HOUSE FINANCE COMMITTEE February 21, 2018 1:34 p.m. 1:34:36 PM CALL TO ORDER Co-Chair Seaton called the House Finance Committee meeting to order at 1:34 p.m. MEMBERS PRESENT Representative Neal Foster, Co-Chair Representative Paul Seaton, Co-Chair Representative Les Gara, Vice-Chair Representative Jason Grenn Representative David Guttenberg Representative Scott Kawasaki Representative Dan Ortiz Representative Lance Pruitt Representative Steve Thompson Representative Cathy Tilton Representative Tammie Wilson MEMBERS ABSENT None ALSO PRESENT Joan Brown, Staff, Representative Paul Seaton; David Teal, Director, Legislative Finance Division; Representative Adam Wool, Sponsor; Rob Earl, Staff, Representative Adam Wool; Representative Steve Thompson, Sponsor; Forrest Wolfe, Staff, Representative Steve Thompson; Ghert Abbott, Self, Ketchikan. PRESENT VIA TELECONFERENCE Margaret Brodie, Director, Division of Health Care Services, Department of Health and Social Services. SUMMARY HB 96 TAXES;DEDUCTIONS;FEES;TAX STAMP DISCOUNT HB 96 was HEARD and HELD in committee for further consideration. HB 176 GROUND EMER. MEDICAL TRANSPORT PAYMENTS HB 176 was HEARD and HELD in committee for further consideration. HB 321 APPROP: SUPPLEMENTAL OP.; FUND; AMENDING HB 321 was HEARD and HELD in committee for further consideration. Co-Chair Seaton reviewed the meeting agenda. HOUSE BILL NO. 321 "An Act making supplemental appropriations and other appropriations; making an appropriation to capitalize a fund; amending appropriations; and providing for an effective date." 1:35:38 PM Co-Chair Foster MOVED to ADOPT the proposed committee substitute for HB 321, Work Draft 30-GH2781\O (Wallace/Martin, 2/20/18). Representative Wilson OBJECTED for discussion. JOAN BROWN, STAFF, REPRESENTATIVE PAUL SEATON, explained the changes in the work draft. She read from a prepared statement: The Administration included supplemental requests in the operating and capital budget bills released on December 15th. The Administration's stand-alone supplemental bill was introduced as HB 321 on January 31st. OMB described the December 15th supplementals when they presented their budget overview on January 18th, the supplemental bill requests on February 1st and then went through the supplemental amendments last Friday, February 16th. The four finance co-chairs, with the assistance of the Legislative Finance Division, have been analyzing the supplemental requests with the goal of having a "fast track" supplemental bill. It's been several years since a separate supplemental bill has been adopted, but it used to be the norm. There are a couple of reasons why earlier passage of at least some of the supplemental requests is a good idea: 1. Agencies that are requesting supplementals know their final current fiscal year budget more timely, alleviating uncertainty for the program managers and for those that benefit from the programs. 2. Shortening the list of supplementals that get added to the capital budget at the end of the legislative session (or special session) reduces the size of the actual capital budget bill making it easier to track the items that should be in the bill. When many items are being added or deleted in various bills and between the bodies, items can be inadvertently dropped. That happened last year. Line 21 adds a supplemental that was inadvertently dropped last year. This Fast Track eliminates 9 pages out of the capital budget bill. This allows Legal Services to get a bill out more quickly. Requests that didn't make it into the "fast track" just mean that at least one finance co-chair had a concern or question that was not answered timely or satisfactorily. Any remaining supplemental requests will be considered for inclusion in the capital budget bill. Tomorrow the other finance committee is also introducing an identical version of the "Fast Track" supplemental. 1:39:36 PM Ms. Brown continued to read from her prepared introductory remarks: In addition to the O version of HB 321, you have before you: 1. The legal-sized spreadsheet of all the supplemental requests. a. The lines that are shaded green in the first column means those items are included in the Fast Track supplemental. So all of the items on pages 1 through 7 ? are included. You'll find the Supplemental Bill total on page 6 of the spreadsheet: $49.5 million of Unrestricted General Fund, $5.1 million of Designated General Funds, and $13.1 million of Other Funds for a total of $67.7 million. b. The remaining page and a half are the accounting system ratifications for prior years, which don't add to the bill total. (Ratifications are entries adding authorization to zero out accounting system errors. The funds were already spent in the prior years.) c. The second "Bill" column indicates in which bill the supplemental was requested. d. The middle columns of the spreadsheet: Department through Fund Source are unchanged from the OMB version of the spreadsheet. e. On the right side of the spreadsheet, the yellow highlighted Modification column notes what, if any, changes the Finance Committee chairs have made to the original requests. i. For example, on lines 2-4, these items are now in the numbers section instead of language. ii. On line 8 there's a new supplemental request from the legislature for $121.3 General Fund/Program Receipts related to the extension of the Anchorage Wells Fargo lease in the Benson Blvd. iii. There are a variety of other changes noted in this column as well. f. On the far right side of the spreadsheet, the yellow highlighted Legislative Finance Division or LFD Notes column includes explanatory notes. 2. You also have a 3-page Legislative Finance operating supplemental report with red boxes on it. The numbers in the boxes correspond to the line numbers on the legal-sized spreadsheet. 3. A Multi-year Agency Summary report that shows the Fast Track supplementals by agency and whether they are operating or capital. a. There's only one capital item included: the $8,125.0 Statutory Designated Program Receipts Volkswagen settlement. It is described on line 14 of the legal-sized spreadsheet. b. You may notice that the total on this report is less than the $67.7 million I just mentioned. That's because on the Agency Summary Report, the Fund Transfers are not included in the Statewide Total. However, the Fund Transfers are shown on the report and if one does the math, the totals do match. [Secretary Note: All the documents Ms. Brown referred to are on file.] 1:42:44 PM Co-Chair Seaton recognized that Representative Kawasaki and Representative Guttenberg had joined the meeting. Representative Pruitt asked if the $30 million increment was switching the fund source from the Power Cost Equalization (PCE) Endowment Fund to the Alaska Comprehensive Health Insurance Fund (ACHI). DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, replied in the affirmative. He detailed that the governor's original budget funded the Community Assistance Fund (CA) from PCE in FY 2018, which informed communities of the amount of their FY 2019 distribution but left the FY 2020 amounts unknown. The supplemental CS proposed to use the reinsurance refund from Premera to ACHI on line 13 of the spreadsheet ["FY2018 Supplemental Bill"] (copy on file) in the amount of $25 million. The balance of the ACHI fund was somewhere between $80 million and $90 million. The purpose was to allow the PCE earnings to be used in FY 19; the transaction occurred in the operating budget. The transaction put the PCE earnings used for community assistance back on the original track the legislature intended; prefunding CA rather than using the supplemental process. The governor's budget disregarded one year's deposit therefore, in order to save the $30 million PCE withdraw for FY 19, the ACHI fund source was chosen for FY 18. One-time funding was chosen for the one-time fund source, which was a reimbursement for reinsurance overpayment. 1:46:35 PM Representative Pruitt recalled that the PCE fund earned $112 million the past year and a formula determined the amount available to spin off for PCE. Legislation in the prior year allowed an amount of money above what was necessary to fund PCE to be used for CA. He asked how the change impacted the overall value of the fund and the two distribution calculations. Mr. Teal replied that the purpose of funding from the ACHI fund was to leave the value of the PCE fund unaffected. Funding both the FY 18 and FY 19 CA expenditures from the PCE was possible because the PCE earnings were so high. However, the option reduced the value of the fund and jeopardized future earnings and was not favored by the co-chairs. Representative Wilson pointed to lines 3 and 4 of the FY 2018 Supplemental Bill spreadsheet pertaining to the Department of Corrections (DOC). She offered that the offender population trend was leveling. She asked for a breakdown of SB 91 - Omnibus Crim Law & Procedure; Corrections [ CHAPTER 1 SLA 17 -03/21/2017] funding for population management based on how the legislature was going to "re-disperse moneys into those specific institutions." Ms. Brown did not have the breakdown on hand but would follow up. Representative Wilson pointed to line 4 of the spreadsheet [inmate healthcare]. She reported that she had been unable to determine in subcommittee how the health needs were being met. The department had sent several inmates out of state because healthcare was more affordable. She had received information from DOC but the breakdown of the $10 million supplemental expenditure was incomplete. She noted an additional $10 million increase in the FY 19 budget. She requested more information regarding the increases in inmate health care. 1:50:00 PM Representative Wilson WITHDREW her OBJECTION to the adoption of the work draft. Co-Chair Seaton OBJECTED for further discussion. Representative Ortiz pointed to page 5, line 20 and asked why the transaction was necessary. He was in favor of the appropriation. Mr. Teal asked for confirmation that he was referencing the $23.9 million appropriation for the Alaska Marine Highway System (AMHS). Representative Ortiz replied in the affirmative. Mr. Teal responded that in the prior session general fund (GF) money was reduced and offset by additional spending from the AMHS fund that was authorized due to a supplemental deposit from a prior year. However, the deposit occurred at a much lower amount than anticipated. The AMHS fund ended up short by almost $24 million. The system could not schedule without the funding. The appropriation was a primary reason for the fast track supplemental; to ensure the AMHS could maintain operations and schedules. 1:52:02 PM Representative Guttenberg pointed to page 5, line 22 of the spreadsheet [University of Alaska Bargaining Unit Agreements]. He asked if the legislature still had to ratify the contract even though the contracts had no monetary terms requiring supplemental appropriation. Ms. Brown replied in the affirmative. Representative Guttenberg pointed to line 37, page 8 item for the Department of Commerce, Community and Economic Development (DCCED) [Financial Examiner I/II for Alaska Native Claims Settlement Act Filings and Support]. He asked if there was a reason why the second position had not been added to the original budget. Ms. Brown could not recall the original issue. Representative Guttenberg pointed to page 13 and spoke about changing the appropriation and transfers of funding between the Alaska Gasline Development Corporation (AGDC) and Alaska LNG Project Fund. He asked whether the transaction was the authorization. Ms. Brown answered that if the item was not shaded green in column one it was not in the supplemental CS. The supplemental items he noted were presented for a decision in the future. Co-Chair Seaton WITHDREW his OBJECTION. There being NO further OBJECTION, Work Draft 30-GH2781\O was ADOPTED. HB 321 was HEARD and HELD in committee for further consideration. Co-Chair Seaton handed the gavel to Co-Chair Foster' Co-Chair Foster indicated that HB 176 was previously heard in committee on February 16, 2018. HOUSE BILL NO. 176 "An Act relating to medical assistance reimbursement for ground emergency medical transportation services; and providing for an effective date." 1:54:34 PM ROB EARL, STAFF, REPRESENTATIVE ADAM WOOL, reviewed a flow chart titled "HB 176; IGT Flow Chart" (copy on file). He noted that the providers signified as a blue circle encompassed municipalities, fire departments, and tribal organizations. He exemplified a scenario of a patient transport cost of $1 thousand that was reimbursed via state Medicaid for $400 leaving $600 in uncompensated costs. He indicated that the scenario represented the current reimbursement schedule. The blue circle to the right of the provider's circle represented state Department of Health and Social Services (DHSS) supplemental reimbursement proposed in HB 176. He expounded that the provider [in the scenario] would submit a total of $300, which represented half of the uncompensated cost or non-federal share plus a 20 percent administrative fee charged by DHSS totaling $360. He remarked that the CS language specified "up to" 20 percent for the administrative fee. The department submitted a bill to federal Medicaid who would reimburse the department for $360. He referenced page 2, lines 3 through 7 of the legislation that delineated that "the provider may not exceed the provider's actual cost for providing emergency medical transportation?." He noted that the reimbursement provision was explained in a box on the lower right of flow chart. He pointed to what the provider would recoup under the scenario. The department kept the $120 in administrative fees and the provider recouped $640 out of $1,000 total cost. 1:58:46 PM Representative Kawasaki asked how the administrative fee was calculated and who received the fee. He believed the 20 percent fee was high. Mr. Earl answered that the fee was higher than the actual administrative cost. He explained that federal rules allowed the embellished administrative fee. He pointed out that under the scenario the administrative fee was matched by the federal government. Representative Kawasaki wondered why the state did not charge an even higher administrative fee. Mr. Earl responded that the amount was determined by the amount the Centers for Medicare & Medicaid Services (CMS) would likely allow under the state plan amendment negotiations. Representative Kawasaki asked for the reason the fee was set at 20 percent. He wondered if it was linked to the ambulance fee. He asked whether there was a nexus between the administrative fee and the total amount. Mr. Earl replied in the negative and added that the 20 percent was predicated on a guess regarding a likely allowable amount. The actual administrative cost was roughly 2.6 percent. Representative Kawasaki surmised that the state was "getting more money from the federal government" at 20 percent. 2:02:00 PM REPRESENTATIVE ADAM WOOL, SPONSOR, concurred that the actual administrative cost was quite a bit less than 20 percent. He elaborated that consultants in other states had relayed that 20 percent was common, with some states charging 27 percent. He presumed that 20 percent would be approved by CMS. The extra money would help the department and "relieve pressure on the UGF the state was currently providing." The idea was to not "look a gift horse in the mouth." Representative Kawasaki asked how much of the reimbursement funding would go to the provider doing the transportation. Mr. Earl answered that under the scenario none of the administrative fee reimbursement was given to the provider. Representative Kawasaki surmised that even if a cost of the ambulance run was more expensive than the amount of reimbursement the state would not distribute any of the administrative reimbursement money to the providers. 2:04:04 PM Representative Wool answered that the administrative reimbursement did not go back to the provider, it went to the state. He mentioned that one of the amendments addressed the issue and allowed the provider to add the 20 percent administrative fee to the overall bill and then would be reimbursed. Representative Tilton was concerned about setting a precedent for a 20 percent administrative fee that seemed arbitrary. She had previously been involved in DHSS and recounted discussions regarding administrative fees. She supported getting as much money back as possible, but she was concerned over setting a 20 percent precedent that could apply to other grants and items. Representative Wool understood the point. He reiterated that the precedent had already been set in other states and the bill mirrored the amount. He mentioned the state's obligation to pay according to Title 19 of the Social Security Act. He agreed that he would not favor a 20 percent administrative fee charged "across the board" for every state department including DHSS. He thought the department could address the issue. He clarified that the bill proposed "up to" 20 percent. Representative Tilton requested an answer from DHSS. 2:07:23 PM MARGARET BRODIE, DIRECTOR, DIVISION OF HEALTH CARE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (via teleconference), replied that she had conversations with the Centers for Medicare and Medicaid recently and discovered that the administrative fee could only cover the cost of the administrative position. Representative Tilton wondered about the state's obligation to continue the program if the federal government ended its funding. Mr. Earl referred to page 1, lines 9 through 11 and read: " the amount of the supplemental reimbursement paid to a provider must be equal to the amount of federal financial participation?" He declared that if the federal financial participation went away the program would end. 2:08:44 PM Co-Chair Foster MOVED to ADOPT Amendment 1, 30-LS0705\O.7 (Glover, 2/20/18) (copy on file): Page 1, line 13: Delete "expenses" Insert "fee described in (d) or (e) of this section" Page 2, lines 19-22: Delete oil material and insert: "(d) If the department authorizes the use of intergovernmental transfers under the program, the deportment shall charge on administrative fee to a provider to cover the deportment's costs of administering the program. The administrative fee must be to equal up to 20 percent of the non-federal share the provider pays to the department. A provider may include the administrative fee in the provider's cost for providing an emergency medical transportation service to a medical assistance recipient. (e) If the department authorizes the use of certified public expenditures under the program, the department may establish an administrative fee for a provider. If the department establishes an administrative fee under this subsection, the department may allow a provider to include the administrative fee in the provider's cost for providing an emergency medical transportation service to a medical assistance recipient." Reletter the following subsections accordingly. Representative Wilson OBJECTED for discussion. Mr. Earl explained the amendment. The amendment did three things. First, the fee was changed to equal to 20 percent versus "up to." Second, the amendment allowed the provider to add the administrative fee to the cost of the medical transport. Thirdly, amendment 1 separated out the Intergovernmental Transfers (IGT) method and the Certified Public Expenditure (CPE) methodology and allowed the department to choose the methodology and not the providers. He pointed to the flow chart and furthered that the amendment allowed the providers to add the administrative fee to the total cost of transport. Therefore, under the scenario the provider would receive a reimbursement of $660 from the department, of which $330 was the federal supplemental reimbursement. He cited page 2, lines 3 through 7 of the bill that delineated that the amount the provider received may not exceed actual costs. 2:11:25 PM Representative Wilson asked who was charging the fee. She wondered why the bill specified what the provider had to charge. Mr. Earl answered that the department charged the provider the fee. Representative Wool elaborated that he wanted an amendment to Amendment 1 that would revert to "up to 20 percent." He confirmed that the charge was from the department to CMS. Representative Wilson stated that she did not have the amendment. 2:12:48 PM Co-Chair Seaton MOVED to ADOPT Conceptual Amendment 1 to Amendment 1: Lines 9 and 10, delete "must be equal to" and insert "may not exceed." There being NO OBJECTION, it was so ordered. Representative Wilson asked Ms. Brodie to add clarification to the administrative fee and what amount was allowable to charge. Ms. Brodie replied that the federal government would only allow to charge for actual costs. The department would estimate the total costs and divide it by the cost of the administrative position divided by 2 to calculate the percentage the department would charge at the beginning of the fiscal year. The calculation would monitor and likely amend the percentage as the fiscal year progressed. Representative Wilson asked if the provider could only charge their actual administrative fees. Ms. Brodie answered that they could only charge the actual costs that may include administrative fees. 2:15:16 PM Representative Wilson surmised that the amendment allowed providers to recoup their actual administrative and service costs. Ms. Brodie answered in the affirmative and qualified that it was permissible as long as the provider did not charge the administrative fees to another program. Representative Wilson WITHDREW her OBJECTION. There being NO OBJECTION, it was so ordered. 2:16:07 PM Co-Chair Foster MOVED to ADOPT Amendment 2, 30-LS0705\O.5 (Glover, 2/19/18) (copy on file). Page 2, following line 22: Insert a new subsection to read : "(e) This section authorizes the department to provide supplemental reimbursements for ground, water, or air emergency medical transportation service provider only if the United States Department of Health and Human Services approves payments to that type of emergency medical transportation service provider." Re-letter the following subsections accordingly. Page 2, line 30, through page 3, line I: Delete all material. Renumber the following paragraphs accordingly. Page 3, lines 8 ? 25: Delete all material and insert: "*See. 2.This Act takes effect immediately under AS 01.10.070(c)." Representative Wilson OBJECTED for discussion. Mr. Earl explained the amendment. He reminded the committee of the concern that adding air transport might jeopardize the entire program through rejection by CMS. The amendment separated ground, water, and air transport to allow the program to continue if federal Medicaid rejected the air portion. In addition, the amendment deleted the conditional effective date language on page 2 of the prior version and added an immediate effective date. Representative Wilson asked Mr. Earl to restate his explanation. Mr. Earl replied that the CS included air transport. He reiterated that concerns were expressed that federal Medicaid may deny coverage for air transport. He pointed to subsection (f) on page 3 of the CS and restated that ground, water, and air transport were separated and read the following: ?reimbursements to a ground, 1 water, or air emergency medical transportation service provider only if the United States Department of Health and Human Services approves payments to that type of emergency medical transportation service provider. Mr. Earl outlined that if CMS approved any specific type of emergency transport the program could move forward with the approved methods of transport. Representative Wilson WITHDREW her OBJECTION. There being NO OBJECTION, it was so ordered. 2:18:56 PM Co-Chair Foster reported that the bill would be held in committee for an updated fiscal note. Co-Chair Seaton requested more analysis on how the law was applied in other states. He noted the earlier discussions regarding the state's ability to charge more and were currently not accepting federal dollars that other states were collecting. Representative Wool agreed with Co-Chair Seaton. He relayed that he had been assured by his consultant that other states were charging a fee of 20 percent and 27 percent. The department was using the ITE and CPE methodologies, which might be the source of the discrepancy between Alaska and the other states. He would follow-up with answers. Representative Guttenberg asked for clarification about whether it was a new administrative charge on top of what was currently being done. He wondered whether the state was receiving reimbursement differently under the bill. He asked whether the prior method charged less than 20 percent. He asked if the program was displacing one set of money for another. 2:21:44 PM Ms. Brodie replied that there were two different payments: the initial billing went through the Medicaid Management Information System with all other weekly bills. She delineated that subsequently, the department billed the provider the difference between what they claimed in total cost and the amount the provider initially received from DHSS plus the administrative fee. The department made two payments to the providers. The first payment was the initial allowable amount. The second payment included a manual process where the state calculated the amount the provider owed the department. Once the provider paid the department it would release the supplemental reimbursement and the providers own funds. Co-Chair Seaton asked whether the department employed the IGT methodology or the current method of payment. Ms. Brodie answered that the current methodology was used for the initial payment and the second payment used the new methodology. Co-Chair Seaton requested the sponsor speak with the state's CMS to fully understand what the bill would do. Representative Wool reminded the committee that the goal of HB 176 was to obtain more medical transport reimbursement regardless of the administrative fee. HB 176 was HEARD and HELD in committee for further consideration. HOUSE BILL NO. 96 "An Act amending the calculation of adjusted gross income for purposes of the tax on gambling activities aboard large passenger vessels; repealing a provision allowing an investigation expense under the Alaska Small Loans Act to be in place of a fee required under the Alaska Business License Act; repealing the amount that may be deducted from the tobacco excise tax to cover the expense of accounting and filing for the monthly tax return; repealing the discount on cigarette tax stamps provided as compensation for affixing the stamps to packages; and providing for an effective date." 2:24:20 PM REPRESENTATIVE STEVE THOMPSON, SPONSOR, thanked the committee for hearing the bill. He detailed that an indirect expenditure was a state discount or tax credit that was never tracked and did not show up in the budget. During a prior session the legislature established a way to track indirect expenditures. The Department of Revenue (DOR) must provide a report every two years on all the state's foregone revenue. The information was subsequently turned over to the Legislative Finance Division (LFD) who examined the data and published a printed report for every legislator. He noted that some of the indirect expenditures had sunsets. The items in HB 96 did not contain sunsets. He indicated that there were four items that amounted to over $350,000 in lost revenue to the state. FORREST WOLFE, STAFF, REPRESENTATIVE STEVE THOMPSON, provided further detail about the bill. He read from prepared remarks as follows: House Bill 96 repeals or removes four minor indirect expenditures from state law, all of which should provide more income for the state of Alaska. First, HB 96 removes the deduction of federal taxes from adjusted gross income when calculating the state tax collected on gambling aboard large cruise ships. Next, HB 96 repeals a provision allowing an investigation expense under the Alaska Small Loans Act to replace a fee required under the Alaska Business License Act. Finally, HB 96 repeals allowing the costs of accounting and filing monthly tax returns to be deducted from the tobacco excise tax, as well as the $50 discount on cigarette tax stamps intended to be compensation for affixing the stamps to packages. Mr. Wolfe reiterated that the bill was estimated to increase revenue in FY 19 by at least $339,500 thousand of which $219.1 thousand would be appropriated into the general fund. 2:29:12 PM Co-Chair Seaton pointed to a handout that contained three components to the bill and not four as stated earlier [titled "Bills Related to Indirect Expenditures" dated February 3, 2017 (copy on file)]. Mr. Wolfe replied that the document had been compiled the past year that included three of the four items in the bill. The third item contained two indirect expenditures. 2:30:20 PM Co-Chair Foster OPENED public testimony. GHERT ABBOTT, SELF, KETCHIKAN, spoke in support of the tobacco tax portions of the bill. Eliminating the indirect expenditure saved the state a small amount of money and slightly increased the price of a pack of cigarettes. She pointed out that foregone revenue only provided a "miniscule" amount of revenue relative to the entire budget and was no substitute for what she deemed was necessary; a broad based progressive tax on income and capital gains. She hoped the committee would not spend much time on indirect expenditure legislation. Co-Chair Foster CLOSED public testimony. Co-Chair Foster relayed the amendment deadline. HB 96 was HEARD and HELD in committee for further consideration. Co-Chair Foster reviewed the agenda for the following day. Representative Wilson hoped to receive answers regarding the supplemental bill prior to reporting it out of committee. Co-Chair Foster agreed. Co-Chair Seaton noted that some of the questions may have been more policy related than numerical. ADJOURNMENT 2:34:08 PM The meeting was adjourned at 2:34 p.m.