Legislature(2007 - 2008)SENATE FINANCE 532
05/07/2007 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB168 | |
| SB80 | |
| SB27 | |
| SB116 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 168 | TELECONFERENCED | |
| + | SB 80 | TELECONFERENCED | |
| + | SB 27 | TELECONFERENCED | |
| + | SB 116 | TELECONFERENCED | |
| + | TELECONFERENCED |
MINUTES
SENATE FINANCE COMMITTEE
May 7, 2007
9:09 a.m.
CALL TO ORDER
Co-Chair Bert Stedman convened the meeting at approximately
9:09:25 AM.
PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
Also Attending: SENATOR TOM WAGONER; SENATOR BETTYE DAVIS; MARY
JACKSON, Staff to Senator Tom Wagoner; TOM OBERMEYER, Staff to
Senator Bettye Davis; JANET CLARKE, Assistant Commissioner,
Department of Health and Social Services; WALTER MAJOROS,
Executive Director, Juneau Youth Services, President, Alaska
Association of Homes for Children, and Vice President, Alaska
Behavioral Health Association, testified in Juneau, in support
of this legislation;
Attending via Teleconference: From offnet locations: JUDY
BRADY, Executive Director, Alaska Oil and Gas Association; JOHN
IVERSON, Director, Tax Division, Department of Revenue; CLOVER
SIMON, Chief Executive Officer, Planned Parenthood of Alaska;
LEONARD FANCHER, lifelong Alaskan, representing Mighty Bikes;
MARK DAVIS, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development; From
Anchorage: DAVID ALEXANDER MD, Retired Pediatrician; JANICE
TOWER, Executive Director, American Academy of Pediatrics,
Alaska Chapter; SARA JACKSON, Board Member, Anchorage Faith in
Action Congregations Together, and human services professional;
SANDRA CASTLE; ANGELA LISTON, Anchorage Faith in Action
Congregations Together.
SUMMARY INFORMATION
SB 168-PASSENGER VESSEL TAX CREDIT
The bill was reported from Committee.
SB 80-OIL & GAS PRODUCTION TAX: EXPENDITURES
The Committee heard from the sponsor, the Department of Revenue
and industry representatives. The bill was held in Committee.
SB 27-MEDICAL ASSISTANCE ELIGIBILITY
The Committee heard from the sponsor, the Department of Health
and Social Services, a faith based organization, pediatric
health care providers and advocates for pediatric health care.
The bill was held in Committee.
SB 116-UNIFORM MONEY SERVICES ACT
The Committee heard from the sponsor and the Department of
Commerce, Community and Economic Development. The bill was held
in Committee.
9:10:17 AM
SENATE BILL NO. 168
"An Act providing a credit for the payment of certain
municipal passenger taxes or fees against the excise tax on
travel aboard commercial passenger vessels; and providing
for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
9:10:35 AM
Co-Chair Stedman asked if members had additional questions on
this legislation. It was established that there were no further
questions.
9:10:43 AM
Senator Elton offered a motion to report the bill from Committee
with individual recommendations and accompanying fiscal note.
Without objection SB 168 was REPORTED from Committee with a new
fiscal note dated 5/4/07 from the Department of Revenue in an
indeterminate amount.
9:11:08 AM
CS FOR SENATE BILL NO. 80(RES)
"An Act relating to allowable lease expenditures for the
purpose of determining the production tax value of oil and
gas for the purposes of the oil and gas production tax; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman announced action would not be taken on the bill
at this hearing.
9:11:47 AM
SENATOR TOM WAGONER, sponsor of the bill, introduced himself and
a member of his staff.
9:12:13 AM
MARY JACKSON, Staff to Senator Tom Wagoner, testified that this
bill would prohibit oil and gas producers from deducting, from
the net tax calculation of the Petroleum Profits Tax (PPT), any
costs incurred as a result of improper maintenance or lack of
maintenance by the producer. By stipulating this in statutes,
the Department of Revenue would be allowed to develop
regulations to implement the provisions.
Ms. Jackson explained that Section 1 of the bill would amend AS
43.55.165(e), providing for exclusions from lease expenditures,
by adding a new subparagraph (19) on page 3, lines 19 through
30. This subparagraph "set out who's responsible for determining
improper maintenance." Currently, the commissioner of the
Department of Revenue in consultation with the commissioners of
the Department of Environmental Conservation and the Alaska Oil
and Gas Conservation Commission (AOGCC), had the responsibility.
This bill would provide that the commissioner of the Department
of Revenue would make determinations in consultation with the
commissioner of the Department of Natural Resources and the
"newly formed" Petroleum System Integrity Office (PSIO) within
the Department of Natural Resources. The PSIO was not
specifically named in the provision in the event the title of
the office was changed; instead a description of the Office's
purpose was provided.
Ms. Jackson acknowledged the possible duplicity of requiring
consultation with both the Department of Natural Resources'
commissioner and PSIO. However inclusion of both would
demonstrate legislative intent that the PSIO was "charged with …
overseeing the pipeline systems in the state of Alaska."
9:14:43 AM
Ms. Jackson informed that the existing statute utilized the term
"standard practices of the industry" and would be changed to
"good oil field practice", a term that was "recognized" by the
industry.
Ms. Jackson reported that the "affected agencies" supported all
the amendments adopted in the Senate Resources Committee
substitute. Some were proposed by the departments.
9:15:15 AM
Ms. Jackson pointed out that the committee substitute deleted
the language of (19)(B) from the existing statute, which Senator
Wagoner would speak to.
9:15:32 AM
Ms. Jackson stated that Section 2 of the bill provided that the
changes made in Section 1 would have a retroactive applicability
date for oil and gas produced after March 31, 2006. This was the
effective date of the original statute.
9:16:12 AM
Senator Wagoner objected to the Senate Resources Committee
substitute because of the deletion of unallowable expenses
described in AS43.55.165(e)(19)(B) from the original version of
the bill and which read as follows.
(B) incurred to maintain the operational
capability of facilities or equipment shut down
because of improper maintenance of property or
equipment
Senator Wagoner informed that this language was deleted by an
amendment offered in the Senate Resources Committee by a vote of
five yeas, two nays. The argument employed in this effort was
the same argument presented by Senator Ben Stevens to the Senate
Special Committee on Natural Gas Development during the special
legislative session held in August 2006 pertaining to the PPT.
Senator Wagoner "found that connection to be at least curious in
the sight of the ongoing investigation of PPT."
Senator Wagoner read further from a prepared statement as
follows.
I was not a supporter of the net system. I worked very hard
to keep the net system at a higher level than it came in
at. I did finally vote for the net system, but I prefer the
gross system at all times. And I still at this time prefer
a gross system. I think we're starting to see some of the
reasons why a gross system is less controversial.
I resign myself to the net system and made numerous
attempts to amend that system. Those attempts were
successful except for one instance and that was done at
this table and that's why we're here at this table now. The
one amendment that failed is the bill before you today. It
failed by a vote of five yeas, seven nays. Obviously, had
it not failed we wouldn't be here discussing it today.
More importantly, all those concerns now connected with the
bill, the retroactive implementation, the lack of standards
or regulations of the Department of Revenue, which would
have followed the passage of the amendment, all those
concerns would be nonexistent. But they are existence and
how to implement this provision to put a tourniquet on the
potential revenue bleed from deductions is at issue.
9:18:40 AM
Senator Huggins commented that the amendment Senator Wagoner
referred to was brought to him as chair of the Senate Resources
Committee by John Norman, Chair, AOGCC. Mr. Norman pointed out
the advantages and disadvantages of "what it represented". A
policy call was necessary to determine whether to provide "an
incentive to keep a facility operating when it could be
dangerous." Mr. Norman analogized an aircraft that required
maintenance yet continued to fly.
9:20:03 AM
Senator Wagoner affirmed the account of Mr. Norman's testimony
before the Senate Resources Committee was correct. However, not
mentioned was that Kevin Banks of the Department of Natural
Resources was available but not provided an opportunity to speak
to the amendment. Additionally, John Iverson was available but
not provided an opportunity to testify to the amendment. These
two people would be involved in the drafting of the regulations
to implement this legislation and they disagreed with Mr.
Norman's summary of the bill.
Senator Wagoner opined, "Let's face it, John Norman through the
Oil and Gas Conservation Commission, he's a brilliant man and
everything else, but his responsibility stops at the wellhead."
By contrast, the Department of Natural Resources and the
Department of Revenue had responsibility for actions from the
point of the wellhead to transfer to an oil freighter for
shipment out of the state.
9:21:38 AM
JUDY BRADY, Executive Director, Alaska Oil and Gas Association,
testified via teleconference from an offnet location about the
trade association that represented oil and gas producers in the
state. This bill reflected a topic of discussion and
"controversy" and she appreciated the co-chair's stated
objective to hold the bill in Committee at this time. All
parties must avoid "a reaction that ends in a bad bill."
Ms. Brady reminded that the amendment offered during the August
2006 special session by Senator Wagoner was done so after the
closure of BP's operations on the North Slope due to leakage in
the oil transit line. However the question of the definitions of
"properly maintained" and "diminished capacity" remained, as
well as identification of the appropriate party qualified to
make such determinations. She detailed the considerations,
including whether an auditor would make determinations and
whether an event such as an oil spill must occur before the
determination could be made. She remarked "If so, it's already
taken care of."
Ms. Brady surmised that the original amendment was defeated due
to an understanding at the time that "the concerns of improper
maintenance were already taken care of" through "other pieces of
the Act". The Association continued to hold this opinion. Pedro
Van Meurs who served as an oil and gas consultant to the former
Murkowski Administration, suggested as an alternative "to trying
to look at every single incidence of capital expenditure, a
three-cent deduction that would act as a proxy for decisions on
every single capital expenditure."
Ms. Brady continued as follows.
Expenditures related to actual leaks or incidents are
already taken care of. You cannot deduct those. So what
you're talking about here in this bill is having an auditor
have to make the decision on every single capital
expenditure for every time there is a shut down, taking a
look to see if that was related to improper maintenance.
That simply is not done anywhere. It's not done anywhere in
the world; it's not done between operators on a field. All
of the main concerns that legislators had are already
incorporated in the Act. Lease expenditures would not
include costs arising from fraud, willful misconduct or
gross negligence.
Lease expenditures - costs incurred for containment,
control, cleanup or removal in connection with any
unpermitted release of oil or hazardous substance would not
be included in the lease expenditures.
There seems to be a conversation here going on in the
background that legislators at the time were not paying
attention to what happened at Prudhoe Bay [and] were not
concerned that the State's interests were being protected.
Not only were the State's interests being protected by the
legislators at the time, Governor Murkowski at the time and
the director of DEC put 120 hour notification of fund
access to the response account for $8 million for a study
for the Department of Law and DEC to take a look at the
State's interests in the spill. That study is still
ongoing. We found out about it just recently when we
realized that the $50 million response fund and the "470
fund" was open again for the one-cent per barrel money from
Prudhoe Bay.
Let me read you what the State is looking at right now.
This is an ongoing study going on right now, I would
suggest, Mr. Chairman that perhaps the people from Law and
DEC could come in and talk about where they are. "The
purpose of this was to investigate the maintenance
corrosion management practices and to recover all State
costs and lost revenues including fines and penalties."
They asked for the $8 million because they talked about the
amount of work that was going to be required to go through
all of the investigations, to hire engineer companies to do
all of the things that were going to be required for them.
And they said that "the State has incurred costs for
response oversight mitigation assessment repair replacement
of corroded pipeline. Moreover the State incurred
substantial losses in revenue from royalty, severance tax
and corporate income tax from the loss of crude oil
production as a result."
So if anybody is implying or believes that legislators and
people in DEC and Department of Law last year were not
paying attention to the State's interests, they're wrong
with respect, because the State was taking all the actions
you would expect the State to take to make sure its
interests were covered.
The reason that this amendment last year was voted down was
because the people - because there was a good showing that
in fact all of the concerns that were expressed in this
amendment were already taken care of, and as a matter of
fact the language in the amendment was unworkable. …when
this bill was introduced again this year, both DEC, DNR,
AOGCC, all wrote letters saying that the language was not
workable. Some changes have been made now to try to move it
in a direction that it is workable, but you've still got a
couple of issues.
One is that … there is no incident that kicks off an
investigation or kicks of a red flag to the auditor. It's
going to have to be every capital expense. That's going to
be a huge issue.
The other thing I'm hoping that you will have time to do is
have someone from Department of Revenue talk to you who is
familiar with the audit process; someone who knows the
audit process. It's at least a three-year process.
Commissioner John Norman when he was talking earlier about
how difficult this is going to be to implement, was saying
if an auditor red flags a cost, and they're going to have
to look at every one of them, it's going to be three years
before you know - before the company knows, what costs are
approved and what costs aren't approved. By that time, the
likelihood is you're going to be in either court or in some
kind of administrative action and we are going to be in
exactly the same situation that we were with the gross
production tax because it was not thought out at the very
beginning and we ended up with billions of dollars in tax
revenues in dispute.
Once that happens, neither the companies nor the State
could make a move to resolve the issues because everybody
was afraid of influencing or losing money on both sides.
I think there was a commitment made when PPT passed, that
this not happen again - that the regulations would be
clear; that there would be a process that worked for
everybody, because everybody was concerned about the
process, that we would not get into this backed up billion
dollar tax unbreakable dead end again. It makes for
terrible relationships between the State and the companies
and influences everything that happens because its right
there, like this black cloud in the background.
We have expressed some other legal concerns with this and I
will with your permission not take your time now. I will
send you a copy of our testimony. The main points are
these.
We believe the State is already protected. We believe that
this bill is going to affect Cook Inlet as well as it will
affect the whole state. It will affect every capital
expenditure. It adds a convoluted process that has not
happened in any other taxing jurisdiction as far as we know
in the world.
The two things I would hope you would do is talk to
Department of Law and DEC about how their investigation is
going to make sure you are comfortable the State's
interests are covered; to go over again the first 18
exclusions in the bill to reconfirm to yourself that you
believe that the State's interests are protected. And to
have a discussion of the audit process so you can see
what's going to happen automatically with this kind of
hang-up with every capital expenditure that is requested.
What this does of course is make it almost impossible for
the PPT tax system to work. And if that was the intent,
it's very successful intent.
Co-Chair Stedman requested the witness summarize her testimony.
Ms. Brady continued.
The hope now would be again that Department of Law and DEC
come in and talk about the $8 million of study they're
undertaking as well as the audit process. Our hope is that
the legislature will come to the conclusion that the
State's rights and interests are protected.
9:34:13 AM
JOHN IVERSON, Director, Tax Division, Department of Revenue,
testified via teleconference from an offnet location.
9:34:38 AM
Co-Chair Stedman requested Mr. Iverson speak to the fiscal
notes.
9:34:46 AM
Mr. Iverson stated that the Department of Revenue fiscal note
reflected that the Department did not know what the actual
fiscal impact of this legislation would be. A petroleum engineer
was currently contracted by the Department to provide expertise
on oil and gas industry practices. Passage of this legislation
would likely require that a second engineer be contracted to
assist in determinations of proper maintenance and other
matters.
Mr. Iverson, addressing the issue of auditing, informed that
each capital expenditure would not be audited. Rather a
"sampling" method would be employed.
9:38:20 AM
Senator Thomas identified the impetuous of this provision as the
oil spill that occurred the previous summer as a result of
corrosion. He understood that tax filings made by BP indicate
that the company intended to "write off" the costs to repair the
system.
9:39:02 AM
Mr. Iverson referenced a media report published February 16,
2007 by the Anchorage Daily News that indicated that BP would
seek tax relief for pipeline repairs. He could not provide
details of taxpayer returns because the information was
statutorily confidential.
9:39:42 AM
Co-Chair Stedman asked the date the Department would have the
ability to inform the Committee of the claimed deductions,
including those that were rejected.
9:40:17 AM
Mr. Iverson estimated the information could either be available
in one year's time or two year's time. The process in
establishing an audit system of the PPT required recruitment and
training of auditors. The normal audit process would last one
year once the system was operational.
9:40:53 AM
Senator Thomas asked if the tax returns were filed for a 12
month calendar year period.
9:41:02 AM
Mr. Iverson affirmed.
9:41:14 AM
Co-Chair Stedman established no additional testimony was
forthcoming and that members had no further questions.
Co-Chair Stedman ordered the bill HELD in Committee.
AT EASE 9:41:28 AM / 9:42:51 AM
9:42:58 AM
CS FOR SENATE BILL NO. 27(HES)
"An Act relating to eligibility requirements for medical
assistance for certain children, pregnant women, disabled
persons, and persons in medical or intermediate care
facilities; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman announced intent to hear bill but not take
action on it at this time.
9:43:28 AM
TOM OBERMEYER, Staff to Senator Bettye Davis, sponsor of the
bill, presented the bill, reading the following statement into
the record.
This was an Act relating to medical assistance for certain
children, pregnant women and persons in medical or
immediate care facilities, and providing for an effective
date.
The focus of this bill initially is the Denali KidCare
portion of the State's children's health insurance program
that is sponsored throughout all 50 states.
In Alaska there are an estimated 18,000 uninsured children,
or about nine percent of the children under age 18 and
under. Private health care coverage for children has
declined over 30 percent in the last ten years. It is
estimated that children with a medical need are five times
as likely that are uninsured as to not to have a regular
doctor as those insured children and four times more likely
to use emergency rooms at a much higher cost.
The eligibility rates in Alaska dropped dramatically for
children after the formula was changed in 2003. The
eligibility rates had been frozen in 2003 at the federal
poverty levels at that time, which was a fixed dollar
amount. It was reduced from 200 percent to 175 percent and
under Senate Bill 27, eligibility for persons under 19
would increase to 200 percent of the poverty level and
requires others who qualify and can afford to make
contributions toward that coverage.
Without Senate Bill 27, it's estimated that our eligibility
rate in, since it was a fixed dollar amount in 2003 and now
floating with the federal poverty guidelines, as all the
other states, that our eligibility rate would drop to 154
percent and it may drop below 150 percent, at which point
Alaska will loose immediately 3 million in federal funding
and the State has already had 2,553 children drop off of
this program.
There were 7,600 children covered by this program as of
December of 2006. We've lost over 30 percent of them
already due to this fixed guideline and these children are
going to also incur greater health coverage later on. So
you essentially have a transfer costs here to other
elements of government as they require additional health
care coverage later on for failure to help them when
they're children.
So nothing has really changed on this other than the fact
that there have been other bills addressed regarding
similar subjects. We do have people from the department
here that might assist with some of the dollar amounts, but
I must note for the record, that the children provide the
least costly types covered under this type of program. It's
an estimated at about $1,700 per child compared to many
thousands for severely disabled and elderly and health care
facilities and so forth.
The numbers that came across from other bills can be
addressed by the State, but it may be as little as $783,000
out of the federal fund. Federal share again at an enhanced
share rate of 70 percent, which is a bargain in anyone's
analysis would be a total Denali KidCare cost of maybe two
million six or seven hundred thousand dollars.
9:47:33 AM
SENATOR BETTYE DAVIS spoke to the need of this legislation and
the many people dependant upon the legislature to address the
Denali KidCare program during this session. This bill included a
component that would "alleviate some of the problems that we
will have if we don't implement this." She indicated a figure
[not specified] related to the bill, as well as another figure
[not specified] of 175. If passage were dependant upon the lower
figure, she would agree to it "because that would be better than
nothing".
9:48:35 AM
Senator Dyson directed attention to AS 47.17.020(b)(6) amended
by Section 1 on page 2, lines 15 through 19. This subparagraph
related to "persons in a medical or intermediate care facility"
and amended the income qualification to "not exceed 300 percent
of the supplemental security income benefit". The existing
statute specified the income qualification as not exceeding
$1,656 a month. He asked the current dollar amount of 300
percent of supplemental security income.
9:49:23 AM
Mr. Obermeyer deferred to the Department of Health and Social
Services. He noted that seven other states utilized a
qualification of 300 percent or more and that 39 states provided
services for those whose income did not exceed 200 percent of
the supplement security benefit. Existing Alaska statute fixed
the income amount at "the very lowest level was something like
$1,635 per month". This amount had been established utilizing
the federal poverty guideline as a base. The change from a fixed
income amount to a percentage of the supplemental security
benefit was intended to eliminate the need for each state to
annually amend its statute to reflect the current federal
guideline level.
9:50:49 AM
Senator Dyson commented that the legislature "had always faced
pressure to put escalator clauses" into its budget. Although
this was a simple method, it concerned him, as it embedded these
clauses into the operating budget. A discussion on this practice
should be held. He also wanted to know the actual dollar amount
calculated for this bill for comparison purposes.
9:51:47 AM
Co-Chair Stedman agreed with Senator Dyson's concern and advised
that this issue should be monitored.
9:52:07 AM
Co-Chair Stedman requested information regarding the fiscal
notes accompanying this bill.
9:52:22 AM
JANET CLARKE, Assistant Commissioner, Department of Health and
Social Services, testified to a table titled, "SB 27 Summary"
that outlined the costs to implement this legislation [copy on
file]. The provision Senator Dyson questioned was not included
in other legislation addressing the Denali KidCare program. Four
years ago, eligibility for the program was codified at 175
percent of the federal poverty level and the income amount to
qualify for care in an intermediate care facility was codified
in statute. The population served by the latter program
qualified for nursing home care or had a disability as
determined by the federal Social Security Administration, was a
different population than that served by the Denali KidCare
program, and was more expensive.
9:54:55 AM
Ms. Clarke pointed out that because of the addition of the
change to the nursing home and intermediate care facility
program, the fiscal notes for this bill were significantly
higher than the fiscal notes accompanying the other bills. This
bill would "unfreeze" the eligibility requirements for both
programs.
Ms. Clarke explained that SB 27 would unfreeze the eligibility
requirement for the Denali KidCare program at 200 percent of the
federal poverty level and unfreeze the "special population group
at 300 percent as well."
Ms. Clarke noted the fiscal note estimates did not include
administrative costs.
Ms. Clarke overviewed the aforementioned table, which provided
an enrollment summary of children, pregnant women and the
"special income group". The fiscal notes reflect that in 2008 an
additional 2,553 children, 436 pregnant women and 106 special
income individuals would be eligible for the Medicaid services.
Expenditures to serve the additional children would be
$3,905,000, expenditures to serve the additional pregnant women
would be $1,401,000, and expenditures to serve the additional
special income individuals would be $6,103,000. These amounts
total $11.4 million, not including administrative costs.
Ms. Clarke reemphasized that the majority of the cost of this
legislation would be the additional participants eligible
through the special income group. Nursing home care and services
for those with disabilities are the most costly.
9:57:03 AM
Ms. Clarke stated that the total cost to implement the
legislation before the Committee would be $4.6 million.
9:57:23 AM
Senator Elton asked if the ratio of federal funds to general
fund matching funds was the same for services for pregnant women
and children and services for the special income group.
9:57:50 AM
Ms. Clarke answered that the State did not receive an "enhanced
rate" for services provided to the special income group. The
regular Medicaid rate was currently 57.58 percent.
9:58:06 AM
Senator Elton clarified that a higher percentage of general fund
matching funds was required for services to the special income
group than was required for services to pregnant women and
children.
9:58:24 AM
Ms. Clarke affirmed and pointed out that the spreadsheet
demonstrated the "melding" of the different rates.
9:58:37 AM
Senator Olson, in reviewing the annual costs of services to the
special income group, noted that the cost increases between 2008
and 2013 would only be $3 million. He asked the validity of the
projections.
9:59:00 AM
Ms. Clarke told of a study conducted by the Lewin Group and
released the previous year that developed a Medicaid forecasting
model to estimate future Medicaid costs. The report predicted
that the special income population would remain "fairly flat"
for approximately eight years after which it "really takes off".
The cost estimates for the years listed on the spreadsheet
reflected that period of flat population growth.
9:59:37 AM
CLOVER SIMON, Chief Executive Officer, Planned Parenthood of
Alaska, testified via teleconference from an offnet location
that she also was a social worker with approximately eight
years' experience working with low income women and children.
She read her testimony into the record as follows.
I support the increase in eligibility for Denali KidCare to
the 200 percent of the federal poverty level. Providing
health care early in a woman's pregnancy improves the
health outcomes for both the woman and the child. I really
feel it should be a priority in Alaska to have the
healthiest children that we can.
I urge the members to consider this increase. I understand
the members' concern regarding fiscal escalators in the
budget. However, I want to remind you that spending money
now saves money in the long run for the management of
chronic preventable illnesses.
10:00:31 AM
LEONARD FANCHER, lifelong Alaskan, representing Mighty Bikes,
testified via teleconference from an offnet location in favor of
the bill. For eight years he has volunteered for a youth
recreation program teaching children to ride bicycles. The
program encouraged children to get physical exercise "off the
couch away from T.V. and video games." It was important that
kids stay physically active and to have the best access to
health care possible so they could remain healthy. Approximately
18,000 children were currently not covered by health insurance.
These children were from working families whose employers did
not provide insurance. The federal government was willing to
contribute 70 percent of the cost to provide insurance for these
children. With the State contribution of 30 percent, this was a
"bargain" and the State could "well afford" the expense.
10:02:05 AM
DAVID ALEXANDER MD, Retired Pediatrician, testified via
teleconference from Anchorage, about the wide support of the
Denali KidCare program and this legislation. He recently
attended a gathering of Anchorage Faith in Action Congregations
Together - the AFACT, along with approximately 200 others. The
attendees were all in favor of improving health care coverage.
He read the following testimony into the record.
There is absolutely no question that routine health care
provides better health and therefore better living both for
kids and for adults. Poor health means you miss work or
school or else you just miss-perform.
Since 2003 when Denali KidCare was cut back, most of these
cut out [from the program] could not afford buying health
care. So many of them did not get routine care. They missed
a lot more school and if needed, went to an emergency room;
and because the federal government says ERs must be willing
to give free care if needed, so Alaska emergency rooms are
now having some $90 million of unpaid emergency room
charges. So the rest of us therefore have to pay a lot more
to cover those unpaid fees.
There is no question that the State Legislature did save
some money - obviously the rest of us lost money. In
addition, since the federal government pays 70 percent of
the charges under each state's CHIP, children health
insurance program, that meant the State lost a couple
million dollars in federal support.
It is also very important to realize 35 to 40 percent of
money that goes to insurance companies goes to their
overhead expenses, while only five to eight percent of
money that goes to government health coverage goes into the
maintenance of those programs. Therefore government
programs provide about 50 percent more actual health
coverage than insurance companies do with the same amount
of funding.
So supporting these new proposals will improve health care
for the kids; improve their ability to attend school and
actually greatly decrease the health expenses of the whole
State.
10:04:34 AM
JANICE TOWER, Executive Director, American Academy of
Pediatrics, Alaska Chapter, testified via teleconference from
Anchorage about the organization's long term goal of insuring
all children in Alaska. The Alaska chapter currently consisted
of 87 pediatricians located throughout the state. She understood
the Committee's time constraints and the necessity to make
important priority decisions. Children should be considered the
highest priority.
Ms. Tower reported that 39 other states provide coverage for
children living at up to 200 percent of the federal poverty
level. Alaska was ranked "in the bottom five". The states of
Montana and South Carolina covered children at 150 percent of
the federal poverty level. Only North Dakota and South Dakota
provided coverage to a lower rate of 140 percent of the federal
poverty level; however, that coverage was not "artificially
restricted". With the "poverty percentage reduction", the
coverage provided in Alaska had decreased to 154 percent of the
federal poverty level.
Ms. Tower stated that the states of California, Connecticut,
Maryland, Massachusetts, Missouri and Vermont provided coverage
for participants with up to 300 percent of the federal poverty
level. New Hampshire provided coverage for children living up to
400 percent of the federal poverty level. Illinois provided
"unlimited coverage" with a "program buy-in" to allow some level
of coverage to all children at an affordable rate.
Ms. Tower disapproved of the coverage provided by the state of
Alaska in comparison to other states. Significant revenue
sources existed for the State from natural resources, tourism
and other activities.
10:07:28 AM
SARA JACKSON, Board Member, Anchorage Faith in Action
Congregations Together, and "human services professional",
testified via teleconference from Anchorage that the
organization was comprised of 15 local churches "concerned about
this issue". She told of her family's experience in which her
granddaughter received "inconsistent and inadequate" health care
although her mother worked full time. Her granddaughter
experienced complex medical conditions and during most crises,
the family incurred significant medical debt and had to rely on
the "mercy of a kind doctor." The family "celebrated" the
creation of Denali KidCare and the granddaughter qualified for
services under the income provision of less than 200 percent of
the federal poverty level. She was able to receive dental
preventative care, an eye examination and other needed services.
Two years later, however, she was "dropped" from the program
because her mother earned $100 per month over the allowable
income amount. Ongoing counseling and other medical care was no
longer available. As a child of the working middle class, the
granddaughter was part of a significant population that was
"medically neglected." Ms. Jackson spoke to the hesitancies and
delays of parents in seeking medical care for their children.
This could exacerbate simple medical conditions.
10:10:51 AM
SANDRA CASTLE testified via teleconference from Anchorage that
she had previously received health care through the Denali
KidCare program under the 150 percent of federal poverty level
income provision. However, she was "cut" and was no longer able
to continue her counseling treatment or receive care from a
pediatric endocrinologist for her diabetes. To receive
treatment, she had to go to an emergency room. Children in the
state of Alaska need health care whether or not their parents
have funding to pay for it.
10:11:56 AM
ANGELA LISTON, Anchorage Faith in Action Congregations Together,
testified via teleconference from Anchorage that over 200 people
recently gathered in a local church to speak about Denali
KidCare. Many family members shared "one horror story after
another" about caring for their children's health needs since
the reduction to the Denali KidCare program four years prior.
These family members were employed and therefore could not be
present to testify at this hearing. They represented every
ethnic group, 15 faith communities and all social economic
groups. Additionally, religious leaders in the state, including
Catholic bishops, Presbyterian ministers, a Russian Orthodox
bishop and Lutheran bishops, had joined the AFACT organization
in supporting an increase to the Denali KidCare program.
Recently AFACT met with US Senator Lisa Murkowski and were
assured that she and US Senator Ted Stevens were seeking an S-
CHIP reauthorization to allow states the "broadest possible
latitude". If that latitude were granted, it would be
unfortunate if Alaska did not take advantage of it. Coverage
should be extended at least to those children living at 200
percent of the federal poverty level.
10:13:38 AM
WALTER MAJOROS, Executive Director, Juneau Youth Services,
President, Alaska Association of Homes for Children, and Vice
President, Alaska Behavioral Health Association, testified in
Juneau, in support of this legislation. He spoke to the impact
of Denali KidCare on children's behavioral health services,
specifically for children with severe mental health problems as
well as children with substance abuse problems. Juneau Youth
Services (JYS) serves approximately 700 of these children each
year.
Mr. Majoros informed that Denali KidCare was the primary funding
source for children's behavioral health services in Alaska,
providing 75 to 80 percent. Effective implementation of the
Bring the Kids Home initiative was impossible without a viable
funding source. A diminished funding source results in fewer
children able to access care in the state and subsequently more
children transferred to receive treatment in residential
psychiatric facilities in the Lower 48. The number of children
eligible for services through JYS had declined from 75 percent
to 69 percent. This trend is similar statewide. Alaska was
ranked the third lowest "eligibility threshold" at 154 percent
of the federal poverty level. Additionally fewer children were
covered by private health care insurance. All Alaskan children
should have access to health care services and the State should
"invest early" in children's health to prevent serious problems
from developing.
10:16:18 AM
Senator Davis considered this legislation one of the most
important bills under consideration this legislative session.
She advised the Committee to "do the right thing", to debate the
issue and report the bill from Committee. She would not dictate
the exact percentage of the federal poverty level to be adopted
for income eligibility, but stressed it should not be less than
175 percent.
10:17:35 AM
Senator Olson requested comment on the inclusion of the special
income group.
10:18:06 AM
Senator Davis admitted extension of services to those in this
group living at 300 percent of the federal poverty level would
triple the cost to implement this legislation, but stated it was
an important issue that must be addressed. However, if extension
of the Denali KidCare program were dependant upon the deletion
of the provision to accommodate the special income group, she
would not oppose the change.
The bill was HELD in Committee.
10:18:32 AM
CS FOR SENATE BILL NO. 116(L&C)
"An Act relating to the Uniform Money Services Act, to
money transmission services, and to currency exchange
services; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman announced intent to not take action on this
legislation at this hearing.
10:18:52 AM
Senator Elton moved for adoption of CS SB 116, 25-LS0508\O, as a
working document.
There was no objection and CS SB 116, Version "O" was ADOPTED as
a working document.
10:19:16 AM
Senator Elton, sponsor of the bill, stated that it would "ensure
the safety and soundness in financial institutions that are used
by Alaskans who don't use banks." These financial institutions
are "the money transferors". This bill would also address "two
of the industries that pose a risk for money laundering: money
transmission and currency exchange." Money transmission also
poses a risk for terrorist financing. Transmission of money
without a license in states that require a license is a federal
felony offense. Alaska is one state that currently did not
require such a license.
Senator Elton explained that this legislation was based on a
model legislation adopted in other states with one "major"
exception. The model legislation also proposed licensing "check
cashers". This bill did not include such provisions, as this
activity did not pose a risk for money laundering or terrorist
financing.
Senator Elton furthered that this bill would ensure law
enforcement coordination to ensure that these businesses were
"not abused by people who avoid banks because they don't want
the scrutiny of bank examiners." Consumers would be protected
through the provisions of this bill relating to "bonding and net
worth requirements". This bill would require a listing of all
fees and terms on the receipt supplied to the customer, as well
as on-site posting of a notification to consumers of agencies
available to assist in the event the customer has "problems with
the business."
10:21:11 AM
Senator Elton pointed out that this bill would be "revenue
neutral" to the State. The fiscal note indicated the cost to
implement the legislation would be $80,000. As required of other
regulated businesses, the businesses affected by this bill would
pay a license fee. The Department of Commerce, Community and
Economic Development estimated that 40 businesses practiced
money transferring in Alaska and that "the regulation and
investigation component" for the Department would require a fee
of $2,000.
Senator Elton reported that despite the significant amount of
the license fee, the affected businesses seek the regulation and
the "safety" that would be assured through licensing. Licensing
would protect legitimate businesses and would make operations of
non legitimate businesses more difficult.
10:21:58 AM
Senator Elton disclosed that this legislation was requested by
the industry. In consideration of this bill by Senate committees
and its companion bill by House of Representatives committees,
it had the received endorsement and support of Wells Fargo, a
large money transmitter as well as that of small "store front"
money transmitters, many of which operate in cruise ship port
towns. The Department of Commerce, Community and Economic
Development and consumer advocates, including the Alaska Bankers
Association, supported this bill.
10:22:47 AM
Senator Elton remarked that this legislation was the first
attempt to regulate the money transfer industry.
Senator Elton concluded his presentation of the bill,
reiterating that an individual involved in the industry
requested it. The more his staff reviewed the matter, the more
it was understood that consumers must be protected and that this
legislation would assist in homeland security efforts.
10:23:57 AM
Co-Chair Stedman asked about any opposition to this bill in
addition to money launderers.
10:24:08 AM
Senator Elton reported that no opposition had been voiced to
either this bill or its companion bill. He attributed this as a
"testament" to staff coordination with the industry and all
affected parties. He repeated that the Alaska Bankers
Association, large and small businesses and consumer interests
supported the bills.
10:24:51 AM
Co-Chair Stedman requested Senator Elton speak to the fiscal
note.
10:24:55 AM
Senator Elton explained that as required of other regulated
businesses, the costs of regulating the currency exchange and
money transfer businesses would be borne by the industry. The
Department estimated the annual cost to implement the program
would be $80,000 and that each business would pay an annual fee
of $2,000. Although this would be a higher license fee than most
other businesses paid, the affected businesses support this
program.
10:25:53 AM
MARK DAVIS, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development,
testified via teleconference from an offnet location in support
of the bill. The revenues collected from the fees would be
utilized to regulate the businesses and for investigations. The
$2,000 licensee fee was calculated based on the 37 businesses
currently registered with the "federal financial crime center";
however, additional businesses could be practicing money
transfers or currency exchange activities.
Mr. Davis informed that upon implementation of a regulatory
program for some industries, more licenses were applied for than
had been estimated. This was likely because some businesses had
been "reluctant" to practice in an unregulated industry.
10:27:12 AM
Senator Thomas asked examples of businesses that practiced money
transfers.
10:27:30 AM
Mr. Davis gave as examples, Money Gram and Western Union. He
also told of a small business that operated in the election
district represented by Senator Elton. Most businesses were
affiliated with a large company such as Western Union. This
legislation would allow the smaller companies to "work through"
the larger affiliates, which would result in "less regulatory
burden" in the industry.
10:28:09 AM
Senator Thomas asked if all banks were considered money
transferors.
10:28:17 AM
Mr. Davis responded that banks would be exempt from the
provisions of this legislation. Consumers could have funds
transferred from one bank to another. This bill would address
business conducted by those consumers that did not utilize
banks, such as cruise ship crew members.
10:28:46 AM
Co-Chair Stedman asked if security broker dealers would also be
excluded from the provisions of this bill.
10:28:54 AM
Mr. Davis answered in the affirmative, explaining that these
dealers provided money services and were regulated through other
licensing programs. Money transferors and currency exchange
providers were regulated in 47 states.
10:29:28 AM
Senator Olson asked if the implementation of this regulatory
program could interrupt fund transfers intended for college
students and for other legitimate purposes.
10:30:03 AM
Senator Elton responded that no provision of this bill should
delay access to funds.
10:30:38 AM
Mr. Davis agreed. This legislation would not change the
industry, rather it would require the businesses to be licensed
and comply with federal reporting procedures. However, a
business already licensed in another state would not be required
to secure an additional license. This would avoid causing a
"regulatory burden" for large companies. Additionally, this bill
would provide for "a timely transmission of the consumer
rights", which did not currently exist.
10:31:19 AM
Senator Olson asked if charges had been filed or should have
been filed against a party attempting to launder money through
such a business.
10:31:45 AM
Mr. Davis was unaware of any violation in this state, although
failures in transmitting money had occurred. The US Congress and
federal law enforcement agencies urged states to adopt
regulatory programs to comply with the federal Bank Secrecy Act.
10:32:17 AM
Co-Chair Stedman ordered the bill HELD in Committee.
ADJOURNMENT
Co-Chair Bert Stedman adjourned the meeting at 10:32:44 AM
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