HOUSE FINANCE COMMITTEE April 20, 1995 8:30 A.M. TAPE HFC 95-87, Side 1, #000 - end. TAPE HFC 95-87, Side 2, #000 - #572. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:45 a.m. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Therriault Representative Grussendorf Representative Kelly Representatives Kohring, Parnell and Navarre were absent from the meeting. ALSO PRESENT Representative Brian Porter; Tom Wright, Staff, Representative Ivan; Bob Bartholomew, Director, Income and Excise Audit Division, Department of Revenue; Michael Stark, Assistant Attorney General, Department of Law; Dennis DeWitt, Staff, Representative Mulder; Jerry Shriner, Special Assistant, Department of Corrections; Jerry Weaver, National Bank of Alaska, Anchorage; Stan Ridgeway, Deputy Director, Division of Vocational Rehabilitation, Department of Education. SUMMARY HB 65 An Act establishing a loan guarantee and interest rate subsidy program for assistive technology. CSHB 65 (HES) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Education, dated 3/22/95. HB 219 An Act authorizing special medical parole for terminally ill prisoners. CSHB 219 (FIN) was reported out of Committee with a "do pass" recommendation and with two zero 1 fiscal notes; one by the Department of Administration, dated 3/27/95; and one by the House Finance Committee for the Department of Corrections, dated 4/20/95. HB 230 An Act making appropriations to the Department of Education for support of kindergarten, primary, and secondary education and for community schools programs for fiscal year 1996 and fiscal year 1997; making appropriations from the constitutional budget reserve fund under art. IX, sec. 17(c), Constitution of the State of Alaska; and providing for an effective date. HB 230 was rescheduled. HB 269 An Act relating to credits against certain taxes for contributions to certain public educational radio and television networks and stations and to endowments for public educational radio and television networks; and providing for an effective date. HB 269 was HELD in Committee for further discussion. HB 286 An Act providing an exemption from gambling and certain alcoholic beverage laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state; relating to promotions on board cruise ships; defining 'cruise ship'; providing for exemption procedures for certain cruise ships before they can conduct gambling in the offshore water of the state; providing an exemption from the coin-operated device tax for cruise ships exempted from the gambling laws; and providing for an effective date. HB 286 was rescheduled to 1:30 p.m. on 4/20/95. HOUSE BILL NO. 65 "An Act establishing a loan guarantee and interest rate subsidy program for assistive technology." REPRESENTATIVE BRIAN PORTER, sponsor HB 65, testified in support of the legislation. He explained that HB 65 would provide a mechanism to use federal funding to provide assistive technology opportunities to individuals with disabilities. The state would guarantee 90 percent of the federal loan. He emphasized that the program will allow 2 disabled persons to buy items that can assist them in becoming productive members of society. The legislation is pointed to those who cannot afford the technologies but are not poor enough to qualify for welfare assistance. The program would be administered by individual banks. He emphasized that other states that have initiated the program have had a default rate of 5 to 5.5 percent. In response to a question by Representative Therriault, Representative Porter clarified that federal funding is anticipated at $100.0 thousand dollars to initiate the program. He clarified that the report required by the legislation would not be annual. JERRY WEAVER, SENIOR VICE-PRESIDENT, NATIONAL BANK OF ALASKA testified via the teleconference network. He spoke in support of HB 65. He observed that there are approximately 20,000 persons with disabilities in Alaska. STAN RIDGEWAY, DEPUTY DIRECTOR, DIVISION OF VOCATIONAL REHABILITATION, DEPARTMENT OF EDUCATION testified in support of HB 65. He noted that the legislation provides a loan guarantee and an interest rate subsidy for those that qualify. He anticipated that the program would be funded at $100.0 thousand dollars a year for four years though federal assistive technology funding. Representative Brown asked who would manage the loans. Mr. Ridgeway explained that the Director of Vocational Rehabilitation would set up a loan committee that would establish the guidelines and assure that funds are not over- committed. The banking institutions will administer their own loan funds. Representative Brown noted that the Department of Commerce and Economic Development manages most of the state's loan programs. Mr. Ridgeway stated that the Department of Commerce and Economic Development is not involved in the program at this time. Representative Brown observed that most state loan functions have been consolidated in the Department of Commerce and Economic Development. Mr. Ridgeway clarified that state funding would come into effect if a loan was defaulted. In response to a question by Representative Therriault, Mr. Ridgeway explained that there is no actual cash outlay for the interest subsidy. The interest subsidy is established by the state and bank. He explained that a portion of the funds could be used for the buy down of interest rates. Representative Foster MOVED to report CSHB 65 (HES) out of 3 Committee with individual recommendations and with the accompanying fiscal note. CSHB 65 (HES) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Education, dated 3/22/95. HOUSE BILL NO. 219 "An Act authorizing special medical parole for terminally ill prisoners." DENNIS DEWITT, STAFF, REPRESENTATIVE MULDER testified in support of HB 219. He provided members with a proposed committee substitute for HB 219, work draft #9-LSO810\M, dated 4/19/95 (copy on file). He explained that the committee substitute removes the requirement for parolees and prisoners to pay for drug testing. He observed that HB 219 provides the Department of Corrections additional tools to control spiraling inmate health care cost by allowing special medical parole for terminally ill and severely disabled prisoners. The legislation also allows the Department to charge for medical services within facilities. The legislation creates a new category of parole called "special medical parole" for inmates who are suffering from terminal diseases or are severely disabled. The classification only allows parole. It does not guarantee parole. The judgment will still rest with the Parole Board. The change was recommended by the Alaska Sentencing Commission. He observed that inmates may be medicaid eligible if they are paroled. Medicaid pays 50 percent of health care costs. Mr. DeWitt noted that the legislation will also allow the Commissioner of the Department of Corrections to establish charges for the health care provided by the Department. He emphasized that the legislation will help deter frivolous use of health care by inmates. In response to a question by Representative Brown, Mr. DeWitt clarified that the committee substitute would result in a zero fiscal note by the Department of Corrections. Representative Brown asked if there would be projected savings. Mr. DeWitt acknowledged that a savings is expected. He emphasized that it is difficult to calculate the savings. Representative Mulder observed that the Department expressed concern that their budget not be effected by an anticipated savings. Representative Mulder spoke in support of HB 219. He noted that the Department is in strong support of the legislation in order to control spiraling medical costs in the 4 institutions. He MOVED to adopt the committee substitute for HB 219, work draft #9-LSO810\M, dated 4/19/95. He explained that the costs of administering the drug testing repayment overshadowed the benefits in the legislation. There being NO OBJECTION, work draft #9-LSO810\M was adopted. JERRY SHRINER, SPECIAL ASSISTANT, DEPARTMENT OF CORRECTIONS clarified that the Department of Corrections would support a zero fiscal note with the adoption of CSHB 219 (FIN). He stressed that collection would be difficult and the cost of collecting could exceed the amount collected. In response to a question by Representative Martin, Mr. Shriner noted that there are no prisoners who would be currently affected by the legislation. He stated that it is difficult to anticipate potential savings. Mr. DeWitt reiterated that parolees would be eligible for the medicaid program. In response to a question by Representative Grussendorf, Mr. DeWitt clarified that parole cannot be forced on an individual. He stated that the state or the inmate could initiate a request for parole. The current terms of parole would not be changed. Representative Grussendorf noted that some prisoners may have no place to go outside of the prison. Representative Brown noted that the sponsor statement estimated that 5 to 10 prisoners may be affected. Mr. DeWitt emphasized that there would not be a large number of inmates affected. Representative Mulder stressed that a few drive the majority of the costs. He observed that one terminally ill prisoner had medical bills of $567.0 thousand dollars over two months. Representative Brown asked if prisoners have alternative health insurance. Mr. Shriner estimated that very few would have alternative health insurance other than medicaid. He noted that one prisoner who would have been eligible under the bill was recently placed in a nursing home. Representative Brown noted that section 13 states that prisoners are responsible for their own medical care and would be required to pay a portion of the costs based upon the prisoner's ability to pay. Mr. DeWitt noted that section 13 is new policy. He stressed that many inmates have some funds. He stated that the co-payments would be small. The provision is designed to act as a deterrent to frivolous complaints. 5 Representative Brown expressed concern with the effect that the provision would have on people with resources and who are confined for some period of time. She observed that health insurance is more expensive if the person is not part of an employee's plan. Mr. DeWitt replied that the expectation is that there would be a relatively small number of inmates that would have the independent wealth to cover their own health care. He stressed that it is an attempt to allow the Department to get control on utilization as opposed to securing revenue. Mr. DeWitt noted that there will be individuals in halfway houses and soft beds that will have other coverage or resources. The legislation allows the Department to become a secondary payer to the primary health care provider. Representative Brown asked if the income of a working spouse could be reached by the Department. Mr. DeWitt expected that the initial focus would be to deter unnecessary utilization and capture available other coverage. He acknowledged that the legislation allows a broader interpretation. He emphasized that Alaska is not a community property state. He stressed that because the institution does not have its own billing system it is going to be difficult to bill other coverage externally. He noted that the intent is to allow the Department to take advantage of other coverage that is available or to access the resources of someone that is independently wealthy. Representative Brown questioned the legality of the retroactive provision. MICHAEL STARK, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW assured her that the retroactive provision would not present a legal problem. He emphasized that the provision is not intended as part of the punishment imposed on an inmate. It is a reasonable effort by the state to defer expenses. He added that institutionalized populations often include individuals that manifest medical complaints in which there is no basis in fact. He stressed that the legislation will deter frivolous medical complaints. Representative Brown reiterated concerns with the breadth of the provision. She asked to what extent the state would pursue other resources. Mr. Stark suggested that some mechanism could be developed to pursue resources that inmates may have. He stressed that it will take time to develop procedures. He emphasized that there will be no denial of medical services. He observed that regulations will have to be adopted. Representative Therriault MOVED to report CSHB 219 (FIN) out 6 of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 219 (FIN) was reported out of Committee with a "do pass" recommendation and with two zero fiscal notes; one by the Department of Administration, dated 3/27/95; and one by the House Finance Committee for the Department of Corrections, dated 4/20/95. HOUSE BILL NO. 269 "An Act relating to credits against certain taxes for contributions to certain public educational radio and television networks and stations and to endowments for public educational radio and television networks; and providing for an effective date." TOM WRIGHT, STAFF, REPRESENTATIVE IVAN provided members with Amendment 1 (Attachment 1). He explained that the amendment added the Fisheries Resource Landing Tax at the request of the Department of Revenue to the list of allowable tax credits; limits the tax contribution at $400.0 thousand dollars; and sunsets the credit for contributions to public broadcasting after five years. (Tape Change, HFC 95-87, Side 2) Mr. Wright clarified that upon the sunset the contribution ceiling will revert to the current level. He observed that the sunset was included in response to concerns regarding the Endowment Trust and contributions to individual stations. Representative Martin expressed concern with the inclusion of the Fisheries Resource Landing Tax. BOB BARTHOLOMEW, DEPUTY DIRECTOR, DIVISION OF INCOME AND EXCISE AUDIT, DEPARTMENT OF REVENUE explained that the state shares 50 percent of the collection of shared fish taxes. The tax credit will reduced what is shared to the local governments. The general fund contribution would not be reduced. Representative Therriault spoke in support of including the Fisheries Resource Landing Tax in the contribution credit. Mr. Bartholomew observed that the Department of Revenue felt that the tax should be included so that all tax payers would be afforded the same credit. In response to a question by Representative Brown, Mr. Bartholomew explained how the Fisheries Resource Landing Tax 7 operates. It was instituted in FY 94. It is applied against fish caught outside of the three mile state waters limit and landed inside of Alaska to be transported to other areas. The value of the fish is taxed by 3.3 percent. Fish caught inside Alaskan waters are taxed at the same rate. The tax is estimated to bring in $6.0 million dollars. Fifty percent of the tax would be shared to the areas where the fish tax was collected. The state would receive $3.0 million dollars. The tax program is currently under litigation. The tax will not be shared until all legal challenges have been resolved. In response to a question by Representative Brown, Mr. Bartholomew clarified that general fund revenue will not be reduced by the addition of the Fisheries Resource Landing Tax. The credit would be deducted from the municipal share of the tax. He explained that all municipalities will share in the loss of the credit. Any municipality subject to sharing will be reduced a pro-rata share. Representative Brown asked if the credit will reduce income to communities that receive a portion of the shared taxes. Mr. Bartholomew stated that the portion of the tax credits that are claimed against the fisheries taxes would reduce the municipal share. He stressed the inability to determine the exact amount that would be potentially reduced. Representative Martin expressed concern that the Department of Revenue is being required to perform additional administrative duties. Mr. Bartholomew noted that the Department does not allocate the cost of administering the tax programs. In response to a question by Representative Martin, Mr. Wright acknowledged that local governments had not had an opportunity to respond to the amendment. Representative Grussendorf suggested that including a credit for the fisheries tax amounts to cost shifting. He spoke in support of the five year sunset provision. Mr. Bartholomew noted that the Fisheries Tax was already included in HB 269. He emphasized that the new credit will be treated the same as the current credit in statute. Co- Chair Hanley observed that section 15 is current law. He stated that the Fisheries Business Tax which applies to fish caught in Alaskan waters was included in previous law. The credit was taken out of the municipal portion. The amendment adds fish that are caught outside of the three mile limit. Representative Brown asked the impact on local governments. 8 Mr. Bartholomew stated that it is hard to estimate new tax payers. He observed that the fiscal note was based on current contributions. He noted that the fiscal impact to municipalities would not change with the addition of public broadcasting. He stated that there is no sharing on contributions to public broadcasting or education on the taxpayers part. He stressed that the impact is one hundred percent on the state treasury. Representative Mulder MOVED to adopt Amendment 1. Representative Martin OBJECTED. He stressed that local governments should have a chance to testify on the change. Mr. Wright noted that some public radio stations are owned by local governments. Representative Brown suggested that the question be divided. Representative Mulder spoke against dividing the question. He emphasized that rural Alaska is the real beneficiary. A roll call vote was taken on the main MOTION. IN FAVOR: Kelly, Mulder, Therriault, Hanley OPPOSED: Brown, Grussendorf, Martin Representatives Kohring, Navarre, Parnell and Foster were absent from the vote. The MOTION FAILED (4-3). Representative Mulder stressed that rural communities would benefit from the amendment. Representative Grussendorf emphasized the need for more discussion. Representative Therriault suggested the bill be held. Representative Brown provided members with Amendment 2 (Attachment 2). She explained that the amendment would include contributions to public schools for education technology, among organizations that are authorized to receive the tax credit. She stressed the need for educational technology. Co-Chair Hanley expressed concern that the legislation not become too inclusive. Representative Kelly asserted that public radio and television are a low priority. Representative Therriault suggested the amendment be included in HB 106, Percent for Art. Representative Grussendorf encouraged Representative Brown to withdraw the amendment. Representative Brown observed that new schools generally allocate dollars for educational technology. She observed that older schools are the most in need of educational 9 technology. Co-Chair Hanley noted that Amendment 2 had not been moved. HB 269 was HELD in Committee for further discussion. ADJOURNMENT The meeting adjourned at 10:00 a.m. 10