Legislature(2011 - 2012)SENATE FINANCE 532

01/18/2012 09:00 AM FINANCE

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                    SENATE FINANCE COMMITTEE                                                                                    
                        January 18, 2012                                                                                        
                           9:02 a.m.                                                                                            
9:02:00 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stedman  called the Senate Finance  Committee meeting to                                                               
order at 9:02 a.m.                                                                                                              
MEMBERS PRESENT                                                                                                               
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lesil McGuire, Vice-Chair                                                                                               
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Diane  Barrans,   Executive  Director,   Postsecondary  Education                                                               
Commission,  Department   of  Education;   Kimberli  Poppe-Smart,                                                               
Deputy Commissioner,  Medicaid and Healthcare  Policy, Department                                                               
of  Health  and  Social   Services;  Kelly  Henriksen,  Assistant                                                               
Attorney  General, Department  of Law;  Jerry Burnett,  Director,                                                               
Administrative Services  Division, Department of  Revenue; Joanne                                                               
Gibbens, Deputy Director,  Senior Disability Services, Department                                                               
of Health and Social Services.                                                                                                  
PRESENT VIA TELECONFERENCE                                                                                                    
Robynn  Wilson, Audit  Supervisor,  Tax  Division, Department  of                                                               
Revenue;   Scott  Sterling,   Department  of   Elder  Fraud   and                                                               
Assistance;   Elizabeth  Russo,   Supervising  Attorney,   Public                                                               
Guardian Section, Office of  Public Advocacy; Katherine Monfreda,                                                               
Chief of  Criminal Records  and Identification  Borough, Division                                                               
of Statewide Services, Department of Public Safety.                                                                             
SB 2   LICENSE PLATES:  NATIONAL RIFLE ASSN.                                                                                    
          SB 2 was SCHEDULED but not HEARD.                                                                                     
SB 16     SPECIAL REQUEST LICENSE PLATES                                                                                        
          SB 16 was SCHEDULED but not HEARD.                                                                                    
SB 86     PROTECTION OF VULNERABLE ADULTS/MINORS                                                                                
          SB 86 was HEARD and HELD in Committee for further                                                                     
CSHB 104(RLS)                                                                                                                   
          ALASKA PERFORMANCE SCHOLARSHIPS                                                                                       
          CSHB 104(RLS) was HEARD and HELD in Committee for                                                                     
          further consideration.                                                                                                
CS FOR HOUSE BILL NO. 104(RLS)                                                                                                
     "An  Act renaming  the  Alaska  performance scholarship  and                                                               
     relating to  the scholarship and  tax credits  applicable to                                                               
     contributions  to   the  scholarship;  relating   to  Alaska                                                               
     Advantage education grant funding  and to Alaska performance                                                               
     scholarship funding;  establishing an  account and  fund for                                                               
     those purposes; making  conforming amendments; and providing                                                               
     for an effective date."                                                                                                    
9:04:54 AM                                                                                                                    
Co-Chair Stedman discussed the agenda and the rules of decorum.                                                                 
DIANE  BARRANS,   EXECUTIVE  DIRECTOR,   POSTSECONDARY  EDUCATION                                                               
COMMISSION, DEPARTMENT OF EDUCATION,  testified in support of the                                                               
legislation  and   expressed  appreciation   on  behalf   of  the                                                               
administration for the bill being  heard so early in the process.                                                               
She  stated that  the governor's  original  request modified  the                                                               
name  of the  program  to deal  with  copyright infringement  and                                                               
provided a stable funding source  for statewide scholarships. She                                                               
added  that the  governor was  seeking to  establish a  recurring                                                               
fund  source.  The current  bill  had  been modified  to  include                                                               
funding  for Alaska  Performance  Scholarships  (APS) and  Alaska                                                               
Advantage Education  Grants. She  observed that  Alaska Advantage                                                               
Education Grants provided the  state's only needs-based financial                                                               
aid program for postsecondary education.                                                                                        
9:11:54 AM                                                                                                                    
Ms. Barrans  discussed Sections 1  through 4,  7, 9, 13,  and 16;                                                               
these sections  were the  program's "housekeeping  components" as                                                               
they renamed the scholarship program.  She informed the committee                                                               
that Section 5 clarified a new  process in the event of a funding                                                               
shortfall and furthered  that if a shortfall  was experienced, no                                                               
new  students would  be accepted  into  the scholarship  program.                                                               
Section   6   added   requirements   that   are   applicable   to                                                               
postsecondary institutions  seeking to  participate in  APS; this                                                               
section  required that  participating  institutions must  provide                                                               
mandatory counseling  and insured that  the courses needed  for a                                                               
student to  complete their  program on  time were  available. She                                                               
related that Sections 8, 10,  and 14 established the accounts, as                                                               
well as  a fund  into which appropriations  would be  made; these                                                               
sections  specified   that  income  earned  on   investments  and                                                               
donations to the fund were  permitted and also provided a funding                                                               
scheme. She  looked at  Sections 11, 12,  and 19;  these Sections                                                               
created tax credits for corporate  citizens to make contributions                                                               
to  the APS  and  Education  Grant funds  and  also ensured  that                                                               
contributions  remain  eligible  for  the  credit  in  the  years                                                               
subsequent to the sunset date.                                                                                                  
Ms.  Barrans  indicated  that  Section  15  contained  transition                                                               
language,  while  Sections 17  through  20  dealt with  effective                                                               
dates. She noted that ideally,  new requirements for institutions                                                               
would have an effective date of  one year later in order to allow                                                               
institutions  to meet  the requirement  changes. She  stated that                                                               
funds were set aside by passing  SB 76 the prior session and that                                                               
conforming  changes to  the bill  were appropriate.  She stressed                                                               
that "We stand  ready to work with the committee  to bring back a                                                               
bill that is acceptable to all parties."                                                                                        
9:15:40 AM                                                                                                                    
Co-Chair Stedman  indicated that  not everyone was  familiar with                                                               
the legislation and  requested an explanation of the  HB 104. Ms.                                                               
Barrans explained that  the bill modified a program  that was put                                                               
into  statute in  2009; it  created a  program that  incentivized                                                               
Alaskans to succeed  in school and score well  on national exams.                                                               
The high school  graduating class of 2011 was the  first class of                                                               
students eligible to  receive the scholarship. She  said that the                                                               
original  bill  required  that the  Commission  on  Postsecondary                                                               
Education, the Department of Education  (DEED), the Department of                                                               
Labor  (DLWD),  and  the  University  of  Alaska  report  on  the                                                               
outcomes of  the scholarship program;  the report was  due within                                                               
ten days of the start of the current session.                                                                                   
Ms. Barrans highlighted the upcoming  report and pointed out that                                                               
approximately  2400  Alaskans  were  eligible  in  2011  for  the                                                               
scholarship, but  that only  a little  over 900  made use  of the                                                               
program.  She  furthered that  due  to  the tentative  nature  of                                                               
funding   the  prior   year,  many   students  chose   to  attend                                                               
institutions   in   other   states.  She   expounded   that   the                                                               
scholarships could  not be  used at  institutions outside  of the                                                               
state  and noted  that  out  of those  eligible,  almost as  many                                                               
students  attended institutions  outside the  state as  those who                                                               
attended  in-state institutions.  She concluded  that over  time,                                                               
more trend  data would be  available regarding  the scholarship's                                                               
eligibility and utilization.                                                                                                    
Co-Chair Hoffman  wondered how  the fund  would be  split between                                                               
the  Alaska  Advantage  Education  Grants and  APS.  Ms.  Barrans                                                               
replied that  there was  no prescribed formula  for a  split. She                                                               
continued  that there  was discussion  during  the prior  session                                                               
regarding a  formula, but that  the offered bill version  did not                                                               
address that aspect.                                                                                                            
Co-Chair Hoffman stated  that there was a lot of  interest in the                                                               
Alaska  Advantage  Education  Grant  Fund  and  that  legislators                                                               
wanted assurances about  what portion would be  allocated to that                                                               
fund. He queried  if the administration had  a recommended spilt.                                                               
Ms. Barrans  responded that there  was a discussion about  a one-                                                               
third/two-thirds split.                                                                                                         
9:19:35 AM                                                                                                                    
Co-Chair  Hoffman wondered  if the  administration felt  that the                                                               
$400 million set  aside would be adequate  under a one-third/two-                                                               
thirds split. Ms. Barrans replied  that the funding was adequate.                                                               
She stated  that the  utilization rates  for the  scholarship had                                                               
been determined  based on a  proxy, but indicated that  the rates                                                               
had  been adjusted  based on  actual experiences  that year.  The                                                               
adjusted  rates were  slightly lower  and were  reflected in  the                                                               
updated fiscal notes.  She deferred to the  Department of Revenue                                                               
(DOR) for a  discussion regarding what income  could be generated                                                               
off of the $400 million allocation.                                                                                             
Senator Thomas  queried what  kind of marketing  was in  place to                                                               
promote  the scholarship  program. Ms.  Barrans replied  that the                                                               
Commission on  Postsecondary Education  had been  working closely                                                               
with DEED and the governor's  office to coordinate the marketing.                                                               
There  was  a   staff  person  at  DEED  who   was  charged  with                                                               
disseminating  information  about  the program  to  the  schools,                                                               
counselors, principals, and  superintendents. The commission used                                                               
direct  marketing  approaches.  Information  from  DEED  and  the                                                               
Permanent Fund Division was used  to identify and target students                                                               
in order to send information  about the program directly to them.                                                               
The commission's outreach staff,  based in Anchorage, gave public                                                               
service  announcements that  were targeted  at students  who were                                                               
planning  for  college.  She  added   that  the  program  had  no                                                               
operating funds and did not have a specific marketing budget.                                                                   
9:22:37 AM                                                                                                                    
Senator  Ellis expressed  concern that  rural students  could not                                                               
realistically  access the  courses  needed to  qualify for  merit                                                               
scholarships. He queried  if any changes could be made  to HB 104                                                               
to address the realistic access  of rural students to the courses                                                               
needed to  compete for scholarships.  Ms. Barrans  responded that                                                               
Commissioner Hanley from  DEED was in the room and  that he might                                                               
want to respond to the  question personally. She interjected that                                                               
she did  not believe the  statutory language had been  altered to                                                               
affect that change. She furthered  that data showed that students                                                               
from small,  remote areas  were making it  into the  program, but                                                               
acknowledged that it  was more of a challenge  for rural students                                                               
to  qualify.  She spoke  about  the  need  to make  the  required                                                               
courses "readily available" to all students.                                                                                    
Co-Chair Hoffman  asked if  an analysis  had been  done comparing                                                               
qualifying  students  from  rural  versus  urban  districts.  Ms.                                                               
Barrans responded that the analysis was included in the report.                                                                 
Ms.  Barrans stressed  that federal  privacy laws  prevented them                                                               
from  reporting small  graduating  classes where  the number  was                                                               
below an established threshold.  Reporting on very small numbers,                                                               
such  as  two  or  three,   could  lead  to  the  students  being                                                               
identified   as  individuals.   In  order   to  satisfy   federal                                                               
requirements, the  commission was  required to "roll  up numbers"                                                               
to a  district or  region level in  schools where  the graduating                                                               
class was too small.                                                                                                            
9:26:30 AM                                                                                                                    
Senator  Thomas  queried if  the  increases  in the  tuition  had                                                               
prompted any  discussion in  the administration  about increasing                                                               
scholarship  funding   levels.  Ms.  Barrans  replied   that  the                                                               
administration  had  not  had   a  discussion  regarding  funding                                                               
levels. She indicated  that the scholarship levels  were fixed to                                                               
the 2010-2011  tuition and  would have  less "buying  power," but                                                               
added that  the dollar levels  were set  in statute and  could be                                                               
Senator  Egan wondered  how many  needs-based  requests they  had                                                               
been receiving. Ms. Barrans replied  that they had received about                                                               
4400 applicants  that year and were  able to fund just  over 2000                                                               
with education  grants. Based on the  current application volume,                                                               
just  under  $7 million  would  be  needed  to fund  all  student                                                               
Senator Egan asked  if the number of  funded students represented                                                               
just less than  half of the applicants. Ms.  Barrans replied that                                                               
Senator Egan was correct.                                                                                                       
Senator Olsen  expressed the importance  of a good  education. He                                                               
noted  that HB  104 seemed  to put  rural school  districts at  a                                                               
disadvantage.  He  indicated  that  he would  have  a  hard  time                                                               
supporting  this  type  of  legislation  until  rural  and  urban                                                               
students were  on more equal  footing and emphasized  to Co-Chair                                                               
Stedman that he had "some pretty strong feelings" on the issue.                                                                 
9:29:34 AM                                                                                                                    
Co-Chair  Stedman stressed  the importance  of using  the sign-up                                                               
sheet if you would like to testify  on a bill. He listed the five                                                               
updated fiscal notes as follows:  two zero fiscal notes from DOR,                                                               
Treasury and  Tax Division, one  zero fiscal note from  DEED, and                                                               
two   fiscal  impact   notes  from   the  Alaska   Commission  on                                                               
Postsecondary Education.  One note from the  Alaska Commission on                                                               
Postsecondary Education  contained a $2 million  dollar increment                                                               
for APS  while the  other reflected a  $3.996 million  request in                                                               
administration and  operating costs.  Both fiscal  notes included                                                               
increasing out-year cost estimates. He  mentioned that one of the                                                               
fiscal notes had been received that morning and was new to him.                                                                 
ROBYNN  WILSON, AUDIT  SUPERVISOR,  TAX  DIVISION, DEPARTMENT  OF                                                               
REVENUE (via teleconference), introduced  herself and stated that                                                               
she was  available for questions. Co-Chair  Stedman inquired what                                                               
the tax credit's net effect  was on the state's credit mechanism.                                                               
Ms.  Wilson replied  that HB  104 did  not change  the amount  of                                                               
credit  available,  but  it  added  a  category  under  which  an                                                               
education credit could be claimed.                                                                                              
9:32:03 AM                                                                                                                    
Senator  Olson wondered  if there  had been  indication that  the                                                               
private sector wanted  to participate in the  tax credit program.                                                               
Ms.  Wilson responded  that they  had  not yet  received the  tax                                                               
returns that would report private sector participation.                                                                         
Senator  Olson  furthered  that  he assumed  there  was  a  study                                                               
regarding  possible  private  sector participation.  He  wondered                                                               
whether  the  state would  fully  fund  the program.  Ms.  Wilson                                                               
indicated that DOR did not  have a study regarding private sector                                                               
participation  and furthered  that  as HB  104  was written,  the                                                               
state would be fully funding the program.                                                                                       
9:33:36 AM                                                                                                                    
AT EASE                                                                                                                         
9:34:19 AM                                                                                                                    
Co-Chair Stedman  expressed his surprise  that no one  had signed                                                               
up to testify on HB 104.                                                                                                        
Co-Chair Hoffman  had a  question in reference  to a  fiscal note                                                               
prepared by  Diane Barrans. He  noted that from  FY 13 to  FY 18,                                                               
the number  of students entering  the program was  anticipated to                                                               
grow by 35 percent and that  the expected payout of the fund will                                                               
increase from  $6.9 million to  $9.6 million. He queried  how the                                                               
fund  would be  managed to  address the  increase in  payouts and                                                               
whether the fund would be  adequate if no additional dollars were                                                               
Ms.  Barrans asked  for clarification  on which  fiscal note  Co-                                                               
Chair Hoffman was referring to.  Co-Chair Hoffman replied that he                                                               
was referring  to the fiscal  note that the Office  of Management                                                               
and Budget (OMB) noted as number 2738.                                                                                          
Co-Chair  Hoffman reiterated  his question.  Ms. Barrans  replied                                                               
that  her   discussions  with  DOR   led  her  to   believe  that                                                               
investments from  the fund  would be based  on expected  pay outs                                                               
and that  investment decisions  would be  aimed at  insuring that                                                               
the  fund was  able to  cover the  costs. She  deferred to  Jerry                                                               
Burnett for a more detailed answer.                                                                                             
Co-Chair  Hoffman noted  that  a  high rate  of  return would  be                                                               
needed to offset increases in student payouts.                                                                                  
9:37:42 AM                                                                                                                    
Co-Chair Stedman  asked for  an explanation  of the  $400 million                                                               
set aside for the fund and  wondered what revenue might be earned                                                               
off   that   allocation,   including  projected   shortfalls   or                                                               
JERRY  BURNETT,   DIRECTOR,  ADMINISTRATIVE   SERVICES  DIVISION,                                                               
DEPARTMENT OF REVENUE, replied that  when the bill was originally                                                               
introduced, the  $400 million was to  be invested in a  fund with                                                               
an annual  real rate of return  of 5 percent. He  stated that the                                                               
fund  was to  be  inflation  proofed and  would  earn  7.75 to  8                                                               
percent in  the current market  place. The fund was  projected to                                                               
earn $20  million the  first year  and would  grow each  year. He                                                               
noted  that "we're  looking at  less  than $20  million in  those                                                               
first years".  DOR would consider  the program's costs  and would                                                               
customize an asset  allocation designed to build  the fund, based                                                               
on the $400 million allocation  and the expected future payments.                                                               
He observed that the $400  million had earned interest throughout                                                               
the year  in the general  investment fund  and that as  a result,                                                               
the Alaska Housing Capital Corporation  had more than the initial                                                               
allocation available.                                                                                                           
9:39:29 AM                                                                                                                    
Co-Chair Hoffman queried  what interest rate the  fund had earned                                                               
during  the first  6  months.  Mr. Burnett  replied  that he  was                                                               
unsure, but  that he  could get that  information. He  added that                                                               
over the past several years, the  fund had earned 3 to 4 percent.                                                               
He reiterated  that the allocation  would be customized  based on                                                               
the future  needs of the fund  and remarked that fiscal  the note                                                               
in the packet indicated that  based on the house bill's language,                                                               
the money would have to be left in the general investment fund.                                                                 
Co-Chair Hoffman  queried if the  $400 million would grow  by the                                                               
anticipated 35  percent between FY 13  to FY 18 in  order to meet                                                               
the expected payout.  Mr. Burnett responded that  he believed the                                                               
$400  million allocation  could potentially  earn enough  to meet                                                               
the  payout in  FY 18  and expounded  that in  order to  meet the                                                               
payouts,  DOR could  customize  an asset  allocation  that had  a                                                               
lower probability of loss.                                                                                                      
Co-Chair Stedman  requested that DOR  come back to  the committee                                                               
with  a  forecast  projecting the  initial  $400  million  input,                                                               
including  expected withdrawals  and payouts.  He specified  that                                                               
the forecast should go through FY  18 or whatever fiscal year DOR                                                               
was comfortable projecting to. He  observed the similarity to the                                                               
Power Cost Equalization program, where  the payouts had reached 7                                                               
percent and erosion of the  principal was a concern. He continued                                                               
that  the fund  could become  part  of a  larger discussion  when                                                               
oversight was done on various pools of funds.                                                                                   
9:42:27 AM                                                                                                                    
Co-Chair Hoffman  queried if  the interest  earned from  the $400                                                               
million  was  going  to  pay  for the  first  year  of  operating                                                               
expenses or if  additional money would be  requested. Mr. Burnett                                                               
replied that  he made no  assertions about how the  program would                                                               
be funded during  the first year and elaborated  that because the                                                               
$400 million had been earning  interest in a segregated fund that                                                               
kept its  earnings, there was  more than $400  million available.                                                               
He added that the appropriation to fund was only $400 million.                                                                  
Senator Ellis queried  if students who get GED's  qualify for the                                                               
merit  based scholarship  programs and  wondered how  the program                                                               
dealt  with  students  from tumultuous  backgrounds,  like  those                                                               
attending military  academies and  alternative high  schools. Ms.                                                               
Barrans replied that students would  be required to obtain a high                                                               
school diploma in order to qualify.                                                                                             
Senator  McGuire inquired  if the  current meeting  was the  last                                                               
hearing on  HB 104. Co-Chair  Stedman stressed that this  was the                                                               
first hearing on HB 104 and that more hearings would be held.                                                                   
9:45:27 AM                                                                                                                    
Senator  McGuire   requested  that   Ms.  Barrans   give  further                                                               
explanation of what  led to HB 104 and what  it accomplished. She                                                               
stated  that the  bill would  not  be the  scholarship for  every                                                               
Alaskan,  but   that  it  was  an   opportunity  for  exceptional                                                               
students. She  continued that special  options could  be explored                                                               
to help rural  students and indicated an interest  in hearing how                                                               
Louisiana had dealt  with their rural townships.  She stated that                                                               
Galena's  student program  was  a  model that  could  be used  to                                                               
create a  program for  Alaska's rural  students and  stressed the                                                               
need   to  enable   rural  districts   to  bring   students  into                                                               
compliance,  rather than  having rigid  standards to  qualify for                                                               
scholarships. She expressed her approval  of the intent of HB 104                                                               
and a  desire to  work with  DOR through  the process.  She added                                                               
that  declining production  of the  Trans-Alaska Pipeline  System                                                               
(TAPS) would  tighten the state's  budget and force the  state to                                                               
make  choices. She  indicated that  funding might  not always  be                                                               
there for certain  programs and that it was DEED's  job to "sell"                                                               
the program to the legislature.                                                                                                 
Ms.  Barrans pointed  out  that  HB 104  was  not  the bill  that                                                               
created the  program. There  were many  hearings on  the original                                                               
bill and  the legislature  had put the  program into  statute the                                                               
prior year.  She emphasized that  the program had  been operating                                                               
less than  a year and  stressed the  benefit of several  years of                                                               
progress before  making substantive  changes to the  program. The                                                               
legislation  was intended  to change  the program's  name and  to                                                               
fund the  program. She urged  that it  was important to  give the                                                               
program time to  operate before attempting to fix  it and related                                                               
that the  program was  intended to help  students make  the right                                                               
decisions early.  She acknowledged that  the program was  not the                                                               
end solution, but that it was a good starting place.                                                                            
Senator Olson noted  that DOR expected to be able  to achieve the                                                               
7.75 to  8 [percent] interest  rate. He wondered  what mechanisms                                                               
were  in  place  to  insure  that  qualified  children  were  not                                                               
overlooked if the expected interest  did not accrue. He furthered                                                               
that his  real question  was if  DOR was setup  to use  the funds                                                               
that  were already  in place.  Mr.  Burnett replied  that he  was                                                               
unable to answer because DOR  needed to examine models for future                                                               
funding  in  order to  establish  an  asset allocation  for  that                                                               
purpose.  He  added that  the  program  could  be  set up  as  an                                                               
endowment  or as  fixed  income investments  that  were based  on                                                               
9:51:56 AM                                                                                                                    
Co-Chair  Stedman  noted  that  the  committee  would  await  the                                                               
analysis that  Mr. Burnett had  referred to and observed  that in                                                               
the  future the  committee  would look  at  a multi-year  period,                                                               
rather  than  using  a  six month  period  and  extrapolating  it                                                               
further  out.  He  announced  that the  Permanent  Fund  and  the                                                               
retirement system would  be reviewed in the committee  at a later                                                               
date. He  pointed out that there  would be a presentation  on the                                                               
growth  in the  Gross  Domestic Product  (GDP)  relative to  debt                                                               
levels; the presentation would give  them a "better feel for what                                                               
we can expect  out of the performance of our  pile of assets that                                                               
we've set aside, our cash."                                                                                                     
Senator Thomas  asked for a  written explanation of  Ms. Barrans'                                                               
response  to  Senator  Egan's question.  Ms.  Barrans  agreed  to                                                               
provide the information.                                                                                                        
9:53:38 AM                                                                                                                    
House  Bill 104  was  HEARD  and HELD  in  committee for  further                                                               
9:53:59 AM                                                                                                                    
AT EASE                                                                                                                         
9:54:20 AM                                                                                                                    
SENATE BILL NO. 86                                                                                                            
     "An Act  relating to the  protection of property  of persons                                                               
     under  disability  and  minors;  relating to  the  crime  of                                                               
     violating a  protective order concerning  certain vulnerable                                                               
     persons; relating  to aggravating factors at  sentencing for                                                               
     offenses concerning a victim 65  years or older; relating to                                                               
     the protection  of vulnerable  adults; amending  Rule 12(h),                                                               
     Alaska  Rules of  Criminal Procedure;  amending Rule  45(a),                                                               
     Alaska  Rules  of  Criminal  Procedure;  amending  Rule  65,                                                               
     Alaska Rules  of Civil Procedure;  amending Rule  17, Alaska                                                               
     Rules of  Probate Procedure; amending  Rule 9,  Alaska Rules                                                               
    of Administration; and providing for an effective date."                                                                    
9:54:35 AM                                                                                                                    
KIMBERLI   POPPE-SMART,   DEPUTY   COMMISSIONER,   MEDICAID   AND                                                               
HEALTHCARE  POLICY, DEPARTMENT  OF  HEALTH  AND SOCIAL  SERVICES,                                                               
testified in support and introduced  the bill and stated that the                                                               
legislation was a collaborative, cross-agency effort.                                                                           
9:57:38 AM                                                                                                                    
JOANNE  GIBBENS,  DEPUTY  DIRECTOR, SENIOR  DISABILITY  SERVICES,                                                               
DEPARTMENT OF  HEALTH AND SOCIAL  SERVICES, testified  in support                                                               
of SB 86  and highlighted important elements  of the legislation,                                                               
which  covered   existing  gaps  in  the   services  provided  to                                                               
vulnerable adults. She stated that  the most important element of                                                               
the   bill  created   a  process   for  appointing   a  temporary                                                               
conservator  to  someone  at  risk   of  eminent  harm  to  their                                                               
financial status  or healthcare decision making.  The legislation                                                               
allowed  the court  to  impose  emergency conservatorships  which                                                               
could be  removed or  renewed as needed.  She furthered  that the                                                               
bill assisted in protecting  financial assets, managing financial                                                               
affairs, and  preventing eminent waste or  fraudulent dissipation                                                               
of assets.  She declared that  the second most  important element                                                               
of the  bill created  a process for  the imposition  of financial                                                               
protective orders. The legislation  imparted the ability to apply                                                               
for  a 20-day  ex parte  protective  order that  gave courts  the                                                               
tools to stop  or prevent financial exploitation.  She noted that                                                               
these  tools were  not currently  available  to Adult  Protective                                                               
Services or others  who assist with vulnerable  adults. She added                                                               
that  another notable  element  of the  legislation  was that  it                                                               
mandated  that  anyone working  at  a  healthcare or  educational                                                               
facility must  report suspected abuse  of vulnerable  adults. She                                                               
expounded  that  currently,  only  administrators  were  mandated                                                               
reporters. Under  SB 86, the  mandate would be expanded  to apply                                                               
to educational  facilities. The  legislation also  defined "undue                                                               
influence" as  a reportable  harm. Undue  influence meant  that a                                                               
person of trust was abusing  or misusing their power and applying                                                               
undue influence  to a vulnerable  adult in order to  gain control                                                               
over their  healthcare decision making, assets,  or finances. She                                                               
felt that the addition of  undue influence and mandated reporters                                                               
would  give  the state  earlier  detection  and intervention  for                                                               
individuals  who were  vulnerable to  loss of  their property  or                                                               
decision  making. The  bill  enabled  earlier protective  orders,                                                               
facilitated   more   thorough  and   successful   investigations,                                                               
provided  protection  of  assets  during  an  investigation,  and                                                               
enhanced  criminal penalties  when  the victim  was elderly.  She                                                               
concluded that  in broad summary,  the bill would  provide Alaska                                                               
the additional tools  necessary to combat the  growing problem of                                                               
financial abuse among elderly and disabled populations.                                                                         
10:01:16 AM                                                                                                                   
Ms.  Gibbens explained  the financial  exploitation issues  among                                                               
vulnerable adults.  She indicated that Adult  Protective Services                                                               
had experienced a slow increase  in the number of calls regarding                                                               
the financial exploitation of vulnerable  adults. She stated that                                                               
the majority  of the calls  were regarding adults  over 60-years-                                                               
old, but  some calls were concerning  developmentally disabled or                                                               
traumatic  brain  injury victims.  She  remarked  that in  FY  10                                                               
Senior  & Disability  Services (SDS)  substantiated 100  cases of                                                               
financial  exploitation; that  number rose  to 125  in FY  11 and                                                               
during the current fiscal year,  SDS had already substantiated 85                                                               
cases. She indicated  there was a trend developing  in the rising                                                               
number  of   cases  of  financial  exploitation   and  that  most                                                               
instances   of  exploitation   involved  family   members  taking                                                               
advantage  of other  family  members. In  many  abuse cases,  the                                                               
offender  had  Power  of  Attorney (POA)  over  the  victim.  She                                                               
discussed  the ways  inner-family  financial abuse  occurs.   She                                                               
continued  that under  SB 86,  the undue  influence statute,  the                                                               
ability to  impose financial protective  orders, and  the ability                                                               
appoint  temporary  conservators  enabled the  state  to  respond                                                               
faster and  more effectively  to abuse.  She related  the reasons                                                               
that  caused  people to  give  up  their  POA and  explained  the                                                               
dynamics between the offender and the victim.                                                                                   
10:06:57 AM                                                                                                                   
Co-Chair Hoffman wondered if any of  the 210 cases the prior year                                                               
and a half had involved  the identity theft of vulnerable adults.                                                               
Ms. Barrans  indicated that  she did not  have the  exact numbers                                                               
with her, but confirmed that  there were cases involving identity                                                               
theft. She agreed to provide the exact numbers at a later date.                                                                 
Co-Chair Hoffman inquired how  the legislation addressed identify                                                               
theft.  Ms.  Barrans   deferred  the  question  to   one  of  the                                                               
attorneys,  but  added  that  she  did not  believe  that  SB  86                                                               
mentioned identity theft specifically.                                                                                          
Senator Egan  observed that  when vulnerable  adults relinquished                                                               
their  POA,  they  may  not   have  had  the  reasoning  capacity                                                               
necessary  to  recognize that  someone  was  taking advantage  of                                                               
them.  He wondered  how cases  where  the victim  was unaware  of                                                               
being taken advantage  of were dealt with.  Ms. Gibbens explained                                                               
that there was a process through  which an evaluation was done to                                                               
determine the victim's cognitive ability  and added that when the                                                               
victim was unaware  of being abused, a phone call  was needed for                                                               
SDS to act                                                                                                                      
Senator Egan  asked if  SB 86 required  employees of  an assisted                                                               
living  facility to  report  the abuse  of  seniors. Ms.  Gibbens                                                               
responded that  under the bill,  employees of an  assisted living                                                               
facility were mandated to report any possible abuse.                                                                            
10:09:58 AM                                                                                                                   
Senator Thomas  noted that SB 86  required temporary conservators                                                               
to  fill out  an annual  reporting form  that detailed  how funds                                                               
were  spent. He  furthered  that the  annual reporting  increased                                                               
accountability  and  he  thought   it  made  fraud  unlikely.  He                                                               
wondered  what documents  a  conservator  signed regarding  their                                                               
responsibilities and  if abuse was substantiated,  what penalties                                                               
were  enforced. Ms.  Gibbens replied  that she  was not  familiar                                                               
with  the  conservatorship  process,  but  indicated  that  Kelly                                                               
Henriksen was present to discuss the specifics of the bill.                                                                     
10:11:24 AM                                                                                                                   
Co-Chair Stedman  addressed the updated fiscal  notes attached to                                                               
SB 86.  He introduced a zero  fiscal note from the  Department of                                                               
Health  and  Social  Services  (DHSS), a  zero  fiscal  note  the                                                               
Department of Administration  (DOA), a zero fiscal  note from the                                                               
Department of Law  (DOL), a zero fiscal note  from the Department                                                               
of Public Safety (DPS), Alaska  State Troopers Detachment, a zero                                                               
fiscal note from the Department  of Corrections (DOC), and a zero                                                               
fiscal note from the Alaska  Court System (COURT). He discussed a                                                               
fiscal impact note from DPS,  Statewide Support, in the amount of                                                               
$48,000  in General  Funds  for the  purposes  of developing  new                                                               
protective  order  forms,  updating   the  Alaska  Public  Safety                                                               
Information Network (APSIN), and training.                                                                                      
10:13:37 AM                                                                                                                   
AT EASE                                                                                                                         
10:16:23 AM                                                                                                                   
10:19:20 AM                                                                                                                   
Co-Chair Hoffman  noted that  there were no  provisions in  SB 86                                                               
that  dealt with  how  the state  interfaced  with tribal  courts                                                               
regarding the  protection of vulnerable  adults. He  wondered how                                                               
Ms.  Russo  saw  the  relationship between  the  two  courts  and                                                               
queried  if  she believed,  as  he  did,  that  it needed  to  be                                                               
specifically addressed  in the  legislation. Ms.  Russo responded                                                               
that it  was her experience  that tribal courts had  not actively                                                               
taken a  role in conservatorship proceedings.  She furthered that                                                               
the  reason it  was  not included  in the  bill  was because  the                                                               
tribal courts had not participated  in the past. Co-Chair Hoffman                                                               
stressed that  the relationship between Alaska  and tribal courts                                                               
should be spelled out before it became a problem.                                                                               
Senator  Thomas  reiterated  his  prior  question  regarding  the                                                               
accountability  of  conservators  and expanded  it  to  encompass                                                               
children in the foster care system.  Ms. Russo replied that SB 86                                                               
did not specifically address the  issue of children in the foster                                                               
care system. She  related that not all  fiduciaries were required                                                               
to  report  finances,  but  that  only  appointed  guardians  and                                                               
conservators  were  subject  to reporting  responsibilities.  She                                                               
indicated that  the gap  in accountability was  the reason  SB 86                                                               
had   addressed   the   POA  issue.   Appointed   guardians   and                                                               
conservators  were  required  to  undergo training,  an  hour  of                                                               
education, and  to sign a  letter of acceptance that  stated they                                                               
understood    the   reporting    requirements.   Guardians    and                                                               
conservators could be held liable  if it had been determined that                                                               
they had acted outside  their fiduciary responsibilities. Senator                                                               
Thomas asked  if there was  a statute that gave  consideration to                                                               
other  persons that  might have  fiduciary responsibilities  over                                                               
vulnerable  individuals, particularly  regarding the  foster care                                                               
system.  Ms. Russo  deferred to  Mr. Sterling  and noted  that he                                                               
would be better  able to answer the question.  She concluded that                                                               
SB 86  focused on vulnerable  adults and  not on the  foster care                                                               
10:25:02 AM                                                                                                                   
SCOTT STERLING,  SUPERVISING ATTORNEY, OFFICE OF  ELDER FRAUD AND                                                               
ASSISTANCE,   OFFICE   OF    PUBLIC   ADVOCACY,   DEPARTMENT   OF                                                               
ADMINISTRATION (via  teleconference), began a  sectional analysis                                                               
of SB 86(copy on file). He reviewed the following sections:                                                                     
   • Section 3 makes the knowing violation or attempted                                                                         
     violation  of a  financial protective  order (introduced  in                                                               
     section 10 of this  legislation to protect vulnerable adults                                                               
     and elders) a crime.                                                                                                       
   • Section 4 amends AS 11.56.740(c), which defines "protective                                                                
     orders,"  by including  financial  protective orders  issued                                                               
     under AS  13 .26.207  -13 .26.209  to that  definition. This                                                               
     change brings  financial protective orders within  the class                                                               
     of protective orders subject to  sanction under the criminal                                                               
   • Section 5 amends AS 12.55.155(c) by adding a new paragraph                                                                 
     (35)  which  makes  the  fact  that  a  defendant  knowingly                                                               
     directed criminal  conduct at  a person 65  years of  age or                                                               
     older an aggravating factor at sentencing.                                                                                 
   • Section 6 amends AS 13.26.165(1) by substantively adding                                                                   
     several  new   paragraphs  and   changes  or   additions  in                                                               
     definitions to  enhance protection of vulnerable  persons in                                                               
     conservatorship proceedings as follows:                                                                                    
     •  amends AS 13.26.165 by deleting the  words "make another"                                                               
        and inserting the words "issue another" regarding the                                                                   
        authority of the court to issue a protection order for a                                                                
        protected person in conservatorship proceedings;                                                                        
     •  creates new paragraph (A) to authorize the court to issue                                                               
        orders protecting  a minor  with money  or property  that                                                               
        needs protection  or who  otherwise needs  protection and                                                               
        substitutes the word "that"  for the word "which"  in the                                                               
        authorizing language;                                                                                                   
     •  creates a new paragraph (B) specifying that the authority                                                               
        of the court to issue protective orders extends to minors                                                               
        with  business  affairs  that  may  be  in  jeopardy  and                                                               
        substitutes the word "that"  for the word "which"  in the                                                               
        authorizing language;                                                                                                   
     •  creates a  new  paragraph  (C) ensuring  that  protection                                                               
        extends to any need to protect a minor's funds or obtain                                                                
        funds for a minor and deletes the unnecessary use of the                                                                
        word "that" twice in the authorizing language;                                                                          
   • Section 7 amends AS 13.16.lS0(a) by adding "a person's                                                                     
     attorney  or other  legal representative."  to  the list  of                                                               
     persons who  may petition for a  conservatorship and further                                                               
     adds  "or caregiver,  the Department  of  Health and  Social                                                               
     Services" to that list. This  change is necessary to broaden                                                               
     the list  of specific persons  authorized to petition  for a                                                               
     conservatorship   in  aid   of   a   vulnerable  adult   and                                                               
     specifically  to ensure  that the  Department of  Health and                                                               
     Social Services is authorized to do so when necessary.                                                                     
10:28:10 AM                                                                                                                   
Mr.  Sterling summarized  the  remaining  sections and  explained                                                               
that they added financial protective  orders, which would operate                                                               
similarly   to   domestic   violence   protective   orders.   The                                                               
legislation  also  added ex  parte  relief  that would  enable  a                                                               
vulnerable adult or  an intermediary, without a lawyer,  to go to                                                               
any  court and  apply for  protection to  stop ongoing  abuse. He                                                               
explained that  it had become  easy to steal someone's  money and                                                               
identity through technology, and when  people became aware of the                                                               
problem,  they needed  help immediately.  He  furthered that  the                                                               
rationale  behind the  ex parte  relief provision  was to  enable                                                               
victims  to get  immediate  help and  added  that other  sections                                                               
allowed  for  temporary  conservators.  Currently,  the  statutes                                                               
allowed for temporary guardians  but not conservators. He related                                                               
that it  was his experience  that courts were reluctant  to grant                                                               
conservatorships  because they  were not  expressly permitted  by                                                               
statute.  The legislation  authorized by  law the  appointment of                                                               
temporary conservators.  He stated  that the  clarification would                                                               
enhance  the ability  of  victims and  DHSS  to obtain  immediate                                                               
relief for  victims of financial  abuse. He explained  that other                                                               
portions of  bill, which were  largely definitional,  expanded or                                                               
added  the  definition  of  things such  as  fraud,  while  other                                                               
sections  added "undue  influence" into  statue. Under  the undue                                                               
influence statute, there  were specific grounds to  assert that a                                                               
fiduciary was abusing their responsibility.                                                                                     
10:30:56 AM                                                                                                                   
Mr. Sterling responded to Senator  Thomas's earlier question, and                                                               
indicated that the only fiduciaries  in Alaska that were required                                                               
to  be vetted  by a  court  were guardians  and conservators.  He                                                               
stated  that trusts  were  a private  matter  and furthered  that                                                               
although there was a section in  Title 13 that dealt with trusts,                                                               
there were no  requirements that a trustee be vetted  in any way.                                                               
He described  Alaska's POA  statute, found in  Section 13,  as "a                                                               
maximum  utility,  minimal   regulation,  and  minimal  liability                                                               
statute."  There were  currently no  requirements for  serving as                                                               
POA  and  there  were  no   standards,  licensing,  or  liability                                                               
provisions  to  deal  with  abuse.  He  explained  that  "maximum                                                               
utility"  resulted  in  a  greater risk  of  abuse  of  fiduciary                                                               
responsibility from POA.                                                                                                        
In response  to an  earlier question  from Co-Chair  Hoffman, Mr.                                                               
Sterling  indicated that  he was  not looking  at how  the tribal                                                               
courts interfaced  with state  courts when he  drafted SB  86. He                                                               
felt that taking  a look at this aspect was  a "meritorious" idea                                                               
and furthered that he would be "happy" to take a look at it.                                                                    
10:33:19 AM                                                                                                                   
KELLY  HENRIKSEN,  ASSISTANT  ATTORNEY GENERAL,  HUMAN  SERVICES,                                                               
DEPARTMENT OF  LAW, introduced herself.  She stated that  half of                                                               
SB 86 dealt with Adult  Protective Services, which was the office                                                               
she represented.  She indicated  that Mr. Sterling  had presented                                                               
the part of  bill that dealt with  conservatorships and financial                                                               
protective orders, which is found in  Title 13. The part that she                                                               
had  drafted, found  in  Title 47,  dealt  with Adult  Protective                                                               
Services.  The  highlights  of   the  Adult  Protective  Services                                                               
Sections,  which began  at  Section  16 of  the  bill, added  the                                                               
concept  of  "undue influence"  to  the  entire Adult  Protective                                                               
Services  code.  The  legislation updated  the  Adult  Protective                                                               
Services  code to  meet  the  practical needs  of  the time.  She                                                               
stated that  because it permeated what  Adult Protective Services                                                               
did,  the  term  "undue  influence" was  added  anyplace  in  the                                                               
statutes  where it  specified what  kinds  of activities  someone                                                               
might make  a report of  harm about,  such as abuse,  neglect, or                                                               
self-neglect. She related that most  of the Sections in the Adult                                                               
Protective  Services  part of  the  bill  simply added  the  term                                                               
"undue  influence",  but that  there  were  no other  substantive                                                               
changes in  those Sections. She  remarked that  another important                                                               
thing  the Adult  Protective Services  portion of  SB 86  did was                                                               
that it  updated and  added definitions in  the statutes  to more                                                               
accurately reflect reality.                                                                                                     
Ms. Henriksen offered that the  final element worthy of note from                                                               
the portion  of SB 86 that  she had drafted was  that it expanded                                                               
the list of  what services Adult Protective Services  was able to                                                               
provide, short of a guardian  or conservator being appointed. She                                                               
cited examples of these services  as follows: staying a financial                                                               
transaction  at a  bank, assistance  with  a rental  application,                                                               
providing  food,  and  providing  other care  services  an  adult                                                               
needed. She indicated that instead  of doing a guardian's duties,                                                               
Adult  Protective  Services  had  discovered a  need  to  have  a                                                               
clearer definition of what they  could do as an intermediary. She                                                               
concluded by stating  that other than the three  elements she had                                                               
pointed out,  there was  not anything  significant in  the Alaska                                                               
Protective Services portion of the sectional.                                                                                   
Senator Olsen stated that he  assumed the victimization of elders                                                               
represented  the  minority  of  cases  of  financial  abuse.  Ms.                                                               
Henriksen responded  that she  was unsure  if that  statement was                                                               
correct, but indicated that Ms.  Gibbens might be able to respond                                                               
to the question. Senator Olsen  queried if there was strain being                                                               
placed on  individuals who were  complying with the law  and were                                                               
legitimately  trying to  obtain guardianship  or conservatorship.                                                               
He  expressed  concern that  responsible  children  could have  a                                                               
difficult  time obtaining  guardianship  or conservatorship  from                                                               
parents who were not being abused.   Ms. Gibbens replied that she                                                               
did not  believe that to be  true and furthered that  the process                                                               
followed  to gain  guardianship or  conservatorship was  the same                                                               
whether or not an individual  was attempting to take advantage of                                                               
an elder.                                                                                                                       
10:37:31 AM                                                                                                                   
Senator  Thomas referenced  a 25  percent increase  in the  abuse                                                               
rate on  the system over the  last year and asked  if anything in                                                               
SB 86  specifically addressed the issue.  Ms. Henriksen specified                                                               
that  the  ability  to impose  financial  protective  orders  and                                                               
temporary  conservators were  two  additions  that addressed  the                                                               
increase in abuse.                                                                                                              
Senator Thomas queried  if Ms. Henriksen thought  there should be                                                               
a  more thorough  vetting process,  such as  a background  check,                                                               
when  a  guardian or  conservator  was  appointed. Ms.  Henriksen                                                               
responded that if Adult Protective  Services received a report of                                                               
harm,  their investigation  was  "very  thorough". She  mentioned                                                               
that  during an  investigation  informal  background checks  were                                                               
performed, so  that when  the case  was heard  any issue  about a                                                               
potential guardian or conservator would  be raised in open court.                                                               
She concluded  that in her experience,  Adult Protective Services                                                               
did not take  chances when allegations of abuse  had been raised.                                                               
She  furthered that  Adult Protective  Services gathered  as much                                                               
information  as  possible,  so  that the  judge  could  make  the                                                               
decision on who was appropriate.                                                                                                
Ms. Henriksen  revealed that  the transfer of  POA was  a private                                                               
matter that did not require  any state involvement or time before                                                               
a  judge  and explained  that  because  of  this, the  state  was                                                               
unaware and  unable to  affect that  process. She  continued that                                                               
Adult  Protective  Services could  only  get  involved when  they                                                               
received a report of harm, but  that once they were involved, the                                                               
process was thorough.                                                                                                           
Senate  Bill 86  was  HEARD  and HELD  in  Committee for  further                                                               
10:41:09 AM                                                                                                                   
The meeting was adjourned at 10:41 AM.                                                                                          

Document Name Date/Time Subjects
HB 104 - CSHB104(EDC)Sectional ACPE 3 21 11.pdf SFIN 1/18/2012 9:00:00 AM
HB 104
HB 104 - SBOE Letter on APS Resolution to HEDC.pdf SFIN 1/18/2012 9:00:00 AM
HB 104
HB 104 NEW Sectional (RLS).pdf SFIN 1/18/2012 9:00:00 AM
HB 104
HB104 AWIBAPSResolution.pdf SFIN 1/18/2012 9:00:00 AM
HB 104
SB 86 AARP Support.pdf SFIN 1/18/2012 9:00:00 AM
SB 86
SB 86 OLTCO letter of support.PDF SFIN 1/18/2012 9:00:00 AM
SB 86
SB 86 Sectional Analysis.pdf SFIN 1/18/2012 9:00:00 AM
SB 86
SB 86 Sponsor Statement.pdf SFIN 1/18/2012 9:00:00 AM
SB 86
SB 86 summary of changes 4-15-11.pdf SFIN 1/18/2012 9:00:00 AM
SB 86
CS SB 2 Support Letters.PDF SFIN 1/18/2012 9:00:00 AM
SB 2
CS SB 2 DMV Letter.pdf SFIN 1/18/2012 9:00:00 AM
SB 2
CSSB 2 Sponsor Statement.pdf SFIN 1/18/2012 9:00:00 AM
SB 2
SB 2 Explanation of Changes.pdf SFIN 1/18/2012 9:00:00 AM
SB 2
SB 2 Special Request Plates-Fact Sheet.pdf SFIN 1/18/2012 9:00:00 AM
SB 2
SB 86 Support Letter-Office of Long Term Care.pdf SFIN 1/18/2012 9:00:00 AM
SB 86
SB 86 Support Letter-ACoA.pdf SFIN 1/18/2012 9:00:00 AM
SB 86
HB 104 ACPE Letter.pdf SFIN 1/18/2012 9:00:00 AM
HB 104
HB 104 APS Outcomes Report.pdf SFIN 1/18/2012 9:00:00 AM
HB 104
HB 104 DOR Response.pdf SFIN 1/18/2012 9:00:00 AM
HB 104
HB 104 Rodell to SFC 1-30-2012.pdf SFIN 1/18/2012 9:00:00 AM
HB 104