Legislature(2015 - 2016)BUTROVICH 205

04/16/2015 09:00 AM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 74(STA) Out of Committee
Moved HB 135 Out of Committee
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 16, 2015                                                                                         
                           9:18 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Bill Stoltze, Chair                                                                                                     
Senator John Coghill, Vice Chair                                                                                                
Senator Charlie Huggins                                                                                                         
Senator Bill Wielechowski                                                                                                       
MEMBERS ABSENT                                                                                                                
Senator Lesil McGuire                                                                                                           
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 135                                                                                                              
"An Act establishing  a Roth contribution program  for the public                                                               
employees' deferred  compensation program;  and providing  for an                                                               
effective date."                                                                                                                
     - MOVED HB 135 OUT OF COMMITTEE                                                                                            
SENATE BILL NO. 74                                                                                                              
"An  Act relating  to  permanent fund  dividends;  relating to  a                                                               
medical  assistance  reform   program;  establishing  a  personal                                                               
health   savings   account   program   for   medical   assistance                                                               
recipients; relating  to the duties  of the Department  of Health                                                               
and    Social   Services;    establishing   medical    assistance                                                               
demonstration  projects;   and  relating   to  a  study   by  the                                                               
Department of Health and Social Services."                                                                                      
     - MOVED CSSB 74(STA) OUT OF COMMITTEE                                                                                      
HOUSE JOINT RESOLUTION NO. 22                                                                                                   
Urging  the Canada  Border  Services Agency  to  keep the  border                                                               
between  Hyder, Alaska,  and Stewart,  British Columbia,  open 24                                                               
hours a day.                                                                                                                    
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 135                                                                                                                  
SHORT TITLE: PUBLIC EMPLOYEE ROTH CONTRIBUTIONS                                                                                 
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
03/04/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/04/15       (H)       L&C, FIN                                                                                               
03/23/15       (H)       L&C RPT 6DP 1NR                                                                                        
03/23/15       (H)       DP: TILTON, KITO, JOSEPHSON, COLVER,                                                                   
                         LEDOUX, OLSON                                                                                          
03/23/15       (H)       NR: HUGHES                                                                                             
03/23/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/23/15       (H)       Moved HB 135 Out of Committee                                                                          
03/23/15       (H)       MINUTE(L&C)                                                                                            
03/31/15       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/31/15       (H)       Heard & Held                                                                                           
03/31/15       (H)       MINUTE(FIN)                                                                                            
04/06/15       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/06/15       (H)       Moved HB 135 Out of Committee                                                                          
04/06/15       (H)       MINUTE(FIN)                                                                                            
04/07/15       (H)       FIN RPT 9DP                                                                                            
04/07/15       (H)       DP: SADDLER, KAWASAKI, PRUITT, WILSON,                                                                 
                         GUTTENBERG, GATTIS, EDGMON, MUNOZ,                                                                     
04/07/15       (H)       THOMPSON                                                                                               
04/14/15       (H)       TRANSMITTED TO (S)                                                                                     
04/14/15       (H)       VERSION: HB 135                                                                                        
04/15/15       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/15/15       (S)       STA, FIN                                                                                               
04/16/15       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
BILL: SB 74                                                                                                                   
SHORT TITLE: MEDICAID REFORM/PFD/HSAS/ER USE/STUDIES                                                                            
SPONSOR(s): KELLY                                                                                                               
03/13/15       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/13/15       (S)       HSS, STA, FIN                                                                                          
03/13/15       (S)       HSS AT 1:30 PM BUTROVICH 205                                                                           
03/13/15       (S)       -- MEETING CANCELED --                                                                                 
03/23/15       (S)       HSS AT 1:30 PM BUTROVICH 205                                                                           
03/23/15       (S)       Heard & Held                                                                                           
03/23/15       (S)       MINUTE(HSS)                                                                                            
04/01/15       (S)       HSS AT 1:30 PM BUTROVICH 205                                                                           
04/01/15       (S)       Heard & Held                                                                                           
04/01/15       (S)       MINUTE(HSS)                                                                                            
04/02/15       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
04/02/15       (S)       <Pending Referral>                                                                                     
04/03/15       (S)       HSS AT 1:30 PM BUTROVICH 205                                                                           
04/03/15       (S)       -- MEETING CANCELED --                                                                                 
04/08/15       (S)       HSS AT 1:30 PM BUTROVICH 205                                                                           
04/08/15       (S)       Heard & Held                                                                                           
04/08/15       (S)       MINUTE(HSS)                                                                                            
04/10/15       (S)       HSS AT 1:30 PM BUTROVICH 205                                                                           
04/10/15       (S)       Moved CSSB 74(HSS) Out of Committee                                                                    
04/10/15       (S)       MINUTE(HSS)                                                                                            
04/11/15       (S)       HSS RPT CS 3DP 1NR NEW TITLE                                                                           
04/11/15       (S)       DP: GIESSEL, ELLIS, STOLTZE                                                                            
04/11/15       (S)       NR: STEDMAN                                                                                            
04/13/15       (S)       STA AT 8:00 AM BUTROVICH 205                                                                           
04/13/15       (S)       Heard & Held                                                                                           
04/13/15       (S)       MINUTE(STA)                                                                                            
04/14/15       (S)       STA AT 8:00 AM BUTROVICH 205                                                                           
04/14/15       (S)       Scheduled but Not Heard                                                                                
04/15/15       (S)       STA AT 8:00 AM BUTROVICH 205                                                                           
04/15/15       (S)       Heard & Held                                                                                           
04/15/15       (S)       MINUTE(STA)                                                                                            
04/16/15       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
BILL: HJR 22                                                                                                                  
SHORT TITLE: STEWART-HYDER BORDER HOURS                                                                                         
SPONSOR(s): ORTIZ                                                                                                               
04/02/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/02/15       (H)       STA                                                                                                    
04/09/15       (H)       STA RPT 4DP                                                                                            
04/09/15       (H)       DP: TALERICO, STUTES, KELLER, LYNN                                                                     
04/09/15       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
04/09/15       (H)       Moved HJR 22 Out of Committee                                                                          
04/09/15       (H)       MINUTE(STA)                                                                                            
04/13/15       (H)       TRANSMITTED TO (S)                                                                                     
04/13/15       (H)       VERSION: HJR 22                                                                                        
04/14/15       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/14/15       (S)       STA                                                                                                    
04/16/15       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
JOHN BOUCHER, Deputy Commissioner                                                                                               
Alaska Department of Administration                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided an overview of HB 135.                                                                           
KATHY LEA, Chief Pension Officer                                                                                                
Division of Retirement and Benefits                                                                                             
Alaska Department of Administration                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Addressed questions regarding HB 135.                                                                     
HEATHER SHADDUCK, Staff                                                                                                         
Senator Pete Kelly                                                                                                              
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Answered questions regarding SB 74.                                                                       
JON SHERWOOD, Deputy Commissioner                                                                                               
Medicaid and Health Care Policy Division                                                                                        
Alaska Department of Health and Social Services                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Addressed questions regarding SB 74.                                                                      
REPRESENTATIVE DAN ORTIZ                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Prime sponsor of HJR 22.                                                                                  
ACTION NARRATIVE                                                                                                              
9:18:02 AM                                                                                                                    
CHAIR BILL  STOLTZE reconvened and  adjourned the April  15, 2015                                                             
Senate  State   Affairs  Standing  Committee  meeting   that  was                                                               
recessed to the  call of the Chair. He called  the April 16, 2015                                                               
Senate State Affairs Standing Committee  meeting to order at 9:18                                                               
a.m.  Present  at  the  call  to  order  were  Senators  Coghill,                                                               
Huggins, and Chair Stoltze.                                                                                                     
           HB 135-PUBLIC EMPLOYEE ROTH CONTRIBUTIONS                                                                        
9:19:39 AM                                                                                                                    
CHAIR STOLTZE announced the consideration of HB 135.                                                                            
9:20:05 AM                                                                                                                    
JOHN   BOUCHER,  Deputy   Commissioner,   Alaska  Department   of                                                               
Administration, Juneau,  Alaska, provided  an overview of  HB 135                                                               
as follows:                                                                                                                     
     HB  135  is an  act  establishing  a Roth  contribution                                                                    
     option for  public employees who choose  to participate                                                                    
     in the deferred  compensation program. This legislation                                                                    
     enables plan members to take  control of one portion of                                                                    
     their retirement  portfolio that they currently  do not                                                                    
     have a choice  over, essentially that is  the timing of                                                                    
     the  taxation of  the contributions  that they  make to                                                                    
     their deferred  compensation plan. The  current statute                                                                    
     has  been   in  effect  since  1973   and  the  statute                                                                    
     currently only allows deferred  compensation to be made                                                                    
     as part of  a pretax contribution. HB 135  is an effort                                                                    
     to modernize and update the  options that are available                                                                    
     to members  of the  plan to  comport with  changes that                                                                    
     have been made on a  national level with other deferred                                                                    
     compensation plans.                                                                                                        
CHAIR STOLTZE asked if the new opportunities are because of                                                                     
federal laws.                                                                                                                   
MR. BOUCHER answered correct. He continued his overview as                                                                      
     In  January   of  2011,  Congress   passed  legislation                                                                    
     enabling  governments to  implement  a designated  Roth                                                                    
     contribution  option and  HB 135  would  allow for  the                                                                    
     incorporation of  this option  to public  employees who                                                                    
     participate   in   the   State   of   Alaska   deferred                                                                    
     compensation plan. The bill  enables members to control                                                                    
     the   timing  of   the  taxation   of  their   deferred                                                                    
     compensation contributions,  whether it be at  the time                                                                    
     that  the   contribution  is   made  to   the  deferred                                                                    
     compensation  plan  or  at the  time  of  distribution.                                                                    
     Should  HB  135  pass  as  purposed,  it  would  enable                                                                    
     members to choose to have  their contributions taxed at                                                                    
     the  time of  contribution, which  would mean  that the                                                                    
     income could  be considered tax-free  at the time  of a                                                                    
     qualified  dividend  distribution. The  default  option                                                                    
     for existing members would be  the current pre-tax plan                                                                    
     and members  would have to  positively elect to  a Roth                                                                    
     investment  to have  their contributions  changed to  a                                                                    
     taxable  status.   This  proposed  legislation   is  in                                                                    
     response  to requests  by members  to  the Division  of                                                                    
     Retirement & Benefits to offer this option to members.                                                                     
9:21:58 AM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee meeting.                                                                              
CHAIR STOLTZE asked if the request was from organized employee                                                                  
groups or individuals.                                                                                                          
MR. BOUCHER replied that the request came from individual                                                                       
CHAIR STOLTZE asked if there have been any formalized requests                                                                  
from any employee groups or retired groups.                                                                                     
9:23:46 AM                                                                                                                    
KATHY  LEA, Chief  Pension Officer,  Division  of Retirement  and                                                               
Benefits,  Alaska Department  of Administration,  Juneau, Alaska,                                                               
explained that  the requests  have come  to the  division through                                                               
its regional  counselors who travel  all over the state  and meet                                                               
individually  with members.  She  specified that  the option  was                                                               
published a  couple of  years ago  when Congress  inaugurated the                                                               
bill and the option has been a topic of conversation.                                                                           
SENATOR  WIELECHOWSKI asked  if  the option  is  common in  other                                                               
MS. LEA  answered that more  states are adding a  designated Roth                                                               
option.  She detailed  that approximately  12 states  offered the                                                               
SENATOR WIELECHOWSKI  asked if the  maximum that can  be deferred                                                               
is the same as the current maximum.                                                                                             
MS. LEA answered that the  current limit is $18,000. She detailed                                                               
that  the  Roth  option  would  take on  all  of  the  rules  and                                                               
contribution limits of the deferred compensation plan.                                                                          
SENATOR  WIELECHOWSKI asked  if  contributions  can be  "stacked"                                                               
where $18,000  is deferred to  each plan or "split"  where $9,000                                                               
is deferred to each plan.                                                                                                       
9:25:36 AM                                                                                                                    
MS. LEA  answered the contributions can  be split as long  as the                                                               
$18,000 limit is not exceeded.                                                                                                  
SENATOR HUGGINS noted that education  and healthcare workers have                                                               
a Roth 403(b) contribution option.  He asked what the differences                                                               
were in the various retirement plans.                                                                                           
MS. LEA  answered that she is  not versed in Roth  403(b) details                                                               
because the division does not administer the plan.                                                                              
SENATOR HUGGINS  asked why  public employees  are not  covered by                                                               
Social Security and how that came about officially.                                                                             
MS. LEA explained that the  early 1950s, the state's teachers had                                                               
an opportunity  to come  into Social Security  and the  option at                                                               
that  time was  the  teachers did  not need  to  opt into  Social                                                               
Security due to an existing  retirement plan. The State of Alaska                                                               
signed  an agreement  with Social  Security  that their  teachers                                                               
would not  participate, many  states did  the same.  She revealed                                                               
that in 1980,  state employees held a referendum and  voted for a                                                               
Social  Security   replacement  plan,  the   Alaska  Supplemental                                                               
Annuity Plan. She noted that the  option to choose has sunset and                                                               
Social Security  only allows an  option choice for  new entities;                                                               
for example, when a borough and city merges.                                                                                    
9:28:28 AM                                                                                                                    
SENATOR  HUGGINS asked  if Ms.  Lea  had history  on whether  the                                                               
teachers supported the state not opting into Social Security.                                                                   
MS.  LEA answered  that the  division  does not  have any  public                                                               
SENATOR  WIELECHOWSKI assumed  that the  same investment  options                                                               
would  be   available  that  would   be  treated   like  deferred                                                               
compensation.  He  asked  if  there would  be  a  separate  state                                                               
account  or could  the  deferred compensation  be  directed to  a                                                               
personal Roth  Individual Retirement  Account (IRA).  He inquired                                                               
that  if  there  is  a  state  account,  would  the  same  Alaska                                                               
Supplemental  Annuity  Plan  (SBS-AP) and  deferred  compensation                                                               
investment options be offered.                                                                                                  
MS. LEA answered as follows:                                                                                                    
     This  is an  option  within  the deferred  compensation                                                                    
     program, so  you would not  be able  to direct it  to a                                                                    
     private IRA and this type  of option is only allowed in                                                                    
     a  457   plan  because   the  limits  are   higher  for                                                                    
     contribution,   it  is   a  taxation   option  so   the                                                                    
     investment   lineup   that    are   in   the   deferred                                                                    
     compensation  plan   don't  change,  it  is   the  same                                                                    
SENATOR  WIELECHOWSKI  asked  if  the investments  are  the  same                                                               
investments that currently exist in the deferred compensation.                                                                  
MS. LEA answered correct.                                                                                                       
SENATOR WIELECHOWSKI asked if a  state employee has the option of                                                               
rolling their Roth  IRA into their own private Roth  IRA when the                                                               
individual leaves state-service.                                                                                                
MS. LEA answered  yes. She specified that  the investment product                                                               
is "rollable" and can go into a Roth IRA.                                                                                       
9:30:38 AM                                                                                                                    
SENATOR  WIELECHOWSKI asked  if there  is any  opposition to  the                                                               
MR. BOUCHER answered that he is not aware of any opposition.                                                                    
SENATOR WIELECHOWSKI  commented that  the proposition  looks like                                                               
another employee option.                                                                                                        
MR. BOUCHER answered  correct. He opined that  the option depends                                                               
on how  the future of taxation  is viewed where a  person decides                                                               
between the  certainty in  current rates  and the  uncertainty in                                                               
future rates. He  noted that one option could be  setting aside a                                                               
portion  of  tax-free  income  for   an  individual's  heirs.  He                                                               
summarized that the option is just another tool.                                                                                
SENATOR  COGHILL asked  to verify  that taxes  are paid  prior to                                                               
MR. BOUCHER answered yes.                                                                                                       
SENATOR  COGHILL  asked  what  tax rates  are  applied  prior  to                                                               
MS. LEA  answered that an  individual is taxed at  the applicable                                                               
rate during the time of the pay period contribution.                                                                            
SENATOR COGHILL  asked to  verify that  an individual  decides on                                                               
what percentage of income is deferred.                                                                                          
MS. LEA answered correct. She  specified that the contribution is                                                               
a positive election that the employee has to make.                                                                              
9:33:46 AM                                                                                                                    
SENATOR  WIELECHOWSKI assumed  that excess  money after  taxes of                                                               
$18,000 could be  put into a Roth  IRA. He asked if  a person has                                                               
to wait a certain amount of time for withdrawal.                                                                                
MS.  LEA  answered that  there  are  some restrictions  that  are                                                               
different from  a personal  IRA and  withdrawal is  allowed under                                                               
the following conditions:                                                                                                       
   · Account must be maintained for at least 5 years.                                                                           
   · In the case of a disability.                                                                                               
   · A survivor may remove the money.                                                                                           
   · Age 59-1/2 and employment has been terminated.                                                                             
MS.  LEA   summarized  that  any   investment  earnings   on  the                                                               
contributions are not taxed as long as the qualifiers are met.                                                                  
SENATOR WIELECHOWSKI asked to verify  that a person strictly pays                                                               
taxes on  the dividends  or interest if  money is  withdrawn from                                                               
the plan within the first five years.                                                                                           
MS. LEA  answered that  money cannot be  removed from  a deferred                                                               
compensation plan unless a person is terminated from employment.                                                                
CHAIR STOLTZE  asked if the  plan can be  used as a  loan account                                                               
where  an individual  can  borrow  on the  money  and repay  with                                                               
interest to oneself.                                                                                                            
9:35:33 AM                                                                                                                    
MS. LEA  answered that the  state plans do  not allow for  a loan                                                               
option. She specified that a  loan option is considered "leakage"                                                               
from an individual's retirement plan.  She remarked that loans on                                                               
a  retirement plan  is considered  robbing  from an  individual's                                                               
CHAIR  STOLTZE  asked if  the  policy  Ms.  Lea described  was  a                                                               
decision that  she made in  presenting the bill and  offering the                                                               
MS.  LEA  replied  that  the  policy decision  was  made  by  the                                                               
Legislature when the deferred compensation plan was created.                                                                    
CHAIR  STOLTZE assumed  that the  policy decision  was made  with                                                               
guidance from the Department of Administration.                                                                                 
SENATOR HUGGINS  asked if  there is a  provision that  allows for                                                               
rolling  over a  different Roth  IRA into  the public  employees'                                                               
Roth IRA.                                                                                                                       
9:37:19 AM                                                                                                                    
MS. LEA answered  that private IRA roll-in  is permissible except                                                               
for the SIMPLE (Savings Incentive Match PLan for Employees) IRA.                                                                
SENATOR COGHILL asked how a catch-up contribution works.                                                                        
MS.  LEA answered  that a  catch-up provision  is allowed  within                                                               
three  years  of  an individual's  normal  retirement  date.  She                                                               
specified that contributions can be  doubled in each of the three                                                               
catch-up years where the limit is $36,000 rather than $18,000.                                                                  
SENATOR WIELECHOWSKI  asked to verify  that funds from  a private                                                               
Roth  IRA  can  be  rolled  into  the  bill's  Roth  IRA  if  the                                                               
legislation is passed.                                                                                                          
MS. LEA answered yes.                                                                                                           
SENATOR  WIELECHOWSKI asked  if  unlimited  amounts maybe  rolled                                                               
into the plan.                                                                                                                  
MS. LEA answered that she is not sure what the limitation is.                                                                   
9:39:05 AM                                                                                                                    
At ease.                                                                                                                        
9:40:09 AM                                                                                                                    
CHAIR STOLTZE  called the committee  back to order. He  asked Mr.                                                               
Boucher if he had any closing comments.                                                                                         
MR. BOUCHER  commented that  the plan is  a fantastic  option for                                                               
people  who  may want  to  choose  to  have  a portion  of  their                                                               
retirement income  not taxed or  taxed now  and not taxed  in the                                                               
CHAIR STOLTZE  asked to verify  that the  bill has a  zero fiscal                                                               
MR. BOUCHER answered correct.                                                                                                   
9:41:23 AM                                                                                                                    
SENATOR COGHILL  moved to report  HB 135,  [version 29-GH1015\A],                                                               
from committee  with individual recommendations and  the attached                                                               
zero fiscal note.                                                                                                               
9:41:37 AM                                                                                                                    
CHAIR STOLTZE announced that hearing  no objection, [HB 135 moved                                                               
out of Senate State Affairs Standing Committee].                                                                                
9:42:04 AM                                                                                                                    
At ease.                                                                                                                        
         SB 74-MEDICAID REFORM/PFD/HSAS/ER USE/STUDIES                                                                      
9:44:08 AM                                                                                                                    
CHAIR STOLTZE announced the consideration of SB 74.                                                                             
9:44:24 AM                                                                                                                    
HEATHER  SHADDUCK,  Staff,  Senator   Pete  Kelly,  Alaska  State                                                               
Legislature, Juneau, Alaska, stated that  the concept of SB 74 is                                                               
to  slow  the  growth  of Alaska's  Medicaid  program.  She  said                                                               
Alaska's  Medicaid program  is growing  at  a very  unsustainable                                                               
rate which  puts the entire  program in jeopardy for  the state's                                                               
most vulnerable Alaskans.  SB 74 is an attempt to  make sure that                                                               
the state  has safeguards in  place for a Medicaid  program which                                                               
Alaska is federally obligated to  provide. She set forth that the                                                               
bill  gets payment  reforms in  place while  trying new  concepts                                                               
like managed  care. She  summarized that  the bill  starts Alaska                                                               
down the reform process.                                                                                                        
CHAIR STOLTZE remarked that irrespective  of whether an expansion                                                               
bill passes, SB 74 is a good policy measure.                                                                                    
MS. SHADDUCK  added that SB 74  is a good policy  call. She noted                                                               
that   the  current   administration  testified   in  yesterday's                                                               
committee  meeting  that  Alaska's current  Medicaid  program  is                                                               
unsustainable without reform.                                                                                                   
CHAIR  STOLTZE noted  that the  Department of  Health and  Social                                                               
Services  (DHSS)  responded  to  his request  for  Medicaid  cost                                                               
projections.  He said  his  intent was  to  point out  Medicaid's                                                               
growth  and  sustainability  without  expansion.  He  voiced  his                                                               
frustration that  DHSS has  not taken  ownership of  its Medicaid                                                               
cost forecasts.                                                                                                                 
9:46:58 AM                                                                                                                    
MS. SHADDUCK revealed  that DHSS has been very  open with Senator                                                               
Kelly's  office. She  disclosed  that there  was  an exchange  on                                                               
provisions that were  agreed and disagreed upon.  She pointed out                                                               
that  DHSS paid  for the  Evergreen Economics  Report. She  added                                                               
that the  Office of  Management and Budget  (OMB) and  the Alaska                                                               
Division  of  Legislative  Finance were  excellent  in  providing                                                               
fiscal note and forecasting assistance.                                                                                         
CHAIR STOLTZE stated that perhaps  Mr. Sherwood could explain why                                                               
DHSS does  not want to take  ownership of just a  simple economic                                                               
fact on the fiscal realities  of sustainability. He said DHSS has                                                               
been given  ample opportunity  to say what  they expect  to save;                                                               
however, their averting of the  discussion of what current growth                                                               
is, causes  suspicion and puts a  little kink in the  strong bond                                                               
of trust.                                                                                                                       
9:49:05 AM                                                                                                                    
JON  SHERWOOD,  Deputy  Commissioner, Medicaid  and  Health  Care                                                               
Policy  Division,   Alaska  Department   of  Health   and  Social                                                               
Services,  Juneau, Alaska,  stated  that DHSS  never intended  to                                                               
hide the numbers.                                                                                                               
CHAIR  STOLTZE  declared  that   Mr.  Sherwood  is  obligated  to                                                               
audibilize projected  year-by-year growth for the  public record.                                                               
He  reiterated that  DHSS  did not  take  ownership on  providing                                                               
Medicaid growth projections.                                                                                                    
9:50:10 AM                                                                                                                    
At ease.                                                                                                                        
9:51:51 AM                                                                                                                    
CHAIR STOLTZE called the committee back to order.                                                                               
MR.  SHERWOOD provided  Medicaid spending  projections from  2014                                                               
out to 2034 as follows:                                                                                                         
        · 2014: $1.5 billion,                                                                                                   
        · 2016: $1.7 billion,                                                                                                   
        · 2018: $2 billion,                                                                                                     
        · 2022: $2.5 billion,                                                                                                   
        · 2024: $3 billion,                                                                                                     
        · 2026: $3 billion,                                                                                                     
        · 2028: $3.5 billion,                                                                                                   
        · 2030: $4 billion,                                                                                                     
        · 2032: $4.2 billion,                                                                                                   
        · 2034: $4.5 billion.                                                                                                   
He  added that  the general  funds  component is  just over  $1.5                                                               
billion by 2034.                                                                                                                
9:53:13 AM                                                                                                                    
CHAIR  STOLTZE asked  to verify  that  DHSS's projections  assume                                                               
that the federal government keeps all of its obligations.                                                                       
MR. SHERWOOD  answered that the  forecast assumes that  the match                                                               
rates stay approximately the same.                                                                                              
CHAIR  STOLTZE  noted   that  the  forecast  is   absent  of  any                                                               
MR. SHERWOOD  confirmed that the  DHSS forecast is absent  of any                                                               
expansion or changes to the Medicaid program.                                                                                   
CHAIR STOLTZE  appreciated that Mr. Sherwood  put DHSS's Medicaid                                                               
spending  forecast on  the  record. He  asked  that Mr.  Sherwood                                                               
address areas that  DHSS supports and does not  support. He added                                                               
that  the Senate  Finance Committee  will continue  to deliberate                                                               
the bill and allow public input.                                                                                                
MR.   SHERWOOD  noted   that  Commissioner   Davidson  previously                                                               
testified about  areas of particular  concern about the  bill. He                                                               
explained  that  DHSS  wants  to make  sure  it  understands  the                                                               
intention of  Section 2 requiring  a computerized  income, asset,                                                               
and identity  eligibility verification  system. He  divulged that                                                               
DHSS has moved  forward on the assumption that  the section would                                                               
be  a  separate  component  that  would  be  an  adjunct  to  the                                                               
department's   existing  computerized   eligibility  verification                                                               
system.  He  stated  that  the   department  has  developed  cost                                                               
estimates for adding components to the current system.                                                                          
9:55:22 AM                                                                                                                    
MR.  SHERWOOD pointed  out  that  on line  4,  the department  is                                                               
instructed  to   pursue  new  payment  processes.   He  said  the                                                               
department  recommends  using  "or"  rather  than  "and"  in  the                                                               
section because  potential conflicts between some  of the methods                                                               
may occur.  He reiterated  that DHSS does  not support  Section 5                                                               
which  requires   Legislative  approval   prior  to   adding  any                                                               
mandatory  Medicaid coverage  groups. He  asserted that  the bill                                                               
contains  a  number  of beneficial  reforms  and  the  department                                                               
welcomes an opportunity to pursue those reforms.                                                                                
CHAIR  STOLTZE explained  that  the  department's noted  concerns                                                               
allows any member in the next  committee to make an amendment. He                                                               
asked that  Mr. Sherwood address  the issue of  privatization. He                                                               
asked  if  the  department  and  the  administration  will  allow                                                               
outsourcing in looking  at finding fraud. He  noted that Illinois                                                               
has been  very aggressive in  allowing a "different set  of eyes"                                                               
outside  of the  institutions. He  remarked that  outsourcing may                                                               
allow  the most  analytical  sets  of eyes  with  a proven  track                                                               
record  to  find  savings  and ferret  out  inherent  abuse  that                                                               
sometimes is not seen.                                                                                                          
9:58:34 AM                                                                                                                    
MR.  SHERWOOD replied  that DHSS  is always  willing to  consider                                                               
outsourcing  when permissible  under federal  law. He  noted that                                                               
restrictions exist; for  example, eligibility determinations need                                                               
to be  made by a civil  servant. He revealed that  DHSS currently                                                               
outsources  a substantial  amount  of Medicaid  audits and  third                                                               
party  recovery   efforts.  He  disclosed  that   DHSS  has  been                                                               
instructed  by  the  administration to  consider  cost  effective                                                               
opportunities  for outsourcing.  He summarized  that there  is no                                                               
general philosophical  opposition to  outsourcing as long  as the                                                               
department can  ensure that programs are  operated appropriately,                                                               
effectively, and desired outcomes are achieved.                                                                                 
CHAIR STOLTZE  pointed out that  technology exists to  simply use                                                               
the internet  for finding fraud.  He asked if Mr.  Sherwood found                                                               
internet searches as intrusive.                                                                                                 
10:01:03 AM                                                                                                                   
MR.  SHERWOOD  replied that  DHSS  does  an extensive  amount  of                                                               
verification;  for example,  cause  for additional  investigation                                                               
occurs when no  income is reported when  income generating assets                                                               
are noted.  He asserted that  taking advantage of  new technology                                                               
must  be done  in a  thoughtful and  equitable manner  that takes                                                               
into consideration  privacy issues  where people are  not singled                                                               
out for the wrong sorts of reasons.                                                                                             
CHAIR  STOLTZE remarked  that the  real  substantive fraud  abuse                                                               
cases  have   been  brought  on   against  large   providers  and                                                               
institutions rather than an individual  making a bad decision. He                                                               
added that the  real systematic fraud often occurs  at the higher                                                               
10:04:05 AM                                                                                                                   
SENATOR  WIELECHOWSKI noted  that legislative  staff members  are                                                               
not permitted  to use  Facebook. He asked  if DHSS  employees are                                                               
allowed to use Facebook.                                                                                                        
MR.  SHERWOOD   explained  that  state  employees   have  to  get                                                               
permission  to use  Facebook. He  noted that  an individual  must                                                               
have  a legitimate  business purpose  to access  Facebook through                                                               
state resources.                                                                                                                
SENATOR  COGHILL  addressed  uncompensated care  and  noted  that                                                               
based   upon    population,   the   federal    government   gives                                                               
disproportionate share  payments to hospitals.  He asked  how the                                                               
disproportionate share payments are calculated.                                                                                 
MR.   SHERWOOD   answered   that   there   are   two   kinds   of                                                               
disproportionate  share  payments:   Medicare  and  Medicaid.  He                                                               
specified that the state does  not have any direct involvement in                                                               
Medicare, but  the state's Office  of Rate Review  calculates how                                                               
much an institution is eligible to receive.                                                                                     
SENATOR  COGHILL  asked  to verify  that  disproportionate  means                                                               
higher  than  the  regular Medicaid  payment.  He  inquired  what                                                               
formulation is used.                                                                                                            
10:06:45 AM                                                                                                                   
MR.  SHERWOOD   answered  that  he   did  not   know  formulation                                                               
specifics.  He   revealed  that   Alaska  has   historically  not                                                               
allocated  all of  its  federal  Disproportionate Share  Hospital                                                               
(DSH)  allotment because  the  state did  not  have the  matching                                                               
general funds to go along with  it. He specified that the state's                                                               
current DSH  payments are targeted toward  the Alaska Psychiatric                                                               
Institute to the maximum extent  allowed by federal law. He noted                                                               
that  there are  three other  hospitals that  provide psychiatric                                                               
services as well.                                                                                                               
SENATOR  COGHILL  assumed  that  calculations are  based  upon  a                                                               
hospital's  billing  volume  which  includes  uncompensated  care                                                               
flow. He  advised that additional  uncompensated care  details be                                                               
provided  to  the  Senate  Finance   Committee.  He  stated  that                                                               
hospitals are probably paid fairly  well by Medicaid, but smaller                                                               
payers are  the ones  that have  felt the heat  due to  a payment                                                               
system  lag. He  pointed out  that  hospitals are  able to  shift                                                               
costs within  hospitals and  noted that  imaging centers  pay for                                                               
things like uncompensated care.                                                                                                 
10:09:50 AM                                                                                                                   
CHAIR STOLTZE  pointed out  that hospitals  in the  Mat-Su region                                                               
are  very  competitive  in  retaining  their  profitable  imaging                                                               
SENATOR  WIELECHOWSKI   asked  how  much  the   $100  million  in                                                               
uncompensated care  costs the  average family  in Alaska  and how                                                               
much an average family would save if Medicaid was expanded.                                                                     
MR. SHERWOOD answered that he did not have any cost estimates.                                                                  
10:12:01 AM                                                                                                                   
SENATOR  WIELECHOWSKI noted  that 65  to 70  percent of  Alaskans                                                               
receive  government healthcare:  state workers,  federal workers,                                                               
military members, veterans, and  Medicare recipients. He asked if                                                               
Mr.  Sherwood had  an estimate  of what  percentage of  the total                                                               
state population is already on government healthcare.                                                                           
MR. SHERWOOD answered that he does not have the information.                                                                    
SENATOR  WIELECHOWSKI  replied  that  he would  like  to  receive                                                               
information with a breakdown.                                                                                                   
CHAIR STOLTZE asserted that a system  that wants to add people on                                                               
requires  some  type  of  mechanism  that  is  watching  out  for                                                               
institutional  fraud before  it gets  too far  and racks  up real                                                               
numbers. He reiterated  that privatization involves organizations                                                               
that specialize  in ferreting out fraud.  He asked if there  is a                                                               
commitment to outside eyes that  have total objectivity solely on                                                               
cost containment.  He noted that  are not always the  most savory                                                               
during times of budgetary deficits.                                                                                             
10:14:42 AM                                                                                                                   
MR.   SHERWOOOD   answered   that    the   department   and   the                                                               
administration are  in complete agreement that  limited resources                                                               
should go  to meet the  real needs of  individuals and not  go to                                                               
support  fraud or  abuse.  He  remarked that  a  role exists  for                                                               
external  entities   in  assisting  the  department   in  staying                                                               
appropriately focused on program integrity                                                                                      
SENATOR  HUGGINS asked  to confirm  that  Mr. Sherwood  projected                                                               
Medicaid costs to increase by 300 percent from 2014 to 2034.                                                                    
10:18:30 AM                                                                                                                   
MR. SHERWOOD answered correct.                                                                                                  
SENATOR   HUGGINS  noted   that  Mr.   Sherwood  worked   off  of                                                               
assumptions  that   lower  projected   growth  is  due   to  cost                                                               
containment. He  admitted that  Mr. Sherwood's  growth forecast's                                                               
big number  frightens him if  the calculations are  incorrect. He                                                               
asked of the state's overall  healthcare picture is under control                                                               
and sustainable.                                                                                                                
10:20:10 AM                                                                                                                   
MR.  SHERWOOD  revealed that  he  has  worked with  the  Medicaid                                                               
program for  25 years and  during the entire time  the department                                                               
has actively tried to manage  and control costs. He remarked that                                                               
managing costs has  not been the department's  only objective and                                                               
noted  the  creation  of the  Denali  KidCare  program,  expanded                                                               
coverage, and added  services where needed. He  detailed that the                                                               
20 year  Medicaid cost forecast  is based on  historical spending                                                               
patterns and does not include  program changes. He concurred that                                                               
the forecast is  concerning, but admitted that he  has lived with                                                               
the concern for 25 years. He  said there are always ways to "bend                                                               
the curve" and noted that  the 2012 forecast's 20 year projection                                                               
would have been  $6 billion instead of $4.5  billion. He remarked                                                               
that Medicaid is not unique  and noted that healthcare in general                                                               
has  seen  its expenses  rise  where  its  share of  the  economy                                                               
increases due to inflation. He  said DHSS will work vigorously to                                                               
manage the Medicaid program.                                                                                                    
10:22:34 AM                                                                                                                   
SENATOR  HUGGINS  asked to  verify  that  Mr. Sherwood  has  been                                                               
involved with Medicaid for 25 years.                                                                                            
MR. SHERWOOD answered yes.                                                                                                      
SENATOR  HUGGINS  asked  what  the state  has  done  with  Denali                                                               
KidCare over time.                                                                                                              
MR. SHERWOOD explained that Denali KidCare was started in 1999.                                                                 
CHAIR  STOLTZE  added that  Denali  KidCare  was part  of  "Smart                                                               
MR.  SHERWOOD  explained  that the  Children's  Health  Insurance                                                               
Program (CHIP)  was an option  that was added to  expand Medicaid                                                               
for children. He  detailed that existing coverage  for low income                                                               
children and pregnant women was  rolled into a package and called                                                               
Denali KidCare. He  specified that income limits were  set at 200                                                               
percent of the poverty level.                                                                                                   
CHAIR  STOLTZE asked  what the  program's starting  cost was  and                                                               
what the current costs are.                                                                                                     
MR.  SHERWOOD  answered  that  he   could  not  provide  specific                                                               
CHAIR STOLTZE  asked that Mr.  Sherwood provide  legislators with                                                               
Denali KidCare's growth analysis.                                                                                               
10:24:39 AM                                                                                                                   
SENATOR COGHILL moved to report  CSSB 74(STA) from committee with                                                               
individual recommendations and attached fiscal note(s).                                                                         
10:24:58 AM                                                                                                                   
CHAIR  STOLTZE announced  that without  objection, CSSB  74(STA),                                                               
[version:  29-LS0692\F], moves  out of  the Senate  State Affairs                                                               
Standing Committee.                                                                                                             
10:25:12 AM                                                                                                                   
At ease.                                                                                                                        
               HJR 22-STEWART-HYDER BORDER HOURS                                                                            
10:26:09 AM                                                                                                                   
CHAIR STOLTZE announced the consideration of HJR 22.                                                                            
10:26:21 AM                                                                                                                   
REPRESENTATIVE  DAN  ORTIZ,  Alaska  State  Legislature,  Juneau,                                                               
Alaska,  prime  sponsor,  provided  an  overview  of  HJR  22  as                                                               
     HJR  22 is  a  resolution that  calls  on the  Canadian                                                                    
     Border Services  Agency (CBSA) to reopen  a border that                                                                    
     exists  between  Hyder,  Alaska  and  Stewart,  British                                                                    
     Columbia on a 24 hour basis.  As of April 1, the border                                                                    
     between  Stewart and  Hyder was  closed  and is  closed                                                                    
     between midnight and 8:00 a.m.                                                                                             
He  said the  border closing  has created  issues for  Hyder's 87                                                               
residents and  Stewart's 500 residents.  He explained  that Hyder                                                               
residents do  not have emergency  access to  hospital facilities.                                                               
He  added that  economic  issues are  involved  where tourism  is                                                               
impacted and  access to the mine  on the Hyder side  is affected.                                                               
He specified that  the resolution calls on CBSA to  look at their                                                               
decision and  perhaps reopen the  border on  a 24 hour  basis, at                                                               
least  during the  border's peak-time  during the  summertime. He                                                               
disclosed that he  has met with Hyder and Stewart  residents at a                                                               
town meeting and  both communities are very  much concerned about                                                               
CBSA's decision.  He added that  U.S. Senator  Murkowski's office                                                               
and the Governor have been involved as well.                                                                                    
10:28:53 AM                                                                                                                   
CHAIR  STOLTZE asked  if there  has  been an  issue raised  about                                                               
changing the border hours at the Skagway crossing as well.                                                                      
REPRESENTATIVE  ORTIZ answered  that he  is unaware  of a  border                                                               
issue with Skagway.                                                                                                             
CHAIR STOLTZE  stated that he  will talk to  Representative Munoz                                                               
regarding the Skagway border. He  asked how the proposed daylight                                                               
savings bill is being received in Southeast Alaska.                                                                             
REPRESENTATIVE  ORTIZ answered  that  Southeast  folks are  happy                                                               
that the bill is on hold.                                                                                                       
CHAIR STOLTZE asked  if the situation with  daylight savings will                                                               
cause issues with the crossing.                                                                                                 
REPRESENTATIVE ORTIZ replied that the issue with daylight                                                                       
savings has not played into the border crossing discussions.                                                                    
10:30:30 AM                                                                                                                   
CHAIR STOLTLZE noted that the committee is lacking a quorum and                                                                 
recessed the meeting to a call of the Chair. [The committee did                                                                 
not reconvene this day therefore, HJR 22 was held in committee.]                                                                

Document Name Date/Time Subjects
HJR 22 Ver A - Initial Version.pdf SSTA 4/16/2015 9:00:00 AM
HJR 22
HJR 22 Sponsor Statement.pdf SSTA 4/16/2015 9:00:00 AM
HJR 22
HJR 22 Fiscal Note LEG-SESS 4-8-15.PDF SSTA 4/16/2015 9:00:00 AM
HJR 22
SB74 DHSS Medicaid Spending Forecast without Expansion 4-16-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
SB74 Fiscal Note DHSS-PAA 4-15-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
SB74 DHSS Position on CS(STA) - Email Commissioner's Office 4-15-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
SB74 DHSS Response to Questions on Section 5 of CS(STA) - Email Commissioner's Office 4-15-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74
HB135 ver A.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Supporting Document - Roth 457 FAQs.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Support Document - Press Release DOA 3-12-15.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Sectional Analysis.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Public Employee Roth Contributions Transmittal Letter.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HB135 Fiscal Note #1 DOA-DRB 2-17-15.pdf SSTA 4/16/2015 9:00:00 AM
HB 135
HJR22 Support Document - Letter Hyder Community Association 4-16-15.pdf SSTA 4/16/2015 9:00:00 AM
HJR 22
SB74 OMB Spreadsheet of Fiscal Notes for Version F - 4-16-15.pdf SSTA 4/16/2015 9:00:00 AM
SB 74