Legislature(2019 - 2020)SENATE FINANCE 532

01/31/2019 09:00 AM FINANCE

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Audio Topic
09:02:22 AM Start
09:05:12 AM Presentation: Alaska Mental Health Trust Authority (amhta)
10:40:49 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Alaska Mental Health Trust Authority by TELECONFERENCED
Mike Abbott, Executive Director & Mary Jane
Michael, Board Chair
                 SENATE FINANCE COMMITTEE                                                                                       
                     January 31, 2019                                                                                           
                         9:02 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:02:22 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair   Stedman  called  the   Senate  Finance   Committee                                                                   
meeting to order at 9:02 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Donny Olson                                                                                                             
Senator Mike Shower                                                                                                             
Senator Bill Wielechowski                                                                                                       
Senator Peter Micciche                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lyman Hoffman                                                                                                           
Senator David Wilson                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Mike Abbott,  Chief Executive  Officer, Alaska Mental  Health                                                                   
Trust  Authority; Mary  Jane  Michael,  Chair, Alaska  Mental                                                                   
Health  Trust   Authority;  Representative   Andy  Josephson;                                                                   
Senator Cathy Giessel.                                                                                                          
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Kris  Curtis,   Legislative  Auditor,   Alaska  Division   of                                                                   
Legislative Audit.                                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^PRESENTATION: ALASKA MENTAL HEALTH TRUST AUTHORITY (AMHTA)                                                                   
                                                                                                                                
9:05:12 AM                                                                                                                    
                                                                                                                                
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,   ALASKA  DIVISION   OF                                                                   
LEGISLATIVE  AUDIT  (via  teleconference),  referred  to,  "A                                                                   
Performance  Review  of  the Department  of  Revenue,  Alaska                                                                   
Mental  Health Trust  Authority  Asset  Management and  Other                                                                   
Select Issues" (copy on file).                                                                                                  
                                                                                                                                
9:34:49 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  stated that the process was  underway for a                                                                   
long  time,  and  the  audit  was  requested  by  Legislative                                                                   
Budget and Audit.  He remarked that the audit  was presented,                                                                   
because  of  its  significance  and  the  interest  that  the                                                                   
legislature  does not  go into  endless  litigation. He  felt                                                                   
that  it was  beneficial that  the audit  be summarized,  and                                                                   
then commented by Mr. Abbott.                                                                                                   
                                                                                                                                
9:37:06 AM                                                                                                                    
                                                                                                                                
MIKE ABBOTT,  CHIEF EXECUTIVE  OFFICER, ALASKA MENTAL  HEALTH                                                                   
TRUST  AUTHORITY, introduced  himself.  He provided  comments                                                                   
on  the audit.  He  thanked  the  executive director  of  the                                                                   
Permanent Fund Corporation, Angela Rodell.                                                                                      
                                                                                                                                
9:49:45 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  queried  the  personnel  changes  and  the                                                                   
number of new Board members.                                                                                                    
                                                                                                                                
Mr. Abbott replied  that the Board chair would  introduce the                                                                   
trustees.  He stated that  he was  a new  CEO in the  current                                                                   
year.  He remarked  that the Land  Director  was also  new in                                                                   
the current  year. He also  noted that  there was a  new CFO,                                                                   
who came from the North Slope.                                                                                                  
                                                                                                                                
Senator  Bishop  wondered  what   was  done  to  protect  the                                                                   
trustees through trustee training.                                                                                              
                                                                                                                                
Mr.  Abbott replied  that the  trust had  taken advantage  of                                                                   
the  resources  available  through   the  Department  of  Law                                                                   
(LAW).                                                                                                                          
                                                                                                                                
9:54:20 AM                                                                                                                    
                                                                                                                                
Senator  Bishop   encouraged  annual  trustee   training  for                                                                   
fiduciary  responsibility,  and  wondered  whether  a  policy                                                                   
could be purchased to hold the trustees harmless.                                                                               
                                                                                                                                
Mr.  Abbott  replied   that  most  of  that   protection  was                                                                   
provided through the state's risk management program.                                                                           
                                                                                                                                
Senator  Olson noted  that audits  were  unpleasant. He  felt                                                                   
that the  most troubling thing  was on page 41,  which showed                                                                   
that   multiple   trustees   were    intentionally   avoiding                                                                   
discussions.  He  wondered  whether  any  Board  members  had                                                                   
resigned because of the situation.                                                                                              
                                                                                                                                
Mr. Abbott  replied in  the affirmative.  He stated  that the                                                                   
Board Chair resigned  during the time that  the poor behavior                                                                   
was occurring. There  was also significant changeover  on the                                                                   
Board.                                                                                                                          
                                                                                                                                
Senator  Olson   wondered  whether   corrective  action   had                                                                   
occurred by the personnel and Board.                                                                                            
                                                                                                                                
Ms. Curtis stated that she could  not comment on that issue.                                                                    
                                                                                                                                
9:59:52 AM                                                                                                                    
                                                                                                                                
Mr.  Abbott  discussed,  "Legislative   Presentation,  Senate                                                                   
Finance Committee" (copy on file).                                                                                              
                                                                                                                                
10:00:22 AM                                                                                                                   
                                                                                                                                
MARY  JANE   MICHAEL,  CHAIR,  ALASKA  MENTAL   HEALTH  TRUST                                                                   
AUTHORITY, briefly highlighted her background.                                                                                  
                                                                                                                                
Ms. Michael highlighted slide 2, "Trustees":                                                                                    
                                                                                                                                
     ?Mary Jane Michael, chair                                                                                                  
     ?Jerome Selby, vice chair                                                                                                  
     ?Carlton Smith, secretary                                                                                                  
     ?Vern? Boerner                                                                                                             
     ?Christopher Cooke                                                                                                         
     ?Laraine Derr                                                                                                              
     ?Paula Easley                                                                                                              
                                                                                                                                
Mr. Abbott highlighted slide 3, "Trust Beneficiaries":                                                                          
                                                                                                                                
     Beneficiaries include Alaskans who experience:                                                                             
          ?Mental illnesses                                                                                                     
          ?Developmental disabilities                                                                                           
          ?Alzheimer's disease and related dementias                                                                            
          ?Traumatic brain injuries                                                                                             
          ?Substance abuse disorders                                                                                            
     The Trust also works in prevention and early                                                                               
     intervention services for individuals at risk of                                                                           
     becoming beneficiaries.                                                                                                    
                                                                                                                                
Mr.  Abbott   addressed  slide  4,  "Grant   Impacts,  Grants                                                                   
Awarded in FY18":                                                                                                               
                                                                                                                                
       ousing                                                                                                                   
     ?Medicaid 1115 Behavioral Health Waiver                                                                                    
     ?Alaska Psychiatric Institute (API)                                                                                        
     ?Crisis Stabilization                                                                                                      
     ?Early Childhood Prevention/Early Intervention                                                                             
     ?Reentry                                                                                                                   
                                                                                                                                
Mr. Abbott  looked at  slide 5,  "FY20 Anticipated  Available                                                                   
Funding."                                                                                                                       
                                                                                                                                
Mr. Abbott  highlighted  slide 6, "Trust  Land Office  Annual                                                                   
Revenue."                                                                                                                       
                                                                                                                                
Mr. Abbott  addressed slide 7,  "Trust Land Office  Principal                                                                   
and Revenue."                                                                                                                   
                                                                                                                                
10:11:03 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof  looked at slide 5, and  queried the total                                                                   
portfolio at the Permanent Fund.                                                                                                
                                                                                                                                
Mr. Abbott  responded that the  Trust had approximately  $550                                                                   
million of  current invested assets.  She stressed  that they                                                                   
were primarily  managed  by the Alaska  Permanent Fund,  with                                                                   
some managed  by the Department  of Revenue (DOR),  through a                                                                   
slightly  different management  process. He  stated that  the                                                                   
$550 million  was a  combination of  the Mental Health  Trust                                                                   
Fund, was the balance and reserves.                                                                                             
                                                                                                                                
Co-Chair  Stedman wondered  how long  the modified  endowment                                                                   
structure been in place.                                                                                                        
                                                                                                                                
Mr. Abbott replied  that it was much lower in  the early days                                                                   
of the  trust at a  2 percent draw,  and had grown  over time                                                                   
as the  trust assets  had grown  and stabilized. He  remarked                                                                   
that the  4.25 percent draw had  been in place for  more than                                                                   
ten years.                                                                                                                      
                                                                                                                                
Co-Chair von  Imhof looked at  slide 6. She pointed  out that                                                                   
while the  portfolio was managed  by the Permanent  Fund, the                                                                   
asset mix  was a little  different than other  endowments due                                                                   
to the  million acres of  land with different  resources. She                                                                   
wondered  how the resources  were considered  with regard  to                                                                   
cash flow.                                                                                                                      
                                                                                                                                
10:15:22 AM                                                                                                                   
                                                                                                                                
Mr.  Abbott  discussed  the  highlights  of  the  Trust  Land                                                                   
Office.                                                                                                                         
                                                                                                                                
10:21:04 AM                                                                                                                   
                                                                                                                                
Senator  Wielechowski looked  at  slide 5.  He surmised  that                                                                   
the million acres was generating $4.2 million.                                                                                  
                                                                                                                                
Mr.  Abbott  replied  that  the   million  acres  was  likely                                                                   
generating closer  to $12 million. The $4.8  million was what                                                                   
was expendable on  an annual basis. The balance  was invested                                                                   
permanently.                                                                                                                    
                                                                                                                                
Senator  Wielechowski wondered  whether $10  to $20  per acre                                                                   
was a reasonable  return, and queried the historic  return of                                                                   
the $550 million invested by the Permanent Fund.                                                                                
                                                                                                                                
Mr. Abbott  replied that the  Trust assets that  were managed                                                                   
by the  Permanent Fund were  comingled asset with  the Alaska                                                                   
Permanent  Fund. He stated  that roughly  one percent  of the                                                                   
corporation's  fund under  management  were  trust funds.  He                                                                   
stated  that  the  Trust  was  a  small  participant  in  the                                                                   
corporation's activity.  He noted that historic  returns have                                                                   
swung in good or bad directions.                                                                                                
                                                                                                                                
Senator  Micciche requested  details on  what the lands  were                                                                   
producing.  He  queried  the   high  value  of  minerals  and                                                                   
materials in FY 13 versus the other years.                                                                                      
                                                                                                                                
Mr. Abbott  agreed to follow up  with detail. He  stated that                                                                   
one of  the Trust's  greatest producing  assets was  the Fort                                                                   
Knox Gold  Mine, because  it was  the landowner  for most  of                                                                   
the state lands associated with that mine.                                                                                      
                                                                                                                                
10:25:09 AM                                                                                                                   
                                                                                                                                
Senator  Micciche surmised  that  the green  section was  the                                                                   
earnings  income that  can be  spent, and  the principal  was                                                                   
the  earnings  for the  year  that  were deposited  into  the                                                                   
permanent investment.                                                                                                           
                                                                                                                                
Mr. Abbott replied in the affirmative.                                                                                          
                                                                                                                                
Senator  Wielechowski  wondered if  the  total  value of  the                                                                   
million acres was known.                                                                                                        
                                                                                                                                
Mr.  Abbott  replied  in  the  negative.  The  processing  of                                                                   
appraising the  acres would be  extremely expensive,  and was                                                                   
not otherwise required by auditing processes.                                                                                   
                                                                                                                                
Co-Chair von Imhof requested the balance of the principal.                                                                      
                                                                                                                                
Co-Chair Stedman  remarked that there  should be a  review of                                                                   
the  payout and  the  averaging,  and what  is  good and  bad                                                                   
about that issue.                                                                                                               
                                                                                                                                
Senator Wielechowski  stressed that he was interested  in the                                                                   
revenue generated  from that million acres, and  would like a                                                                   
rough  estimate.  He  wondered  whether the  trust  had  ever                                                                   
considered selling  that land, and investing  that money with                                                                   
a 8 to 10 percent return.                                                                                                       
                                                                                                                                
Mr. Abbott replied  in the affirmative, and  stated that they                                                                   
were an active land seller.                                                                                                     
                                                                                                                                
10:30:32 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman added  that  enhancing waterfront  property                                                                   
should not have a setback.                                                                                                      
                                                                                                                                
Mr.  Abbott  discussed  slide  8,  "Trust  Investment  Payout                                                                   
History."                                                                                                                       
                                                                                                                                
Mr.  Abbott   highlighted  slide   9,  "FY  20   Trust  Grant                                                                   
Allocations":                                                                                                                   
                                                                                                                                
     Authority Grants                                                                                                           
     $12,336.7                                                                                                                  
     Designated grants to community providers, nonprofits,                                                                      
     local governments and Tribal organizations.                                                                                
     Includes $1.7 M in mini grants.                                                                                            
                                                                                                                                
     MHTAAR                                                                                                                     
     $10,735.7 Designated grants to state agencies, require                                                                     
     receipt authority                                                                                                          
                                                                                                                                
Mr. Abbott addressed slide 10, "Administrative Budgets":                                                                        
                                                                                                                                
     Trust Authority                                                                                                            
          ?Trustees approved: $4,135.3                                                                                          
          ?Governor's proposed budget: $TBD                                                                                     
     Trust Land Office                                                                                                          
          ?Trustees approved: $4,568.4                                                                                          
          ?Governor's proposed budget: $TBD                                                                                     
     Same administrative spending levels as FY19                                                                                
                                                                                                                                
Mr. Abbott looked at slide 11, "Trust Priorities":                                                                              
                                                                                                                                
     ?Medicaid Reform                                                                                                           
     ?Criminal Justice Reform                                                                                                   
                                                                                                                                
     Established Focus Areas                                                                                                    
     ?Disability Justice                                                                                                        
     ?Substance Abuse Prevention and Treatment                                                                                  
     ?Beneficiary Employment and Engagement                                                                                     
     ?Housing and Long-term Services and Supports                                                                               
                                                                                                                                
Mr. Abbott discussed slide 12, "Mental Health Budget Bill":                                                                     
                                                                                                                                
     ?Trustees   approved   $10.7M  in   Mental   HealthTrust                                                                   
     Authority   Authorized    Receipts   (MHTAAR)   to   SOA                                                                   
     departments   for  beneficiary   related  programs   and                                                                   
     projects                                                                                                                   
                                                                                                                                
     ?Trustees  also made  recommendations  of $5.5Min  GF/MH                                                                   
     funds to the Governor and Legislature                                                                                      
                                                                                                                                
10:35:48 AM                                                                                                                   
                                                                                                                                
Mr.    Abbott   looked    at    slide    13,   "FY20    GF/MH                                                                   
Recommendations."                                                                                                               
                                                                                                                                
Mr. Abbott displayed slide 14, "Advocacy":                                                                                      
                                                                                                                                
      Promote  understanding  of  our beneficiaries  and  the                                                                   
     services needed to support them in the community                                                                           
                                                                                                                                
     ?Focus  on  programs and  laws  that will  impact  Trust                                                                   
     beneficiaries                                                                                                              
                                                                                                                                
     ?Work with  state departments,  lawmakers and  others to                                                                   
     advise on funding and policies                                                                                             
                                                                                                                                
Co-Chair von  Imhof noted  that the  income was described  in                                                                   
slide  5  as  $31.7  million.   She  noted  the  spending  as                                                                   
outlined  throughout the  slide deck.  She requested  a slide                                                                   
that  showed  income and  all  expenses  in the  future.  She                                                                   
noted that the  money was the mental health  trust money from                                                                   
the GF, because it was DGF.                                                                                                     
                                                                                                                                
Mr. Abbott agreed.                                                                                                              
                                                                                                                                
Co-Chair  Stedman stated  that  Co-Chair von  Imhof would  be                                                                   
the  subcommittee  chair for  the  Department  of Health  and                                                                   
Social Services.                                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:40:49 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:40 a.m.                                                                                         

Document Name Date/Time Subjects
013119 AMHT response to Audit.pdf SFIN 1/31/2019 9:00:00 AM
AMHTA
013119 AMHTA-Final-Audit.pdf SFIN 1/31/2019 9:00:00 AM
AMHTA
013119 Legislative Presentation 1.29.19 - S FIN.pdf SFIN 1/31/2019 9:00:00 AM
AMHTA