operating                                                            
budget to  the Department  of Education and  Early Development,  not                                                            
enough transfer authorization  was given to allow for carry-forwards                                                            
from the previous fiscal year as well as grant receipts.                                                                        
Ms.  Rehfeld also  noted  an  additional  $2 million  federal  funds                                                            
available  to the department  for live-change  efforts and  outreach                                                            
activities that could be utilized in the current fiscal year.                                                                   
Senator Austerman  referred  to Section 6(b)  and asked if  the $2.1                                                            
million  is  available  as a  result  of  the  pupil transportation                                                             
shortfall of FY 01.                                                                                                             
Ms. Rehfeld affirmed.                                                                                                           
Senator  Austerman  wanted  to  know  if this  request  is  to  fund                                                            
contracts currently in effect.                                                                                                  
Ms. Rehfeld affirmed.                                                                                                           
     Section 6(d)                                                                                                               
     Department of Education and Early Development                                                                              
     Special and Supplemental Services BRU                                                                                      
     Increase federal Title I and Special Education funds.                                                                      
     $4,700,000 federal funds                                                                                                   
Ms. Rehfeld  spoke  to the significant  increases  in federal  funds                                                            
available for programs  relating to Title One and special education.                                                            
She pointed out these funds  are in the form of grants to the school                                                            
districts for the current year.                                                                                                 
Co-Chair Donley  wanted to know how the department  determines which                                                            
school districts receive the grants.                                                                                            
Ms. Rehfeld  spoke to the  specific allocations  within the  federal                                                            
grants program  that are based on  the number of students  living in                                                            
poverty  and  the  number  of  students  receiving   certain  public                                                            
services. She stated there  is a formula used to make determinations                                                            
for the allocation of the funds.                                                                                                
Co-Chair  Donley asked if  the department has  any discretion  or if                                                            
the guidelines are strictly set.                                                                                                
Ms.   Rehfeld  answered   that   the  formulation   guidelines   are                                                            
established   by   federal   regulations    or   statute   and   are                                                            
Co-Chair Donley requested a list of the grant recipients.                                                                       
Department of Natural Resources                                                                                               
     Section 7                                                                                                                  
     Department of Natural Resources                                                                                            
     Fire Suppression BRU                                                                                                       
     Fund fixes fire suppression costs that were not in base budget                                                             
     and variable costs incurred through fall fire season.                                                                      
     $4,768,400 general funds                                                                                                   
     $5,981,700 federal funds                                                                                                   
NICO BUS stated this is  a "routine request" and explained that each                                                            
year,  the  legislature  funds approximately   $3 million  to  cover                                                            
estimated costs  for the start of the fire season.  After the summer                                                            
fire season  is completed,  he said, the  department reports  to the                                                            
legislature the  actual expenditures from July through  December and                                                            
requests supplemental  funds for anticipated  expenditures  relating                                                            
to fire activity in May and June.                                                                                               
Mr.  Bus pointed  out  that  the amount  of  federal funds  is  high                                                            
because the  department was able to  send many Alaskan firefighters                                                             
to other states  to assist in their fires. He stated  this helped to                                                            
offset some of the in-state fixed costs.                                                                                        
Senator  Wilken asked  for an explanation  of the  declaration  of a                                                            
disaster  emergency  because  of  insufficient  money.  He  said  he                                                            
questioned the timing.                                                                                                          
Mr. Bus explained that  each year the state spends an average of $12                                                            
million on fire  suppression although the legislature  only approves                                                            
approximately $3 million  in the original operating budget. When the                                                            
funds  are depleted,  he continued,  the department  must declare  a                                                            
disaster in  order to utilize additional  funds to fight  the fires.                                                            
Senator Wilken asked if this is an annual event.                                                                                
Mr. Bus responded  that it is actually  a monthly event as  a result                                                            
of recent  legislation that  requires the  department to update  the                                                            
disaster declaration every 30 days.                                                                                             
Senator  Wilken asked  if  a disaster  declaration  is necessary  to                                                            
access money unavailable in the normal budget process.                                                                          
Mr.  Bus replied  that  the  statute authorizes  the  department  to                                                            
access any available  funds once the disaster has  been declared. He                                                            
noted the declaration becomes  the method that allows the department                                                            
to continue fighting fires.                                                                                                     
Senator Wilken requested a copy of a disaster declaration.                                                                      
Senator  Leman asked  how the department  accounts  for the cost  of                                                            
fires fought on federal land.                                                                                                   
Mr. Bus detailed  the state is divided into two zones,  northern and                                                            
southern. He stated that  the state fights all fires in the southern                                                            
zone and determines  actual land ownership  afterwards. If  the fire                                                            
occurred on federal  land, he informed, the state  bills the federal                                                            
government  for reimbursement of the  firefighting efforts.  He also                                                            
noted that if the fire  was located on Native-owned land, the United                                                            
States Bureau of Indian Affairs reimburses the state.                                                                           
Senator  Leman  asked  if the  current  budget  shortfall  would  be                                                            
adjusted  to account  for costs  that the federal  government  would                                                            
Mr. Bus assured that the  federal funds would be reimbursed and that                                                            
most of the costs  were incurred by fighting fires  in the Lower 48.                                                            
Senator  Austerman asked  if the  total firefighting  budget is  $12                                                            
million annually and how  much of the total amount is federal funds.                                                            
Mr. Bus detailed  the initial appropriation of $3.1  million general                                                            
funds and $5 million federal  funds at the start of the fiscal year.                                                            
Senator  Austerman asked  the total  expenditure at  the end  of the                                                            
fiscal year.                                                                                                                    
Mr.  Bus  answered   that  the  average  federal  reimbursement   is                                                            
approximately $5.5 million for firefighting activities.                                                                         
Senator Austerman  calculated the annual cost to be  between $17 and                                                            
$18 million.                                                                                                                    
Senator Wilken  created a timeline and recalled that  $7 million was                                                            
appropriated  in the FY 00  supplemental budget  to pay the  cost of                                                            
fighting fires  in that fiscal year.  He remembered that  $3 million                                                            
was funded in  the FY 01 regular operating budget.  On September 22,                                                            
2001, he  noted, a disaster  emergency was  declared, which  allowed                                                            
access to $10,750,000 to  cover expenditures for the remainder of FY                                                            
01. He wanted to know how  the cost to fight fires for the remainder                                                            
of the fiscal year was known in September.                                                                                      
Mr. Bus  replied  that the  department  is required  by statutes  to                                                            
follow a  financial plan,  that fixed costs  are already  identified                                                            
and  that the  remaining  fire activity  for  the calendar  year  is                                                            
estimated.  He detailed the process  of calculating the federal  and                                                            
state obligations, the  payroll, vendor expenses, etc., to determine                                                            
a financial  plan. He pointed  out that by  December, fires  are not                                                            
expected to occur before April or May of the following year.                                                                    
Senator Wilken  clarified that the  supplemental request  is not for                                                            
the  cost  of  the  actual  firefighting  expenses,  but  rather  an                                                            
estimate  of those  costs.  He  understood  the supplemental  is  to                                                            
reflect the actual cost of firefighting.                                                                                        
Mr. Bus  replied that  as of January  19, 2001,  the department  has                                                            
expended  $5,450,000   and  that  fixed  costs  are  known  for  the                                                            
remainder of  the fiscal year. He  stated that spending adjustments                                                             
would be made. He detailed  the process of ratification conducted at                                                            
the end  of the fiscal  year and  referred to  Section 19(b)  of the                                                            
     Section 13                                                                                                                 
     Department of Natural Resources                                                                                            
     Recorders Office BRU                                                                                                       
     Increased costs of Palmer and Fairbanks Recorder's Office                                                                  
     leases, which expire this fiscal year.                                                                                     
     $100,000 general funds                                                                                                     
Mr.  Bus  informed  that the  Palmer  Recorder's  Office  lease  has                                                            
expired.  He stated  that the  Department of  Administration  agreed                                                            
that the office  should be combined  with another located  in Palmer                                                            
and that this  has been done. He listed the initial  cost of $26,000                                                            
for "build  outs"  and $24,000  for moving costs  including  utility                                                            
Mr. Bus added  there is a similar situation in the  Fairbanks office                                                            
with  the lease  expiring  in May.  He  estimated $50,000  would  be                                                            
expended in that effort.                                                                                                        
     Section 19(b)                                                                                                              
     Department of Natural Resources                                                                                            
     Fire Suppression BRU                                                                                                       
     AR 37313-00 Fire Suppression                                                                                               
     $4,299,492.91 general funds                                                                                                
Mr. Bus stated  this is the final accounting for FY  00 and reflects                                                            
the actual amount expended in May and June of 2000.                                                                             
Senator Austerman  returned to Section 13 and wanted  to know if the                                                            
Department of Administration  handles leases for all agencies and if                                                            
that department would submit  a supplemental request for the cost of                                                            
increased leases in facilities across the state.                                                                                
Mr. Bus responded  that normally when  Department of Administration                                                             
renews a  lease, it incurs  the cost. In this  event, he noted,  the                                                            
Department  of  Natural  Resources  requested   a  negotiated  lease                                                            
because new walls,  electrical and other improvements  were required                                                            
and that  the Department  of Natural  Resources  is responsible  for                                                            
these expenses. He explained  this is because the costs could not be                                                            
calculated  into  the  square  footage  rate. He  pointed  out  that                                                            
because  of the  negotiated  lease,  the cost  per square  foot  was                                                            
reduced from $1.25 to $1.08.                                                                                                    
     Section 9(a) and (b)                                                                                                       
     Various Agencies                                                                                                           
     Increased Fuel Costs BRU                                                                                                   
     Increased fuel costs in various agencies for heating,                                                                      
     vehicles, aircraft, ferries, etc. due to higher oil and gas                                                                
     $2,123,000 general funds                                                                                                   
     $  457,600 International Airports Revenue Funds                                                                            
Mr. Bus  testified this item  is to cover  increased fuel costs  for                                                            
the  Division  of  Parks.  He listed  that  $16,000  is  needed  for                                                            
facilities,  and  $37,000  for  park vehicles.  He  noted  the  park                                                            
rangers is  the only department program  which additional  funds are                                                            
requested to cover the increases in fuel costs.                                                                                 
Department of Public Safety                                                                                                   
     Section 9(a) and (b)                                                                                                       
     Various Agencies                                                                                                           
     Increased Fuel Costs BRU                                                                                                   
     Increased fuel costs in various agencies for heating,                                                                      
     vehicles, aircraft, ferries, etc. due to higher oil and gas                                                                
     $2,123,000 general funds                                                                                                   
     $  457,600 International Airports Revenue Funds                                                                            
KEN  BISCHOFF,  Director,   Division  of  Administrative   Services,                                                            
Department of Public Safety,  spoke of the increased operating costs                                                            
for the  Division of  Fish and Wildlife.  He added  that fuel  costs                                                            
have  also increased  for  aircraft  operated  by the  Alaska  State                                                            
     Section 14(a)and(b)                                                                                                        
     Department of Public Safety                                                                                                
     Fire Service Training BRU                                                                                                  
     Technical fund source change from statutory designated program                                                             
     receipts to receipt supported services to fully fund a                                                                     
     Fairbanks Fire Service Training positions.                                                                                 
Mr. Bischoff explained  the advantage of changing the funding source                                                            
from fees charged for courses.  He characterized the situation as "a                                                            
chicken and  an egg" because fees  could not be collected  until the                                                            
program  is  established  and  the program  needs  funds  to  become                                                            
established.  He detailed  the request  is to  utilize revenue  from                                                            
building plan  review fees to start  the program during this  fiscal                                                            
     Section 18                                                                                                                 
     Various Agencies                                                                                                           
     Miscellaneous Claims and Stale-dated Warrants BRU                                                                          
     Stale-dated warrants and miscellaneous claims.                                                                             
     $ 85,500 general funds                                                                                                     
     $141,100 federal funds                                                                                                     
Mr. Bischoff listed the  Department of Public Safety portion of this                                                            
item as $11,000 for billings  received after the two-year stale date                                                            
period  for  which  the department  has  authorization  to  pay  the                                                            
     Section 14(c)                                                                                                              
     Department of Public Safety                                                                                                
     Capital BRU                                                                                                                
     Change scope of prior Crime Lab capital appropriation to allow                                                             
     currently needed work.                                                                                                     
Mr. Bischoff  explained this request  it for authorization  to allow                                                            
an existing  appropriation to be used  as matching funds  to receive                                                            
$1,250,000 federal funds.                                                                                                       
Co-Chair Donley  asked if this is a language change  to the original                                                            
budget to obtain additional federal funds.                                                                                      
Mr. Bischoff  affirmed and explained  it would reduce the  amount of                                                            
state funds required to operate the crime lab                                                                                   
[Pause on the record.]                                                                                                          
Co-Chair Donley requested  the witness further explain this to staff                                                            
at a later time.                                                                                                                
Senator Green  asked if the change of program receipts  requested in                                                            
Section 14(b) would apply in future years.                                                                                      
Mr. Bischoff  replied  this is  a one-time  request  to receive  the                                                            
funds in the current fiscal year.                                                                                               
Department of Revenue                                                                                                         
     Section 15                                                                                                                 
     Department of Revenue                                                                                                      
     Municipal Bond Bank Authority BRU                                                                                          
     Funding for costs of additional municipal bond sales.                                                                      
     $58,000 Muni Bond Bank Receipts                                                                                            
DEVON  MITCHELL,  Debt Manager,  Treasury  Division,  and  Executive                                                            
Director, Alaska Permanent  Fund Corporation, Department of Revenue,                                                            
detailed  the increased activity  in the  current year. He  informed                                                            
that the  bond bank budget  is "demand driven"  and is based  on the                                                            
number of communities  that request funding for loans.  He noted the                                                            
existing allocation  of $450,000 has not changed for  several years.                                                            
Department of Law                                                                                                             
     Section 19(a)(7)                                                                                                           
     Department of Law                                                                                                          
     AR 13907-00 AHFC Outside Counsel                                                                                           
     $340.83 federal funds                                                                                                      
KATHRYN DAUGHHETEE,  Director, Division of Administrative  Services,                                                            
Department  of  Law, explained  that  this  is an  old reimbursable                                                             
services agreement  (RSA) that the  department is unable  to collect                                                            
the revenue.  She  stated that  the department  had  a contract  for                                                            
outside council on behalf  of the Alaska Housing Finance Corporation                                                            
(AHFC) dating  from FY 97.  She explained  that the file was  closed                                                            
and discarded  and the department  was unable to produce  a bill for                                                            
the $340.83 for  expenditures made by the department.  She noted the                                                            
total amount  of the contract  was $300,000  and that this  items is                                                            
Department of Labor and Workforce Development                                                                                 
     Section 11                                                                                                                 
     Department of Labor and Workforce Development                                                                              
     Workers' Compensation/Second Injury BRU                                                                                    
     Increase Second Injury Fund authorization for unanticipated                                                                
     increases in claim sizes and expansion of payouts resulting                                                                
     from recent court decisions.                                                                                               
     $325,700 Second Injury Fund                                                                                                
REMOND HENDERSON,  Director,  Division of  Administrative  Services,                                                            
Department  of Labor and Workforce  Development, testified  that the                                                            
department  is required to  make some lump-some  payments and  needs                                                            
authorization from the legislature to do so.                                                                                    
     Section 19(a)(2)                                                                                                           
     Department of Labor and Workforce Development (for former                                                                  
     Department of Community and Regional Affairs)                                                                              
     C&RA/1 Stop BRU                                                                                                            
     AR 52901-99 1-Stop/AJCN Staff Sup                                                                                          
     $249.68 general funds                                                                                                      
Mr.  Henderson stated  this  item was  "inherited"  from the  former                                                            
Department of  Community and Regional Affairs. He  explained it as a                                                            
correction of  an over-receipt and that the Department  of Labor and                                                            
Workforce Development needs  authorization to receive the additional                                                            
federal funds.                                                                                                                  
Department of Law (cont.)                                                                                                     
     Section 10                                                                                                                 
     Judgments and Claims                                                                                                       
     Law BRU                                                                                                                    
     Judgments and claims.                                                                                                      
     $478,700 general funds                                                                                                     
Co-Chair  Donley  stated  that  members   could  pose  questions  on                                                            
particular items.                                                                                                               
          Item #1: Stephen H. Williams Planned Parenthood of                                                                  
          Alaska, et al. vs. State of Alaska                                                                                  
          Description: Unconstitutionality of statute limiting                                                                  
           partial birth abortions-Superior Court Award.                                                                        
          Date: 4/15/98                                                                                                         
          Award: $81,588.00 plus $27,507.45 interest as of 2/2/01,                                                              
          totaling $109,095.45                                                                                                  
BARBARA   RITCHIE,   Deputy  Attorney   General,   Civil   Division,                                                            
Department of Law, testified  that the Alaska superior court awarded                                                            
the plaintiff  attorney fees. She  noted that the Criminal  Division                                                            
of the department  handled this case for the state.  She stated this                                                            
case related  to the constitutionality  of a partial-birth  abortion                                                            
statute  passed by  the legislature.  She  informed  that the  court                                                            
found the statute violates  the Alaska Right to Privacy and Right to                                                            
Due  Process  and the  state  appealed  this  ruling to  the  Alaska                                                            
Supreme Court. The appeal  was dismissed, she said, after the United                                                            
States Supreme  Court issued a decision  in a case involving  almost                                                            
identical  statutes  in  the  State of  Nebraska,  which  found  the                                                            
Nebraska statute  unconstitutional  under the federal constitution.                                                             
Co-Chair Donley  asked if the fees followed the standard  guidelines                                                            
provided under Civil Rule 82, or if they are higher.                                                                            
Ms.  Ritchie  believed  that  because  this   case  involved  public                                                            
interest litigants,  the award qualified  for reimbursement  of full                                                            
reasonable attorneys fees.                                                                                                      
Co-Chair Donley  asked for comparison of the amount  that would have                                                            
been awarded  under Civil  Rule 82  and the amount  awarded  in this                                                            
case and other public interest litigant cases.                                                                                  
Ms. Ritchie stated she would provide details to the Committee.                                                                  
Senator Wilken asked why  the interest is so high in this first case                                                            
compared to the other judgments in the budget request.                                                                          
Ms. Ritchie explained the  interest rate is calculated from the date                                                            
of the award in April 1998.  She noted the judgment is not presented                                                            
to  the  legislature  until  the case  is  complete  and  meanwhile,                                                            
interest is accruing on the original judgment.                                                                                  
Senator Leman  remembered attorney  rates of $275 per hour  paid for                                                            
judgments the  previous fiscal year, which he thought  was too high.                                                            
Ms. Ritchie  responded  that the hourly  rate of  appellate work  is                                                            
$195 per hour,  which is what was  awarded in this case.  She stated                                                            
the rate for  work done in the superior  court ranges from  $110 and                                                            
$180  per hour.  She  said  the reason  the  rates vary  is  because                                                            
Planned Parenthood  had more than one attorney working  on the case.                                                            
She assured these rates are within the normal range in Alaska.                                                                  
Co-Chair  Donley  asked  if  any  of  the  remaining  cases  involve                                                            
settlements for fees other than attorney fees.                                                                                  
          Item #7: Overly vs. State of Alaska                                                                                 
           Description: Settlement in whistleblower case                                                                        
          Date: 9/12/00                                                                                                         
          Award: $55,000, with no interest accrued as of 2/2/01                                                                 
Ms.  Ritchie  explained  this  is a  recommended  settlement  in  an                                                            
employment case. She noted  that part of the agreement provides that                                                            
no interest  is paid. She  detailed the case  brought by  Lieutenant                                                            
Colonial  Overly  of  the  Alaska  National   Guard,  who  allegedly                                                            
suffered discrimination  and retaliation after whistle  blowing. She                                                            
explained  that this  case is "fact  specific" and  that it  depends                                                            
upon "who said  what to whom" in that  one party considered  actions                                                            
to be insubordinate while another party did not.                                                                                
SFC 01 # 26, Side B 09:50 AM                                                                                                    
Ms. Ritchie  told the Committee  that management  in this case  took                                                            
disciplinary  action against  the  employee accused  of causing  the                                                            
retaliation, and  that this action was reviewed beforehand  by their                                                            
attorneys as well as attorneys in Washington D.C.                                                                               
Ms. Ritchie  noted the  whistle blowing involved  alleged misuse  of                                                            
government assets and hiring  practices. She informed that this case                                                            
was  settled and  therefore,  it remains  undetermined  whether  the                                                            
charges meet the criteria set for whistle blowing.                                                                              
Ms. Ritchie  relayed that the Inspectors  General from the  military                                                            
evaluated the  case and concluded  the plaintiff had suffered  "some                                                            
measure"  of retaliation. She  spoke of a  concern that exposure  of                                                            
the issue "could  be significant.   She also noted the plaintiff  is                                                            
still  employed by  the Alaska  National  Guard and  that the  state                                                            
could get a better  settlement figure in this situation  then if the                                                            
employee  discharged from  the service  and filed  a claim on  those                                                            
Senator Hoffman  asked what actions  the department took  to correct                                                            
the misconduct of the employee causing the retaliation.                                                                         
Ms. Ritchie  replied this was a situation  where management  thought                                                            
it took appropriate  steps with regard  to the employee.  She shared                                                            
that the Department of  Law attorney who worked on the case issued a                                                            
memorandum stating  that further action should not  be taken because                                                            
of the risk of a lawsuit brought by this employee.                                                                              
Co-Chair Donley commented  that the advice the Alaska National Guard                                                            
received  from their  attorneys was  unacceptable  because it  would                                                            
cost the state $55,000.                                                                                                         
Ms. Ritchie responded  that the National Guard has  in-house council                                                            
that does not work for  the Department of Law. She pointed out these                                                            
attorneys do  not litigate cases,  and the Department of  Law became                                                            
involved with the lawsuit was filed.                                                                                            
Co-Chair Donley questioned  the legal advice or the actions taken by                                                            
the National Guard in this instance.                                                                                            
Ms. Ritchie reiterated  there was a sequence of events that occurred                                                            
in  this  situation.  She detailed  the  process  of  the  plaintiff                                                            
bringing  a complaint  before  the Air  Force Board  and  ultimately                                                            
deciding to file a lawsuit.                                                                                                     
Co-Chair Donley requested  the Alaska National Guard be available at                                                            
next  hearing to  explain the  case further.  He  stressed that  the                                                            
departments  involved  in  these claims  should  be  addressing  the                                                            
Committee rather than just the Department of Law.                                                                               
Ms. Ritchie said  she would make the request. She  cautioned that an                                                            
executive  session  could  be  required  since  the  case  is  still                                                            
Co-Chair Donley agreed.                                                                                                         
          Item  #9: Northern Alaska Environmental  Center and Sierra                                                          
          Club NAEC/Sierra Club vs. State of Alaska                                                                           
          Description:   Challenge  to  the  Department  of  Natural                                                            
          Resources'   right  of  way  permitting   process  for  an                                                            
          electric transmission line-Superior Court award                                                                       
          Date: 10/19/00                                                                                                        
          Award:  $57,250.41, plus $3,187.20 interest  as of 2/2/01,                                                            
          totaling $60,437.61                                                                                                   
Senator Hoffman  noted that no changes  in statutes, regulations  or                                                            
policy are recommended.  He pointed out that the matter is therefore                                                            
still open for liability.                                                                                                       
Co-Chair Donley agreed.                                                                                                         
Ms. Ritchie stressed  that a whistle blower statute  is in place and                                                            
that the  department does  not consider this  statute to be  flawed.                                                            
She cautioned  that  it is difficult  to legislate  how to  evaluate                                                            
people's motives.                                                                                                               
Co-Chair Donley  commented that a  factual case could be  built that                                                            
proves  an employer's  action was  not taken  for improper  motives,                                                            
such as retaliation against a whistle blower.                                                                                   
Ms. Ritchie replied that she would further study the matter.                                                                    
          Item  #11: Tara  Logsdon, Golter  and Logdson Bennett  vs.                                                            
          State of Alaska                                                                                                       
          Description:  Modification of child support in a "switched                                                            
          Date: 7/28/00 and 8/24/00                                                                                             
          Award:  $1,103.39,  plus  $80.88  interest  as of  2/2/01,                                                            
          totaling $1,184.27                                                                                                    
Ms. Ritchie stated  this item relates to a standard  $1,000 attorney                                                            
fees and  court costs  awarded to  a plaintiff  who prevails  in the                                                            
appeals process.                                                                                                                
          Item    #14:    Alaska   State    Employees   Association                                                             
          (ASEA)/AFSCME Local 52 vs. State of Alaska                                                                            
          Description:  Whether certain firefighters are required to                                                            
          be members of the Alaska Air National Guard                                                                           
          Date: 11/17/00                                                                                                        
          Award:  $4,813.00,  plus $237.36  interest  as of  2/2/01,                                                            
          totaling $5,050.35                                                                                                    
Co-Chair Donley noted this claim is for a small amount.                                                                         
Department of Transportation and Public Facilities                                                                            
     Section 9(a) and (b)                                                                                                       
     Various Agencies                                                                                                           
     Increased Fuel Costs BRU                                                                                                   
     Increased fuel costs in various agencies for heating,                                                                      
     vehicles, aircraft, ferries, etc. due to higher oil and gas                                                                
     $2,123,000 general funds                                                                                                   
     $  457,600 International Airports Revenue Funds                                                                            
KURT PARKAN, Deputy  Commissioner, Department of Transportation  and                                                            
Public  Facilities,  testified  the  department's  portion  of  this                                                            
request   amounts   to   $800,000   general   funds   and   $457,600                                                            
International Airports  Revenue Funds to apply to the three regions.                                                            
He  stated  the  funds   would  cover  costs  for  maintenance   and                                                            
operations of state facilities  as well as the Marine Highway System                                                            
Co-Chair  Donley asked if  the cost increases  have been  determined                                                            
using the actual fuel prices.                                                                                                   
Mr. Parkan  answered this  has been done.  As an example, he  stated                                                            
the department estimated  a fuel cost of $1.03 per gallon to operate                                                            
the MHS. He said that instead,  the department paid almost $1.18 per                                                            
gallon for  the first six months of  the fiscal year. He  noted that                                                            
in  the Northern  and  Central Regions,  the  fuel costs  have  been                                                            
approximately 58-60% higher then projected.                                                                                     
     Section 17(a)                                                                                                              
     Department of Transportation and Public Facilities                                                                         
     Central Region Facilities BRU                                                                                              
     Retrofit or replace fuel day tanks in Central Region to avoid                                                              
     Court Plaza-type fuel spills.                                                                                              
     $34,000 general funds                                                                                                      
     Section 17(b)                                                                                                              
     Department of Transportation and Public Facilities                                                                         
     Northern Region Facilities BRU                                                                                             
     Retrofit or replace fuel day tanks in Central Region to avoid                                                              
     Court Plaza-type fuel spills.                                                                                              
     $236,000 general funds                                                                                                     
Mr. Parkan  explained that  after the oil  spill in the Court  Plaza                                                            
Building in Juneau, the  department surveyed the day tank systems in                                                            
state-owned  facilities  in the  Northern  and Central  Regions.  He                                                            
relayed that tanks  with similar faulty switches were  identified in                                                            
several  facilities.  He said  it  was determined  these  should  be                                                            
addressed before  another spill occurred.  He also noted  that there                                                            
was another spill in a  building in the Northern Region. He spoke of                                                            
the need for better monitoring systems on the tank switches.                                                                    
Co-Chair  Donley asked if  the department  considered using  the 470                                                            
Fund to cover the cost of these upgrades.                                                                                       
Mr. Parkan said it had not.                                                                                                     
Co-Chair Donley requested this be done.                                                                                         
Senator Hoffman  asked if the survey was done on smaller  buildings.                                                            
Mr. Parkan affirmed  and listed facilities in Quartz  Creek, Kodiak,                                                            
Dutch  Harbor, and  Bethel in the  Central Region,  and Shishmaref,                                                             
Saint  Mary's  and facilities  located  along  the Railbelt  in  the                                                            
Northern  Region. He noted  that most of  the facilities  identified                                                            
are located in rural areas.                                                                                                     
     Section 17(c)                                                                                                              
     Department of Transportation and Public Facilities                                                                         
     Northern Region Facilities BRU                                                                                             
      Operating costs for the Harborview Development Center.                                                                    
     $93,000 general funds                                                                                                      
Mr. Parkan  stated this item reflects  costs incurred in  past year,                                                            
including  fuel increases  not  included in  Section 9.  He told  of                                                            
preparations  in converting  the facility  to separate the  hospital                                                            
portion from the unused  state-portion. He detailed the discovery of                                                            
asbestos, and  necessary roof repairs, an emergency  generator and a                                                            
fire alarm system  that were required by the state  fire marshal. He                                                            
pointed   out   that   the   department   has   been   "handed   the                                                            
responsibility"  of the  Harborview  facility and  has had to  spend                                                            
funds  from  the department's  maintenance  budget  to  address  the                                                            
aforementioned problems.                                                                                                        
Senator  Ward  understood  adequate  funds  were  allocated  in  the                                                            
regular budget  to make Harborview self-sufficient  with the goal of                                                            
either closing  the state-owned portion  of the facility  completely                                                            
or finding a different owner.                                                                                                   
Mr. Parkan agreed and stressed  that the intent is to dispose of the                                                            
facility with  the hospital section operated by the  City of Valdez.                                                            
He described how  the original $235,000 appropriation  has been used                                                            
for utilities and some of the repairs.                                                                                          
Senator Ward requested  a blueprint of the existing  facility in its                                                            
current  layout.  He referred  to one  he saw  two  years prior  and                                                            
wanted to know how much of the facility remains unoccupied.                                                                     
Mr. Parkan  replied  he would provide  a blueprint  and gave  verbal                                                            
description  of the hex portion of  the facility that had  been used                                                            
by the Department of Health  and Social Services for developmentally                                                            
disabled  and  the portion  used  as  a hospital,  with  a  corridor                                                            
connecting the  two. He noted the kitchen and dining  room areas are                                                            
no longer needed.                                                                                                               
Senator  Ward questioned  why the  state continues  to spend  public                                                            
money for  upkeep of  an empty  building while  other buildings  are                                                            
under funded.                                                                                                                   
Mr. Parkan  responded that  the department  would not disagree  with                                                            
that point.                                                                                                                     
Co-Chair Donley asked the  consequences of not funding this request.                                                            
Mr. Parkan replied  the funds would have to be taken  from elsewhere                                                            
in the department's budget.                                                                                                     
Co-Chair  Donley  hoped  the  department   would  not  do  that.  He                                                            
preferred  the department  "give some  warning"  to the Legislative                                                             
Budget   and  Audit  Committee   or  the   Legislative  Council   if                                                            
overspending for a specific function is necessary.                                                                              
Mr. Parkan agreed  and noted the matter had been discussed  with the                                                            
Alaska  Representative  of the  district in  which  the facility  is                                                            
Department of Health and Social Services                                                                                      
     Section 8(a)                                                                                                               
     Department of Health and Social Services                                                                                   
     Medicaid BRU                                                                                                               
     Medicaid caseload growth of 7% and higher average cost per                                                                 
     month, particularly for hospital and pharmacy costs.                                                                       
     $ 9,124,700 general funds                                                                                                  
     $50,642,700 federal funds                                                                                                  
     $11,412,900 Statutory Designated Program Receipts                                                                          
JANET  CLARKE,  Director,   Division  of  Administrative   Services,                                                            
Department  of Health and  Social Services,  referenced wall  charts                                                            
prepared  to show  some of  the factors  impacting the  cost of  the                                                            
Medicaid  program. She instructed  how the  program is divided  into                                                            
four groups: children, adults, disabled and elderly.                                                                            
BOB LABBE, Director,  Division of Medical Assistance,  Department of                                                            
Health and  Social Services,  addressed the  first group,  children,                                                            
referring to a chart showing  the increase in the number of eligible                                                            
participants  due  to expansions  in  the program.  He  noted it  is                                                            
expected the growth would level out.                                                                                            
Senator Ward asked  about the action that caused the  large increase                                                            
in the cost of that action.                                                                                                     
Mr.  Labbe replied  the  action followed  federal  legislation  that                                                            
created child  health insurance program  block grants to  the states                                                            
to increase  the eligibility from  130 percent of the poverty  level                                                            
to  200 percent.  He  noted more  applications  were  received as  a                                                            
result of this change that was implemented in March 1999.                                                                       
Senator Ward asked the actual cost of this increase.                                                                            
Ms. Clarke  responded  that she would  have to  calculate the  exact                                                            
amount. She  assured that state receives  an enhanced match  rate of                                                            
72   percent  in   federal   funding   to  address   the   increased                                                            
Senator Ward estimated  the amount to be in the millions of dollars.                                                            
He voiced concern  about the impact  on the state's budget  once the                                                            
federal funds are discontinued.  He opined that returning to the 130                                                            
percent poverty level qualification is one option.                                                                              
Mr. Labbe explained  that since the  state receives federal  funding                                                            
at the higher match rate  because of the percentage of poverty level                                                            
increase,  that level  could not be  reduced.   He also pointed  out                                                            
that Alaska receives  additional federal funds resulting  from other                                                            
states not expending the  block grants allocated to them. He did not                                                            
anticipate these grants would go away.                                                                                          
Senator  Ward asked  if the number  of participants  increased  from                                                            
35,000 to  55,000 because  of the change  to the qualifying  poverty                                                            
level percentage.                                                                                                               
Mr. Labbe  replied the  annual number of  children qualifying  under                                                            
the new criteria is from  15,000 to 16,000 more then would have been                                                            
covered under  the old rules. He noted  outreach efforts  that are a                                                            
part of the new  program also accounts for some of  the increase. He                                                            
spoke  of marketing  this  program  called  Denali KidCare  and  the                                                            
streamlined  application process  that makes  enrollment easier.  He                                                            
stated  that this  process  has also  resulted in  participation  of                                                            
children who qualified under the previous percentage.                                                                           
Senator Ward  asked the number of  new participants that  would have                                                            
qualified  for  the  program  at  the  130  percent   poverty  level                                                            
Mr. Labbe  answered that  about half of the  new participants  would                                                            
have qualified under the previous rules.                                                                                        
Co-Chair Kelly  asked how the department  predicted that  the growth                                                            
rate would even out.                                                                                                            
Mr. Labbe  recounted a  previous expansion  to the Medicaid  program                                                            
implemented  in the early  1990s when the  qualification was  raised                                                            
from 70 percent  of the poverty level  to 133 percent. He  cited the                                                            
increase  in   participation  for   the  first  three  years   after                                                            
implementation   after  which  the  growth  rate  leveled   off.  He                                                            
ascertained this was due to market saturation.                                                                                  
Co-Chair Kelly spoke to  earlier legislation that proposed to reduce                                                            
the qualification level  to 130 percent, when it was discovered that                                                            
the  level could  be reduced  no  further than  158  percent of  the                                                            
poverty level. He asked the reason for this.                                                                                    
Mr. Labbe  replied the  level could  be reduced  to 133 percent  for                                                            
children up  to age six and 100 percent  for children six  years and                                                            
Co-Chair Kelly  understood poverty levels for Alaska  are calculated                                                            
with an additional 25 percent of the national average.                                                                          
Mr. Labbe affirmed  and noted this  was a choice made through  state                                                            
Mr. Labbe  stressed that  children are the  least expensive  clients                                                            
the program  serves. He cited $2,000  to $2,500 a year is  spent for                                                            
the average  child versus  $13,000 to $15,000  per year spent  for a                                                            
disabled person.                                                                                                                
Senator Wilken  requested additional information about  the expected                                                            
growth  rates. He also  wanted to  know if there  is any  indication                                                            
that Denali KidCare is replacing other insurance.                                                                               
Mr. Labbe  replied there  is no  evidence showing  this. He  assured                                                            
that  existing insurance  coverage  disqualifies  a  child from  the                                                            
Denali KidCare.  He further explained  that a child is not  eligible                                                            
for the program  for a period of one  year after discontinuation  of                                                            
any insurance.  He noted the department is already  seeing a slowing                                                            
in the growth of the number of new participates in this program.                                                                
Senator Leman  reminded how the legislature was initially  "sold" on                                                            
the  poverty  level percentage  increase.  He  remembered  that  the                                                            
legislature  was  warned that  not participating  in  the  expansion                                                            
would appear  to the U.S.  Congress to be  a "bad faith effort".  He                                                            
asked if  the state has  actually benefited  from the lower  general                                                            
fund  match   requirement,  given   the  "incredible"  increase   in                                                            
Mr. Labbe was unsure and  said he would have to research the matter.                                                            
He remembered  that the match  rate increase  from 50 percent  to 60                                                            
percent was part  of the arrangement. He noted that  the state saved                                                            
approximately  $30  million  on  the first  year  this  program  was                                                            
Senator  Leman requested  the  information.  He stated,  "I think  I                                                            
probably  speak   for  several  others-this   growth  is   troubling                                                            
especially when you look at the costs associated with it."                                                                      
Co-Chair Kelly  noted the income level  is higher in Alaska  than in                                                            
the rest of the country.                                                                                                        
Mr. Labbe  agreed  and detailed  how the  federal  poverty level  is                                                            
adjusted for Hawaii and  Alaska. He stated that the poverty level is                                                            
Alaska is set at 125 percent of that for states in the Lower 48.                                                                
Senator  Green shared  that she  has seen literature  marketing  the                                                            
Denali  KidCare program  at the U.S.  Post Office  and other  public                                                            
government  facilities and asked the  cost of this outreach  effort.                                                            
She commented that she  had not predicted that this program would be                                                            
secondary to any other  insurance coverage. She was unable to locate                                                            
any statements  to show that  Denali KidCare  was designed  to serve                                                            
children  who have  no other  insurance. She  asked  if this were  a                                                            
federal policy.                                                                                                                 
Mr. Labbe  spoke  to the  different levels  of eligibility  for  the                                                            
Denali KidCare  program based on age  and income in relation  to the                                                            
poverty level.  He stated that a child with insurance  and an income                                                            
above 150 percent  of the poverty  level would not qualify,  while a                                                            
child  living  below 150  percent  would  qualify for  the  Medicaid                                                            
program  if they  already  have insurance.  Those  children with  no                                                            
insurance  and living  below 150 percent  of the  poverty level,  he                                                            
said,  would be  included in  the block  grant and  the state  would                                                            
receive a higher  match percentage  for funds spent for this  group.                                                            
Mr. Labbe shared  that the original  intent was a premium  system or                                                            
other  form of cost  sharing system  for those  participants  living                                                            
above the 150  percent poverty level. However, he  informed that the                                                            
federal government would  not allow this method. He pointed out that                                                            
the regular  Medicaid program does  not consider existing  insurance                                                            
coverage as a factor in participation.                                                                                          
Senator Green asked about  participants in the Medicaid program that                                                            
were transferred  to the Denali KidCare  program to allow  the state                                                            
to receive a higher percentage of federal funds.                                                                                
Mr. Labbe  responded  that this was  not allowed  and that  children                                                            
eligible  for Medicaid  could not  be placed in  the Denali  KidCare                                                            
program  instead.  He qualified  there  are many  complicated  rules                                                            
governing the program and offered to detail them further.                                                                       
Co-Chair  Kelly  commented  that  if  the  income  requirement  were                                                            
raised,  children  who  had qualified  for  Medicaid  would  instead                                                            
qualify  for Denali  KidCare and the  state could  receive a  higher                                                            
match rate.  He opined that there  is more incentive to serve  those                                                            
with  higher incomes  and  a less  immediate  need then  those  with                                                            
possibly  a  greater  need.   He assured   he  does  not  blame  the                                                            
department for  this since the federal government  established these                                                            
Mr. Labbe agreed  and noted the intent  of the federal requirements                                                             
is to  prevent states  from serving Medicaid  eligible participants                                                             
under  the new program  and  subsequently collecting  federal  funds                                                            
based on the higher match rate.                                                                                                 
Senator Green  asserted that  some other states  are able to  charge                                                            
participants for a portion  of the cost and asked why this could not                                                            
be done in Alaska.                                                                                                              
Mr. Labbe answered  that because the  block grant program  is a part                                                            
of Medicaid, the Medicaid rules must be complied with.                                                                          
SFC 01 # 27, Side A 10:37 AM                                                                                                    
Mr. Labbe continued  that some states have been able  to implement a                                                            
form of cost sharing using  state funds other then Medicaid matching                                                            
funds.  He  pointed  out  that  other  states  have  done  extensive                                                            
demonstration   projects   working   with   Medicaid   that   expand                                                            
eligibility,  and  he  described  these.  He  qualified  that  these                                                            
projects  have to show  they are  "budget neutral"  for the  federal                                                            
government in  that the federal cost does not increase.  He stressed                                                            
that  he worked  personally  with  representatives  of  the  federal                                                            
office to try  to devise a method for cost sharing  and learned that                                                            
without federal statutory changes, this was not allowable.                                                                      
Mr. Labbe then  addressed the adult group of Medicaid  participants.                                                            
He described these  participants as parents of families  who receive                                                            
temporary assistance as  well as pregnant women. He noted a downward                                                            
trend in the number of  these participants due to the welfare reform                                                            
efforts and  the subsequent increase  in the number of people  going                                                            
off of welfare.  He pointed out these  participants are eligible  to                                                            
continue   receiving   Medicaid  benefits   for   12  months   after                                                            
discontinuing welfare if  they have employment. He stressed that the                                                            
decreasing trend would level off as welfare reform is concluded.                                                                
Mr. Labbe next referenced  a wall chart indicating the growth trends                                                            
of  the number  of  elderly  Medicaid participants.  He  noted  that                                                            
although  there are  fewer  participants in  this  group, the  trend                                                            
continues to rise,  as there are more seniors in the  population and                                                            
more that more  would access this program over time.  He pointed out                                                            
that these  clients are among  the most expensive  to serve  with an                                                            
average cost of $10,000  per year. He stated that these participants                                                            
typically   have  Medicare  as  primary   insurance,  which   covers                                                            
hospitals  and physician  expenses  but does  not include  long-term                                                            
care  or prescription  drugs.  He also  informed that  the state  is                                                            
required to pay  the Medicare premium for these participants,  which                                                            
equals an additional $6 to $7 million each year.                                                                                
Co-Chair  Kelly asked what  year would have  a sharp incline  in the                                                            
number  of   these  participants   with  the  aging  of   baby  boom                                                            
Mr.  Labbe   could  not   give  an  exact   answer,  citing   income                                                            
requirements  as one reason. He explained  that people tend  to have                                                            
higher  incomes  at the  time of  their  retirement.  As people  age                                                            
further,  he said, nursing  home care  is more  often necessary.  He                                                            
also noted the  phase-out of the Longevity Bonus Program  would also                                                            
result in an increase in the number of Medicaid participants.                                                                   
Mr.  Labbe  next  told   of  the  disabled  Medicaid  participants,                                                             
referencing   another  wall  chart.   He  noted  this  category   of                                                            
participants  includes both  children and  adults. He stressed  that                                                            
the program  incurs the greatest  cost in  caring for this  group of                                                            
participants.   He informed  that while many  of these participants                                                             
qualify  and receive  Medicare  benefits,  many  others  do not.  He                                                            
described  the continual  upward growth  of the  number of  Medicaid                                                            
participants in  this group and the expectation that  this would not                                                            
change. He  compared the increasing  costs incurred by participants                                                             
in this group.                                                                                                                  
Co-Chair Kelly chaired the remainder of the meeting.                                                                            
Ms. Clarke  detailed the specifics  influencing the cost  increases,                                                            
citing another  wall chart  that shows the  number of checks  issued                                                            
each week.  She examined the "check  writes" of FY 00 and  FY 01, to                                                            
date, indicating  that issuances exceeded  $10 million six  times in                                                            
FY 00 compared  to 14 times in the first half of FY  01. She assured                                                            
that  the  department  makes  every  effort  to  correctly  estimate                                                            
upcoming   expenses.   However,   she  stated   that   $22   million                                                            
supplemental funds  were needed for FY 00 and that  the baseline was                                                            
not adjusted when making projections for FY 01.                                                                                 
Co-Chair  Kelly  wanted  to  know the  amount  requested  for  these                                                            
expenses  in the  regular  operating budget  versus  the amount  the                                                            
legislature appropriated.                                                                                                       
Ms.  Clarke  replied that  the  legislature  appropriated  the  full                                                            
amount requested  but that that figure was based on  the lowest case                                                            
Co-Chair Kelly  asked if the governor's budget request  historically                                                            
used a low case scenario.                                                                                                       
Ms. Clarke  replied that  this had  not been necessary  in the  past                                                            
because of  the amount of federal  funds received except  during the                                                            
early 1990s when the program had a significant increase.                                                                        
Ms.  Clarke  continued  explaining  the supplemental  request  is  a                                                            
combination  of the funding  in the original  budget based on  a low                                                            
case  scenario,  costs  that  went above  the  projections  and  the                                                            
continuing increase of weekly expenditures.                                                                                     
Senator  Green  requested   additional  information   about  Planned                                                          
Parenthood  et al versus  the State of Alaska  relating to  Medicaid                                                          
funding for  abortion services.  She stated  that the court  ordered                                                            
the department  to fund  these services  and gave  it permission  to                                                            
reallocate  funds  to  do  so.  She  asked   where  this  money  was                                                            
originally appropriated.                                                                                                        
Ms. Clarke offered  for the attorney who argued this  case on behalf                                                            
of  the   state  to  speak   to  the  Committee   about  the   legal                                                            
technicalities.  She summarized that the court ruled  that the funds                                                            
were to be taken from within the Medicaid program.                                                                              
Co-Chair Kelly  asked if general funds  directed by the legislature                                                             
to be used as matching  funds to receive federal funds, were used to                                                            
cover the abortion services expenses.                                                                                           
Ms. Clarke affirmed.                                                                                                            
Co-Chair  Kelly   gave  a  history  of  the  situation   saying  the                                                            
legislature  attempted to  remove public funding  of abortions  from                                                            
budgets because  abortion is a divisive  issue. However,  he stated,                                                            
the court ruled  this was not permissible  under the former  General                                                            
Relief  Medical program.  He informed  that the  judge in this  case                                                            
stipulated that any time  public funds are spent for other pregnancy                                                            
related  services,  money  must  also  be  available   for  abortion                                                            
services.  In  response, he  said,  the legislature  created  a  new                                                            
program "following  the court's directive" using funds  that are not                                                            
for pregnancy  related services.  He continued  that as a result  of                                                            
this, the court held the  commissioner held in contempt of court for                                                            
following  the  legislature's  directive.  He  asserted  this  is  a                                                            
separation  of powers issue independent  of the pro-life/pro-choice                                                             
arguments.  He  said  this  is because  the  judge  ruled  that  the                                                            
legislative power to appropriate money is no longer valid.                                                                      
Ms. Clarke  pointed  out that  the judge  never  actually found  the                                                            
commissioner   in  contempt  of  court   but  instead  ordered   the                                                            
department  to pay for the  abortion services.  She stated  that the                                                            
rest of Co-Chair Kelly's statement is accurate.                                                                                 
Co-Chair Kelly understood  the department is uncomfortable complying                                                            
with the judge's  order because of  the separation of powers  issue.                                                            
Ms. Clarke agreed  and told of the efforts undertaken  in support of                                                            
the legislature's action.  She remarked that although the department                                                            
does  not necessarily   agree with  the  legislative  decision,  the                                                            
department   "believed"  it   was  carrying   out  the  legislative                                                             
Co-Chair Kelly  requested the attorney address the  issue before the                                                            
Committee.  Co-Chair Kelly opined,  "Judge Sen Tan is just  one step                                                            
away from sitting at the  head of this table and appropriating money                                                            
for  the  legislature   because  he   has  completely  crossed   the                                                            
separation  of powers." He  warned, "I think  we're going to  have a                                                            
big debate  over this if we don't  find a way to cure it."  He hoped                                                            
the department would assist the legislature in this effort.                                                                     
Senator  Green spoke  to her frustration  that the  state should  be                                                            
able to impose  similar restrictions as the federal  government does                                                            
in prohibiting federal  Medicaid funds to be used to pay for certain                                                            
abortion  services  under  the Hyde  Amendment.  She  stressed  that                                                            
general funds  allocated to be used,  as matching funds for  federal                                                            
Medicaid funding, should not be reallocated.                                                                                    
Ms. Clarke noted  this was one of the arguments the  department made                                                            
to the court.                                                                                                                   
Ms. Clarke  referenced  another wall  chart that  showed the  amount                                                            
paid out to date for abortion services and the projected amount                                                                 
needed for the remainder of the fiscal year. She listed the total                                                               
amount as $217,300.                                                                                                             
Co-Chair Kelly adjourned the meeting at 10:59 AM                                                                                

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