Legislature(2019 - 2020)SENATE FINANCE 532

02/22/2019 09:00 AM FINANCE

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Audio Topic
09:02:25 AM Start
09:05:08 AM SB20
09:05:08 AM Departmental Review: Health and Social Services
10:23:49 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Departmental Review Continued: TELECONFERENCED
- Health & Social Services - Rescheduled from
- Item Below Removed from Agenda -
+ Legislative Finance Overview & Analysis by David TELECONFERENCED
Teal, Director of Legislative Finance
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 22, 2019                                                                                          
                         9:02 a.m.                                                                                              
9:02:25 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 Lyman Hoffman                                                                                                           
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Mike Shower                                                                                                             
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Lacey  Sanders, Budget  Director, Office  of Management  and                                                                    
Budget;  Sana   Efird,  Administrative   Services  Director,                                                                    
Department  of   Health  and  Social  Services,   Office  of                                                                    
Management and  Budget; Senator  Cathy Giessel;  Senator Mia                                                                    
Costello; Senator Elvi Gray-Jackson; Senator Gary Stevens.                                                                      
SB 20     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          SB 20 was HEARD and HELD in committee for further                                                                     
Co-Chair Stedman  remarked that the committee  endeavored to                                                                    
provide the senators and the  public with a broader feel for                                                                    
the budget due to the  severe changes in policy. He informed                                                                    
that  the Department  of Health  and Social  Services (DHSS)                                                                    
Senate  Finance Subcommittee  would be  chaired by  Co-Chair                                                                    
von  Imhof.  He thought  there  would  be many  subcommittee                                                                    
meetings  as  DHSS  was  one of  the  state's  biggest  cost                                                                    
drivers  and  the  state  was trying  to  better  align  its                                                                    
expenditures with its revenues.                                                                                                 
SENATE BILL NO. 20                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  making appropriations  under art.  IX,                                                                    
     sec. 17(c),  Constitution of the State  of Alaska, from                                                                    
     the constitutional  budget reserve fund;  and providing                                                                    
     for an effective date."                                                                                                    
9:05:08 AM                                                                                                                    
^DEPARTMENTAL REVIEW: HEALTH and SOCIAL SERVICES                                                                              
9:05:08 AM                                                                                                                    
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, introduced herself.                                                                                                     
SANA EFIRD, ADMINISTRATIVE  SERVICES DIRECTOR, DEPARTMENT OF                                                                    
HEALTH  AND  SOCIAL  SERVICES,   OFFICE  OF  MANAGEMENT  and                                                                    
BUDGET,  relayed   that  she  would  discuss   a  high-level                                                                    
overview  of the  major budget  changes in  the presentation                                                                    
"State of Alaska;  Office of Management and  Budget; FY 2020                                                                    
Governor's  Amended  Budget;   Presentation  to  the  Senate                                                                    
Finance Committee; February 22,  2019; Budget Director Lacey                                                                    
Sanders" (copy on file)."                                                                                                       
Ms.  Efird looked  at  slide 2,  "Department  of Health  and                                                                    
Social Services."                                                                                                               
Ms. Efird turned  to slide 3, "FY2020  Budget: Department of                                                                    
Health  &  Social Services,"  which  showed  two bar  graphs                                                                    
entitled  'Funding   Comparison,'  and   'Budgeted  Position                                                                    
Comparison.'  She  specified  that the  slide  depicted  the                                                                    
funding  totals and  a comparison  of the  FY 19  management                                                                    
plan to  the governor's  FY 20  proposed amended  budget. On                                                                    
the left side, the graphs showed  the FY 19 total budget was                                                                    
$3,249,951,500; compared  to the  proposed FY  20 governor's                                                                    
amended   budget    of   $2,468,798,400,   which    was   an                                                                    
approximately 25 percent reduction.                                                                                             
Ms. Efird continued to address  slide 3. She listed the fund                                                                    
types  and amounts  and noted  that the  largest portion  of                                                                    
"other" funds  were interagency  receipts. The  General Fund                                                                    
(GF)  $908,655,100  was  composed  of  Unrestricted  General                                                                    
Funds  (UGF) and  Designated General  Funds  (DGF). The  UGF                                                                    
made  up 90  percent  of  the GF  total,  and  the other  10                                                                    
percent  was  DGF.  The  largest portion  of  DGF  was  from                                                                    
Pioneer  Home  resident   receipts,  Social  Security  child                                                                    
support collections, background check fees, and other fees.                                                                     
9:08:24 AM                                                                                                                    
Co-Chair Stedman asked if Ms.  Efird could break down the GF                                                                    
component of the FY 19 Management Plan.                                                                                         
Ms. Efird stated that in the  FY 19 Management Plan, the UGF                                                                    
funding was $1,146,733,100; and DGF was $87,213,100.                                                                            
Co-Chair Stedman asked for Ms.  Efird to review the position                                                                    
Ms. Efird  elucidated that the  right-hand graph on  slide 3                                                                    
showed the changes  in budgeted positions. There  was a loss                                                                    
of 291  positions from FY  19 to  the FY 20  amended budget.                                                                    
The  majority  of the  positions  (about  268) were  in  the                                                                    
Alaska Psychiatric  Institute (API).  She reminded  that the                                                                    
department  was exploring  different  private management  of                                                                    
API in  FY 20.  The positions  were shown  as moving  into a                                                                    
contractual  line  and were  not  being  deleted. The  other                                                                    
largest portion of  positions being deleted was  in the Nome                                                                    
Youth  Facility. There  were 16  positions in  the treatment                                                                    
and  detention services,  13 of  which were  proposed to  be                                                                    
lost. Eleven of the positions were currently filled.                                                                            
Co-Chair  Stedman  asked Ms.  Efird  to  help the  committee                                                                    
understand the reduction in federal funds.                                                                                      
Ms.  Efird stated  that generally  the largest  reduction in                                                                    
federal  funds from  FY  19 to  FY 20  was  in the  Medicaid                                                                    
Co-Chair  Stedman asked  if the  reduction was  allocated or                                                                    
Ms. Efird  stated that  the reduction  was allocated  in the                                                                    
Medicaid Services  component, and OMB was  currently working                                                                    
on a plan  to show specifics of what the  reduction would be                                                                    
allocated for.                                                                                                                  
Senator  Wielechowski referenced  Ms. Efird's  remarks about                                                                    
privatization  of  API.  He noted  that  the  change  record                                                                    
detail showed a shift of  $28 million from personal services                                                                    
to services  and wondered if  the amount signified  the cost                                                                    
for  exploring privatization,  or  the  cost of  privatizing                                                                    
Co-Chair Stedman  stated that the  next slide  would address                                                                    
the subject of API.                                                                                                             
9:12:34 AM                                                                                                                    
Ms. Efird  advanced to slide  4, "FY2020  Budget: Department                                                                    
of Health and Social Services Snapshot ($ Thousands)":                                                                          
     ? Increase Behavioral Health Opioid Grants in the                                                                          
     offices of Epidemiology and Substance Misuse and                                                                           
     Addiction Prevention (+6,120.0 Fed)                                                                                        
     ? Alaska Psychiatric Institute:                                                                                            
          ? Explore Privatization of the Alaska Psychiatric                                                                     
          Institute (-$0.0, PFT -248)                                                                                           
     ? Alaska Pioneer Homes:                                                                                                    
          ? Fund Alaska Pioneer Homes Payment Assistance                                                                        
          (+$15,000.0 GF)                                                                                                       
          ? Implement Rate Increase to Cover Full Cost of                                                                       
          ? Realign Pioneer Home Funding (-$16,792.4 GF, -                                                                      
          $16,386.2 GF/MH)                                                                                                      
     ? Medicaid:                                                                                                                
          ? Implement Medicaid Services Cost Containment                                                                        
          Measures and Reforms (-$225,000.0 GF, -$450,000.0                                                                     
          ? Eliminate Adult Dental Medicaid Benefit (-                                                                          
          $8,273.6 GF, -$18,730.9 Fed)                                                                                          
          ? $271 million reduction from status quo                                                                              
         projections (inclusive of bullets above)                                                                               
Ms.  Efird addressed  Senator  Wielechowski's question.  She                                                                    
explained that  the state was  in a contract  for management                                                                    
services  through  the  end  of June,  with  the  option  of                                                                    
continuing  the  contract.  The  fund  shift  reflected  the                                                                    
policy decision to continue the contract.                                                                                       
Senator  Wielechowski  asked if  the  $28  million shift  to                                                                    
services was for  privatizing API, or if the  funds were for                                                                    
exploring privatizing API.                                                                                                      
Ms. Efird stated that when  the budget was put together, the                                                                    
administration  was exploring  the option  of privatization.                                                                    
Since that time, the commissioner  had declared an emergency                                                                    
declaration for API  and there was a contract  for a private                                                                    
entity to manage the facility.                                                                                                  
Senator Hoffman  asked about the  $450 million  reduction in                                                                    
federal funds and asked if any federal approval was needed.                                                                     
Ms.  Efird explained  that the  department was  working with                                                                    
the  Centers for  Medicare and  Medicaid  Services (CMS)  to                                                                    
explore  the  possibility  for  another  1115  Demonstration                                                                    
Project, which  would require  federal approval.  There were                                                                    
also other  internal initiatives to examine  ways to contain                                                                    
and sustain the Medicaid budget.                                                                                                
Co-Chair Stedman  asked about the  significance of  the 1115                                                                    
Ms. Efird explained  that the 1115 waiver was  an option for                                                                    
states to  compile a  budget request  to CMS  to look  at an                                                                    
innovative  way to  look at  covering eligibility  groups or                                                                    
additional services that needed to be approved.                                                                                 
9:15:46 AM                                                                                                                    
Senator Hoffman  thought the administration was  putting the                                                                    
cart before the  horse. He suggested that  the waivers would                                                                    
be  obtained  before  the reduction.  He  asked  what  would                                                                    
happen if the waiver was  not granted, and the authorization                                                                    
to receive  the funds was not  in the budget. He  thought it                                                                    
seemed  like  there  was  a major  gamble  being  taken.  He                                                                    
commented on the seriousness of the situation.                                                                                  
Co-Chair Stedman asked for an  explanation and for Ms. Efird                                                                    
to comment on the flexibility the  state had or did not have                                                                    
pertaining to federal funds. He  mentioned getting billed in                                                                    
a supplemental.                                                                                                                 
Ms.  Efird stated  that the  bill also  contained additional                                                                    
language requesting approval for  allowing the department to                                                                    
be able  to use  the current funds  in the  Statutory Budget                                                                    
Reserve  (SBR)  (which  she  believed   to  be  around  $172                                                                    
million)  as  a  backstop  if  approval  from  CMS  was  not                                                                    
Senator   Hoffman  commented   that  in   other  pieces   of                                                                    
legislation  there were  fiscal notes  that followed  public                                                                    
policy. He thought the public  policy question of making the                                                                    
changes described by Ms. Efird  should be included in SB 20.                                                                    
He  thought   that  the  budget  presented   should  not  be                                                                    
contingent  upon  legislation.  He  asked why  there  was  a                                                                    
deviation from the norm when  it was critical in health care                                                                    
delivery to the citizens of the state.                                                                                          
Ms. Efird stated  that there were many  initiatives that the                                                                    
department  was   exploring  that  would  not   require  CMS                                                                    
approval.  The intention  was not  to harm  Alaskans in  any                                                                    
way. The  department wanted to provide  the most sustainable                                                                    
Medicaid program to cover low  income Alaskans; but with the                                                                    
policy  direction   for  the  current   administration,  the                                                                    
department  needed to  match revenues  to expenditures.  She                                                                    
reminded that Medicaid was one  of the largest GF spends for                                                                    
the state.                                                                                                                      
9:19:31 AM                                                                                                                    
Co-Chair  Stedman  asked  if Ms.  Efird  could  address  the                                                                    
reason why the SBR was used.  He reminded that the state had                                                                    
two  major  savings  accounts -  the  Constitutional  Budget                                                                    
Reserve (CBR) and  the SBR. He thought it seemed  out of the                                                                    
ordinary  of  historical  practices to  access  the  savings                                                                    
account as proposed. He asked why  it should be used and why                                                                    
the committee should consider changing the proposal.                                                                            
Ms.  Sanders stated  that  the  SBR fund  was  chosen as  an                                                                    
account within  the state that  had a sufficient  balance to                                                                    
meet the  needs. She  asserted that  DHSS was  undertaking a                                                                    
significant list.  The funds were  proposed as  a multi-year                                                                    
appropriation that  would cover  FY 19  through FY  21 while                                                                    
the  department   worked  to  get  approval   from  CMS  and                                                                    
implement the changes.                                                                                                          
Co-Chair  Stedman  expected  the   committee  would  take  a                                                                    
"jaundiced" look at accessing the SBR.                                                                                          
Senator Hoffman commented that the  topic was federal funds.                                                                    
He emphasized  that the  budget could  not be  balanced with                                                                    
federal  funds. He  did not  think the  testifier's comments                                                                    
were  apropos  to the  question  at  hand of  balancing  the                                                                    
budget.  He thought  the proposed  budget  was playing  with                                                                    
people's lives.                                                                                                                 
Co-Chair  von  Imhof  considered  the  upcoming  slides  and                                                                    
commented  that it  would be  helpful if  the timing  of the                                                                    
various proposals was  explained. She did not  think many of                                                                    
the items could  be rolled out July 1, 2019;  and there were                                                                    
critical components to accomplish  first. She thought it was                                                                    
important  to  include  rationale  behind  each  forthcoming                                                                    
bullet  point. She  thought the  proposed cuts  were lacking                                                                    
Senator Shower referenced slide 3  and asked how many of the                                                                    
proposed eliminated positions had been vacant.                                                                                  
Ms. Efird did not have the  number at hand but restated that                                                                    
the majority of the positions  were from API. She reiterated                                                                    
that  the bulk  of the  positions  were for  the Nome  Youth                                                                    
Facility; and of the 13 positions, 11 were filled.                                                                              
9:24:10 AM                                                                                                                    
Ms. Efird  stated that the  next two slides  were high-level                                                                    
overviews  of major  reduction  proposed  in the  governor's                                                                    
amended budget.                                                                                                                 
Ms. Efird  spoke to slide  5, "FY2020 Budget:  Department of                                                                    
Health and Social Services Snapshot ($ Thousands)":                                                                             
     ? Repeal Senior Benefits Payment Program (-$19,986.1                                                                       
     ? Reduce Adult Public Assistance (-$14,700.0 GF)                                                                           
          ? Move to 1983 standard for maintenance of effort                                                                     
     ? Reduce Temporary Assistance for Needy Families                                                                           
    (TANF) Maintenance of Effort (MOE) (-$16,912.0 GF)                                                                          
             Work with federal partners to reduce MOE                                                                           
     ? Repeal Hold Harmless Program (-$17,724.7 Other)                                                                          
          ? Provide option to receive dividends through                                                                         
          monthly payments to minimize disruption to                                                                            
          assistance recipients                                                                                                 
     ? Close Youth Detention and Treatment at Nome Youth                                                                        
     Facility (-$2,000.0 GF)                                                                                                    
     ? Reduce Public Health Nursing (-$2,000.0 GF)                                                                              
     ? Statewide Support  Executive Branch 50% Travel                                                                           
     Reduction (-$448.6 GF)                                                                                                     
Ms. Efird  reminded of  the opioid crisis  in the  state and                                                                    
noted that the  increased federal funds were  to support the                                                                    
opioid  emergency.  She  restated  that  when  the  proposed                                                                    
budget   was   being   composed,   there   had   been   many                                                                    
conversations  about the  right  path to  ensure safety  for                                                                    
patients  and staff  at  API.  There had  been  a number  of                                                                    
emergency  situations at  the institute,  and  API had  been                                                                    
under  a corrective  action plan  and  the commissioner  had                                                                    
declared an  emergency. There  was a  contract in  place for                                                                    
management  of API,  through June  30. If  deliverables were                                                                    
met, there  was a second  phase to engage with  a contractor                                                                    
to take over management.                                                                                                        
Ms.  Efird  continued  to address  slide  5.  She  discussed                                                                    
Alaska  Pioneer  Homes, and  noted  that  there would  be  a                                                                    
proposed  increase  to  residents  that  would  reflect  the                                                                    
actual cost  of providing the  service. Along with  the rate                                                                    
increases, there would  also be a budgeted $15  million as a                                                                    
payment  assistance   grant  program   to  ensure   that  no                                                                    
residents  were   evicted,  and  low-income   seniors  would                                                                    
continue to be admitted per regulation.                                                                                         
Ms.  Efird discussed  reductions  to Medicaid  as listed  on                                                                    
slide 4. She  stated that the administration  was working to                                                                    
explore various  options and ways that  the department would                                                                    
meet the reduction.                                                                                                             
9:27:52 AM                                                                                                                    
Senator Wielechowski  asked about the Medicaid  reduction of                                                                    
$225 million.  He asked for further  explanation about items                                                                    
listed in  the change record  detail. He asked if  there was                                                                    
concern  about  how a  rate  change  would impact  physician                                                                    
availability for Medicaid patients.                                                                                             
Ms.  Efird  did not  feel  qualified  to discuss  diagnosis-                                                                    
related  groups  and  other options  being  considered.  She                                                                    
stated that the  department was working on a  full plan that                                                                    
would be  provided to the  committee that would  outline the                                                                    
exact steps  and options that  the department felt  would be                                                                    
achievable in  FY 20. Additionally,  the plan  would outline                                                                    
stages of implementation.                                                                                                       
Co-Chair  Stedman asked  Ms. Efird  to  bring more  detailed                                                                    
information    back   to    committee   regarding    Senator                                                                    
Wielechowski's question.                                                                                                        
Senator Bishop  asked if there  was going to be  an increase                                                                    
in fees for current residents of pioneer homes.                                                                                 
Ms. Efird  answered in the  affirmative and stated  that the                                                                    
proposed rates would be implemented  July 1, 2019 for FY 20.                                                                    
She noted that there would  be a required regulation process                                                                    
with  public  comment. She  continued  that  the budget  was                                                                    
built on the rate increases going to into effect.                                                                               
9:30:23 AM                                                                                                                    
Senator  Micciche asked  about  the length  of the  previous                                                                    
1115 waiver process.                                                                                                            
Ms. Efird reminded that she  had started in her current role                                                                    
only  a  month previously.  She  recalled  that the  current                                                                    
process  had  been ongoing  for  over  two years.  The  1115                                                                    
waiver  demonstration  project  had been  approved  for  the                                                                    
portion for  substance use disorder treatment  services, but                                                                    
coverage of  increased behavioral health services  was still                                                                    
awaiting approval from CMS.                                                                                                     
Co-Chair  Stedman   thought  more  information   was  needed                                                                    
regarding the pioneer home rates.  He shared that he had two                                                                    
family members that had passed  away at the Pioneer Home and                                                                    
had  two members  that were  current  residents. He  assumed                                                                    
that the state was not going to evict current residents.                                                                        
Ms. Efird answered in the affirmative.                                                                                          
Co-Chair  Stedman asked  if the  intention was  to make  the                                                                    
homes  self-supporting.  He asked  if  there  were plans  to                                                                    
liquidate, sell, or privatize pioneer homes.                                                                                    
Ms.  Efird  was not  aware  of  plans  to do  what  Co-Chair                                                                    
Stedman asked.                                                                                                                  
Co-Chair Stedman  understood that  rates would  be adjusted.                                                                    
He   recalled  that   Level  2   for   mid-rate  care   cost                                                                    
approximately $5,000 per month, which would be doubled.                                                                         
Ms.  Efird did  not have  the proposed  rates available  for                                                                    
consideration.  She  believed  that  what  Co-Chair  Stedman                                                                    
stated  was  correct. She  shared  that  the department  was                                                                    
considering  going  back to  five  levels  of care  to  more                                                                    
accurately  "levelize"  the cost  of  care  with the  actual                                                                    
needs of each  resident. She did not know the  amount of the                                                                    
proposed rate  increases but stated  that the  figures would                                                                    
soon be released and open for the public comment process.                                                                       
9:34:10 AM                                                                                                                    
Co-Chair   Stedman  recalled   that  residents   produced  a                                                                    
financial disclosure  and list of  assets upon entry  to the                                                                    
Alaska  Pioneer  Home.  He  thought if  a  person  had  over                                                                    
$10,000  in liquid  assets a  person would  have to  pay. He                                                                    
thought most  people's major  asset was  a home.  He thanked                                                                    
the department  for working with  individuals to  sell homes                                                                    
and pay the bill. He  understood that under the new proposed                                                                    
program,  he a  person had  to be  financially qualified  to                                                                    
move into  the home. He  asked about residents that  did not                                                                    
have resources to cover the fees.                                                                                               
Ms. Efird  stated that under  the proposal, with  the Needs-                                                                    
Based Assistance  Grant Program, individuals  would continue                                                                    
to  be supported  in the  Pioneer homes.  The administration                                                                    
was not proposing  to evict Pioneer Home  residents based on                                                                    
income. The  budget proposed to  show the cost of  the state                                                                    
providing the service. She referenced a waitlist process.                                                                       
Co-Chair  Stedman asked  if an  individual  could enter  the                                                                    
Alaska Pioneer Home if they had no resources.                                                                                   
Ms.  Efird  answered in  the  affirmative.  She stated  that                                                                    
individuals would still be able  to enter the homes based on                                                                    
current regulations. The budget was  trying to show the true                                                                    
cost  of  providing the  service  and  was requiring  income                                                                    
information so that those that  could afford to pay the cost                                                                    
would be billed.                                                                                                                
9:37:41 AM                                                                                                                    
Co-Chair Stedman  thought the  practice Ms.  Efird described                                                                    
was already  in place. He had  run an account up  to $50,000                                                                    
before he  sold his  father's house. He  asked Ms.  Efird to                                                                    
get  back to  the  committee with  a  comparison of  current                                                                    
policy  and  what was  proposed.  He  thought it  seemed  as                                                                    
though what was  being presented was a  monthly increase. He                                                                    
was personally  concerned about Alaska Pioneer  Home policy.                                                                    
He  recalled  that the  first  home  was constructed  during                                                                    
territorial days.  He was concerned about  a colossal policy                                                                    
error with regard to caring for the state's elders.                                                                             
Ms. Efird  stated the department  would provide  more detail                                                                    
during the subcommittee process.  She addressed the topic of                                                                    
privatization   and  affirmed   that   the  department   was                                                                    
exploring  contracting  out  hospitality  services  if  cost                                                                    
effective. The Juneau Pioneer Home  did contract out laundry                                                                    
services and other hospitality services.                                                                                        
Co-Chair Stedman  asked Ms. Efird to  provide the enrollment                                                                    
of current Alaska Pioneer Homes  by home with information as                                                                    
to  which   residents  were  paying   or  were   on  payment                                                                    
assistance.  He commented  that  he had  not seen  extremely                                                                    
wealthy people as residents of Pioneer Homes.                                                                                   
9:41:59 AM                                                                                                                    
Senator Micciche  considered the $271 million  in reductions                                                                    
to  Medicaid as  proposed on  slide 4.  He did  not see  any                                                                    
policy  changes that  would take  a  couple of  years to  be                                                                    
approved. He asked if Medicaid  eligibility would be changed                                                                    
in  Alaska to  result in  real reductions.  He asked  if the                                                                    
administration was going to stop  the mismanagement, such as                                                                    
Indian Health  Service (IHS) "leakage" that  should not have                                                                    
occurred. He  thought what was  proposed on the  slide would                                                                    
result  in   a  supplemental  budget  rather   than  a  real                                                                    
Senator Micciche  continued his  remarks and  reiterated the                                                                    
concept of  a tax  shift to local  communities. He  used the                                                                    
example of emergency care in community hospitals.                                                                               
Co-Chair Stedman  asked for  Ms. Efird  to address  the $200                                                                    
million   IHS  issue   when  answering   Senator  Micciche's                                                                    
Ms. Efird  stated that the  intention of the  department was                                                                    
to provide  the committee with very  specific information on                                                                    
what the  department felt were achievable  reductions in the                                                                    
Medicaid program that could be  implemented in FY 20 and for                                                                    
the next few  years. She noted that the  department had been                                                                    
looking at Medicaid  reform for the past  several years, and                                                                    
continued reform  initiatives would  be "a heavy  lift." She                                                                    
stated that it  was the department's intention  to forward a                                                                    
formal more solid plan, with  consideration of the "backstop                                                                    
language" included in  the budget bill in the  case that the                                                                    
department was unable to meet the CMS approval timeframes.                                                                      
9:45:31 AM                                                                                                                    
Senator  Micciche thought  that  the  department had  fought                                                                    
real reductions  for years. He reiterated  that real changes                                                                    
took time.  He did not  know how  the state could  expect to                                                                    
see the  reductions in FY  20. He thought  wholesale changes                                                                    
in  eligibility   and  the  waiver  process   was  extremely                                                                    
unlikely to occur in FY 20.                                                                                                     
Co-Chair von  Imhof considered  the proposed  elimination of                                                                    
the Adult Dental Medicaid Benefit  as listed on slide 4. She                                                                    
asked why  the item  was chosen for  elimination in  lieu of                                                                    
other optional services items.                                                                                                  
Ms. Efird  affirmed that Adult  Dental had been chosen  as a                                                                    
policy  decision.  There  would still  be  emergency  dental                                                                    
services  available under  the Medicaid  Healthcare Services                                                                    
Co-Chair von Imhof was interested  in policy. She noted that                                                                    
there were 24 optional services,  and not all states offered                                                                    
all  24. She  thought it  might  be useful  to compare  with                                                                    
other states. When she talked  to health care providers that                                                                    
offered adult dental, they had  found adult dental was often                                                                    
something  that  would  bring   individuals  into  a  clinic                                                                    
because of the  pain involved and could  result in provision                                                                    
of additional  medical services.  She thought that  if adult                                                                    
dental services were lost, important  access to patients was                                                                    
lost.  She questioned  the comparative  importance of  other                                                                    
items on the optional services list.                                                                                            
9:48:46 AM                                                                                                                    
Senator Wielechowski  asked about  API. He had  seen studies                                                                    
that showed  that privatization of API  was the highest-cost                                                                    
option.  He thought  that the  change record  detail in  the                                                                    
proposed budget showed a  net savings through privatization.                                                                    
He wondered how  the savings was possible  when research had                                                                    
shown the opposite.                                                                                                             
Ms. Efird stated  that the budget did not show  a savings as                                                                    
a  result  of  privatization  of API.  She  thought  Senator                                                                    
Wielechowski observed  the movement of dollar  amount of all                                                                    
items into  the contractual  line items. The  department did                                                                    
not  contend  that privatization  of  API  would be  a  cost                                                                    
savings.  She  contended  that  the  basis  for  the  policy                                                                    
decision was for the safety of the patients and the staff.                                                                      
Senator Wielechowski  asked if there were  provisions in the                                                                    
collective  bargaining agreements  with  API employees  that                                                                    
dealt with the issue of privatization.                                                                                          
Ms.  Efird  stated  that  there  was  a  requirement  for  a                                                                    
feasibility  study within  the  bargaining agreement.  There                                                                    
had been a feasibility  study prepared two years previously.                                                                    
She was not  included in the union discussion.  She was sure                                                                    
the unions were in conversation regarding the requirements.                                                                     
Co-Chair Stedman  stated that at  a local level,  when there                                                                    
was  a hospital  closure  or sale  a  termination study  was                                                                    
required. He  mentioned the hospital  in Sitka. He  asked if                                                                    
there would  be a termination  study so the  committee would                                                                    
thoroughly  understand any  termination costs  with API.  He                                                                    
was interested in the same  question applied to the topic of                                                                    
the Alaska Marine Highway System (AMHS).                                                                                        
Ms. Efird was  not aware of a termination  study. She stated                                                                    
that the  department would be  happy to provide  more detail                                                                    
on API during the subcommittee process.                                                                                         
9:51:55 AM                                                                                                                    
Senator  Wielechowski  was  interested  in  considering  the                                                                    
withdrawal liability for API and  AMHS, and he thought there                                                                    
would  be  millions of  dollars  withdrawn  from the  Public                                                                    
Employee Retirement  System (PERS).  He was  also interested                                                                    
in analysis  of the cost  of potential lawsuits due  to lost                                                                    
wages  of employees.  He  addressed  procurement issues  and                                                                    
thought there was a clear  violation of procurement laws. He                                                                    
asked  if  there  had  been   an  analysis  of  whether  the                                                                    
department had followed procurement laws.                                                                                       
Ms.  Efird stated  that the  contract was  procured under  a                                                                    
sole source procurement  that was based on  a declaration of                                                                    
an emergency.                                                                                                                   
Co-Chair  Stedman  encouraged   members  to  keep  questions                                                                    
related to  financial matters. He thought  the overall point                                                                    
was  the  committee  wanted  to  know  about  any  financial                                                                    
implications of closing  the API facility, as  well as other                                                                    
Senator Bishop  wondered about Alaska  Retirement Management                                                                    
Board projections into the future.                                                                                              
Co-Chair Stedman thought the  subcommittee could address the                                                                    
Senator  Olson agreed  with  Co-Chair  von Imhof's  comments                                                                    
about  adult  dental  care   creating  increased  access  to                                                                    
patients.  He asked  if there  were hospitals  that were  in                                                                    
danger of  closing due to the  proposed Medicaid reductions.                                                                    
He asked which hospitals had been identified.                                                                                   
Ms.  Efird  did  not  have the  specifics  of  the  proposed                                                                    
Medicaid  reduction, but  would provide  the information  to                                                                    
the committee. She  stated there was no  intention under the                                                                    
reduction to close  any of the state's  critical care access                                                                    
Senator Olson understood that closures  were not planned but                                                                    
thought  it could  be a  result of  the proposed  budget. He                                                                    
asked  if it  was true  that there  were six  hospitals that                                                                    
were in danger of closure.                                                                                                      
Ms. Efird could not comment on Senator Olson's question.                                                                        
9:56:06 AM                                                                                                                    
Ms.  Efird  went  back  to  slide  5.  She  spoke  to  other                                                                    
reductions, including repeal of  the Senior Benefits Payment                                                                    
Program and  reduction of the  Adult Public  Assistance. She                                                                    
noted that the  reductions were based on  the maintenance of                                                                    
effort current calculation. The  state was currently under a                                                                    
total  expenditures calculation.  The department  would need                                                                    
to ask  the Social Security  Administration for a  change in                                                                    
the way the state currently  calculated the funds to another                                                                    
option. If approval  was received, there would  be a savings                                                                    
of $14.7 million.                                                                                                               
Ms.  Efird  continued  to  address  slide  5.  There  was  a                                                                    
proposed reduction  to TANF,  and a  proposed repeal  to the                                                                    
Hold Harmless Program.  There had been a  policy decision to                                                                    
minimize disruption to assistance recipients.                                                                                   
Ms. Efird addressed the proposed  closure of youth detention                                                                    
and  treatment   at  the  Nome  Youth   Facility.  Probation                                                                    
services  would  be  continued.  She  addressed  a  proposed                                                                    
reduction to public health nursing  by $2 million. She spoke                                                                    
to the  50 percent  travel reduction to  statewide agencies,                                                                    
which constituted a $448.6 million reduction for DHSS.                                                                          
9:59:44 AM                                                                                                                    
Co-Chair  von  Imhof considered  the  bullets  on the  slide                                                                    
addressing maintenance  of effort. She asked  if the federal                                                                    
government had  every approved a  change to  the maintenance                                                                    
of effort due  to economic hardship. She  thought the change                                                                    
was  very difficult  to achieve.  She asked  if the  federal                                                                    
government had indicated how long the change might take.                                                                        
Ms.  Efird  stated  that the  program  director  for  public                                                                    
assistance  had  been  in   conversation  with  the  federal                                                                    
government. She  did not have  information about  the latest                                                                    
conversation. She  was not aware  of another state  that had                                                                    
made the change.                                                                                                                
Co-Chair Stedman  thought it  was hard to  claim a  state of                                                                    
poverty with $60 billion in the bank.                                                                                           
Senator Micciche reminded  that he had wanted  to reduce the                                                                    
maintenance  of  effort for  the  previous  three years.  He                                                                    
asked if the  Hold Harmless Program was  not possible, since                                                                    
the state  had been told the  program could not be  used for                                                                    
Ms.  Efird stated  that the  department was  looking at  the                                                                    
option and working with the congressional delegation.                                                                           
Senator Bishop mentioned  TANF. He stated that  there were a                                                                    
number  of   schools  in  the  Fairbanks   Northstar  School                                                                    
District in  which over  50 percent of  children were  at or                                                                    
below  poverty level;  and qualified  for federal  lunch and                                                                    
breakfast  programs. He  thought if  the state  were to  cut                                                                    
TANF, it would exacerbate the problem of child hunger.                                                                          
Ms.  Efird  stated  that  she  would  communicate  with  the                                                                    
director  to see  if there  would  be an  effect as  Senator                                                                    
Bishop described.                                                                                                               
Senator  Bishop  thought the  state  was  trying to  improve                                                                    
educational  outcomes and  thought improved  nutrition would                                                                    
work towards the goal.                                                                                                          
10:03:15 AM                                                                                                                   
Senator  Wielechowski  asked  how   many  seniors  would  be                                                                    
impacted by the loss of  the Senior Benefits Payment Program                                                                    
and  asked  about the  average  benefit.  He wondered  about                                                                    
other social  programs that  might increase  as a  result of                                                                    
the loss of the benefits.                                                                                                       
Co-Chair Stedman  asked for more  information on  the Senior                                                                    
Benefits Program.                                                                                                               
Ms. Efird  informed that the Alaska  Senior Benefits Payment                                                                    
Program paid monthly cash benefits  to Alaskans who were age                                                                    
65  or over  and had  low  to moderate  income. The  payment                                                                    
levels  were dependent  upon available  funding  and on  the                                                                    
number of applicants. A little  over 11,000 seniors received                                                                    
payment through the program in 2018.                                                                                            
Co-Chair  Stedman  recalled  that   several  years  ago  the                                                                    
program was changed to be needs-based.                                                                                          
Senator Micciche stated that the  program had been evaluated                                                                    
and removed the top tier  so that the neediest seniors would                                                                    
receive the benefits.                                                                                                           
Co-Chair Stedman stated that the  program had been evaluated                                                                    
to  curtail costs  and those  still  receiving the  benefits                                                                    
were the  neediest. He asked  for more  detailed information                                                                    
about recipients  of the program, including  location in the                                                                    
Ms. Efird agreed to provide the information.                                                                                    
Senator Wielechowski asked how  much seniors were getting on                                                                    
average and  wondered where  else the need  would be  met if                                                                    
the  funds  were  lost.  He  asked  for  similar  additional                                                                    
details on TANF recipients.                                                                                                     
10:06:51 AM                                                                                                                   
Senator  Hoffman discussed  about the  proposed $17  million                                                                    
reduction  for  TANF  and the  maintenance  of  effort  that                                                                    
required working  with federal partners. He  asked about the                                                                    
justification  for the  proposed reduction.  He wondered  if                                                                    
the  program was  not working,  or if  the reduction  was to                                                                    
balance the state's budget.                                                                                                     
Ms.  Efird re-stated  that there  was a  policy decision  to                                                                    
match expenditures  with revenues,  and the program  was one                                                                    
pot  of GF  money that  the state  spent to  receive federal                                                                    
TANF  funding. The  department  was  exploring changing  the                                                                    
state's  share  for  the  maintenance   of  effort  for  the                                                                    
Senator  Hoffman  asked  if  there  were  tribes  that  were                                                                    
supporting implementation of the reduction.                                                                                     
Ms.  Efird  stated  that   seven  tribes  administered  TANF                                                                    
programs and  received federal dollars directly.  If a tribe                                                                    
no longer  wanted to administer the  program, the recipients                                                                    
that were  still eligible would be  administered through the                                                                    
Senator  Hoffman  asked  if  there   were  any  tribes  that                                                                    
supported the reduction.                                                                                                        
Ms. Efird  had not  heard from  any tribal  organizations in                                                                    
support of the proposed cut.                                                                                                    
Senator Hoffman was certain that  tribes would be discussing                                                                    
the  proposed  cut  with the  congressional  delegation.  He                                                                    
thought there would be no support for the proposal.                                                                             
10:09:43 AM                                                                                                                   
Senator Olson  considered the impact  of the  maintenance of                                                                    
effort change and  wondered what would happen  if the change                                                                    
was not approved. He asked what services would be reduced.                                                                      
Ms. Efird stated that the  funds went directly to the tribes                                                                    
to support  TANF. She did  not have specific  information as                                                                    
to how the  funds were used but believed that  some of funds                                                                    
were used  for benefits for  recipients. She stated  that if                                                                    
the change  was not approved,  the state would have  to meet                                                                    
the maintenance of effort requirement.                                                                                          
Senator Olson  asked when  the proposed  Medicaid reductions                                                                    
were planned to be implemented.                                                                                                 
Ms.  Efird  stated that  the  department  would provide  the                                                                    
proposal  to  outline which  year  the  reductions could  be                                                                    
achieved.  The reduction  listed on  the slide  was proposed                                                                    
for  FY  20, including  backstop  language  that would  help                                                                    
support  the program  if the  required initiative  approvals                                                                    
were not granted.                                                                                                               
Co-Chair von Imhof asked about  the department's plan in the                                                                    
event  that  the large  reductions  for  FY  20 did  not  go                                                                    
through. She  wondered where  else the  administration would                                                                    
cut to balance the budget.                                                                                                      
Ms. Sanders  stated that it was  the administration's intent                                                                    
that  the $172  million would  support the  programs through                                                                    
the time  that the agency could  get the waivers or  come up                                                                    
with a plan to implement  future changes. She continued that                                                                    
if the  state did not  receive approval for  the maintenance                                                                    
of  effort change,  she believed  the agency  would be  back                                                                    
before the committee to discuss a supplemental request.                                                                         
10:12:44 AM                                                                                                                   
Senator  Micciche  asked   if  Medicaid  professionals  were                                                                    
involved  in preparation  of the  budget, or  if the  budget                                                                    
proposal  was   similar  to  other  OMB   efforts  in  other                                                                    
Ms.  Efird stated  the Medicaid  directors were  involved in                                                                    
the  conversation  about  how  the  agency  would  meet  the                                                                    
proposed reduction.                                                                                                             
Senator Micciche  stated that the committee  had prioritized                                                                    
the DHSS  budget in recognition of  protecting Alaska's most                                                                    
needy  senior  citizens  and   the  seriously  disabled.  He                                                                    
thought the  committee had identified ideas  for significant                                                                    
reductions that  could occur between  $300 and  $400 million                                                                    
with current  statutes. He saw  that there  were suggestions                                                                    
that required  significant multi-year effort in  order to be                                                                    
delivered, and  that no  longer prioritized  the individuals                                                                    
he mentioned.  He asked  if the  administration was  open to                                                                    
looking at real cuts without an unallocated reduction.                                                                          
Ms.   Efird  stated   that  the   department  welcomed   the                                                                    
committee's  involvement and  engagement  in supporting  any                                                                    
innovative  ideas to  make the  Medicaid budget  sustainable                                                                    
and affordable to cover low income needy Alaskans.                                                                              
Co-Chair  Stedman  asked  Ms.  Efird  about  an  unallocated                                                                    
Ms. Efird stated that the  department's intention was to put                                                                    
forward a  plan that would allocate  proposed reductions and                                                                    
have  the   information  to  support  what   the  department                                                                    
believed what was achievable for FY 20.                                                                                         
Co-Chair   Stedman  did   not   want   to  see   unallocated                                                                    
reductions.  He stressed  that the  committee wanted  to see                                                                    
what was  going to impact  the people of Alaska;  and wanted                                                                    
to look  at the short  term, long term, and  historic policy                                                                    
changes to make the best-informed decision.                                                                                     
Senator Hoffman asked about the  proposed reduction to adult                                                                    
public assistance and thought  the record detail showed that                                                                    
the implementation  would go  back to the  move to  the 1983                                                                    
standard  for maintenance  of effort  calculation. He  asked                                                                    
Ms. Efird  to provide  the committee with  information about                                                                    
the March 1983 standard as compared to the current amount.                                                                      
Ms. Efird agreed to provide the information.                                                                                    
10:16:41 AM                                                                                                                   
Senator Wielechowski referenced  the proposed elimination of                                                                    
Community Initiative Matching Grants.  He thought the grants                                                                    
had provided  a huge  amount of  funding for  abused women's                                                                    
aid in  crisis, victims  of domestic violence,  homeless at-                                                                    
risk youth,  Catholic Community Services,  homeless pregnant                                                                    
women, and  women with  children. He asked  if there  was an                                                                    
impact  analysis of  how  the grant  cuts  would impact  the                                                                    
homeless in the state.                                                                                                          
Co-Chair  Stedman asked  if Ms.  Efird could  expand on  the                                                                    
proposed elimination of the program.                                                                                            
Ms.  Efird  stated  that  the  Community  Initiatives  Grant                                                                    
Program  was  for  small human  social  services  non-profit                                                                    
agencies. The program was proposed  to be eliminated and was                                                                    
currently  $861,000.  The  funds  went to  many  small  non-                                                                    
profits in the state to  cover services mentioned by Senator                                                                    
Co-Chair Stedman asserted that  the sub-committee would look                                                                    
at the proposed reduction.  He suggested that the department                                                                    
get back to the committee with more information.                                                                                
Senator  Hoffman  wanted  the   department  to  address  the                                                                    
elimination  of the  hold-harmless  provision.  He asked  if                                                                    
legislation had been filed to change statute.                                                                                   
Ms. Efird thought a bill had not been formally filed.                                                                           
Co-Chair Stedman thought the bill was coming.                                                                                   
Ms. Efird affirmed that the bill was coming.                                                                                    
Senator  Hoffman  thought  the accelerated  process  of  the                                                                    
proposed budget  was not expeditious. He  requested that the                                                                    
department provide  a list of  who would be affected  by the                                                                    
elimination of  the provision by  district so  members could                                                                    
understand the effect on constituents.                                                                                          
Ms.  Efird believed  the data  was available  and agreed  to                                                                    
provide it to the committee.                                                                                                    
10:20:32 AM                                                                                                                   
Senator Olson  referenced closing  the Nome  Youth Facility.                                                                    
He  asked about  the decision  process and  asked where  the                                                                    
youth would go.                                                                                                                 
Ms. Efird  stated that the facility  had been under-utilized                                                                    
for a number  of years. The department  had considered other                                                                    
options  to serve  the community  and the  youth. The  youth                                                                    
would be transported to another  youth facility in Bethel or                                                                    
SB  20  was   HEARD  and  HELD  in   committee  for  further                                                                    
Co-Chair  Stedman discussed  the  agenda  for the  following                                                                    
week. He discussed the subcommittee  process. He stated that                                                                    
there   would   be   forthcoming  presentations   from   the                                                                    
Legislative  Finance  Division  as  well  as  from  the  OMB                                                                    
10:23:49 AM                                                                                                                   
The meeting was adjourned at 10:23 a.m.                                                                                         

Document Name Date/Time Subjects
FY2020 Gov Amend Budget to SFC 2.22.19 DHSS.pdf SFIN 2/22/2019 9:00:00 AM
SB 20