HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE March 14, 1995 2:08 p.m. MEMBERS PRESENT Representative Cynthia Toohey, Co-Chair Representative Con Bunde, Co-Chair Representative Al Vezey Representative Gary Davis Representative Norman Rokeberg Representative Caren Robinson Representative Tom Brice MEMBERS ABSENT None COMMITTEE CALENDAR * 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." HEARD AND HELD * HB 228: "An Act reducing payment levels for the program of aid to families with dependent children and the adult public assistance program." HEARD AND HELD (* First public hearing) WITNESS REGISTER REPRESENTATIVE MARK HANLEY Alaska State Legislature Room 507, State Capitol Juneau, AK 99801 Telephone: (907) 465-4939 POSITION STATEMENT: Testified in favor of HB 230. DICK SWARNER, Executive Director of Business Management Kenai Peninsula Borough School District 148 N. Binkley Soldotna, AK 99669 Telephone: (907) 262-5846 POSITION STATEMENT: Testified against HB 230 via teleconference. ROBERT DOYLE, Finance Director Matanuska-Susitna Borough School District 1900 Porcupine Trail Wasilla, AK 99654 Telephone: (907) 376-3172 POSITION STATEMENT: Testified against HB 230 via teleconference. ALICE WALSH, PTA President Cottonwood Creek Elementary School 5240 Shenum Drive Wasilla, AK 99654 Telephone: (907) 376-6719 POSITION STATEMENT: Testified against HB 230. PAM McCAUL, Parent, PTA President, former PTA Vice-president High School Varsity Coach 361 Gastman Wasilla, AK 9964 Telephone: (907) 376-3550 POSITION STATEMENT: Testified against HB 230. MELINDA BROOKS, Member Matanuska-Susitna Budget Committee P.O. Box 873796 Wasilla, AK 99687 Telephone: (907) 376-3860 POSITION STATEMENT: Testified against HB 230. CAROL KANE, Educator 1000 Woodcrest Circle Wasilla, AK 99654 Telephone: (907) 376-2467 POSITION STATEMENT: Testified against HB 230. LARRY HEALY, Educator Matanuska-Susitna School District 1320 Ivy Circle Wasilla, AK 99654 Telephone: (907) 373-0165 POSITION STATEMENT: Testified against HB 230. LINDA STOLL, Parent P.O. Box 875555 Wasilla, AK 99687 Telephone: (907) 746-5555 POSITION STATEMENT: Testified against HB 230. KEITH EVANS, Superintendent Dillingham City Schools P.O. Box 170 Dillingham, AK 99576 Telephone: (907) 842-5223 POSITION STATEMENT: Testified against HB 230. BRUCE BACHEN, President Sitka School Board 713 Sirstad St. Sitka, AK 99835 Telephone: (907) 747-6850 POSITION STATEMENT: Testified against HB 230. CAROL MEARS, Legislative Chair Fairbanks District Council PTA P.O. Box 9 Fairbanks, AK 99725 Telephone: (907) 479-3247 POSITION STATEMENT: Testified against HB 230. JOHN TONGEN, President Alaska Association of School Business Officials P.O. Box 1896 Valdez, AK 99686 Telephone: (907) 835-4924 POSITION STATEMENT: Testified against HB 230. LELAND DISHMAN, Superintendent Yupiit School District P.O. Box 100 Akiachak, AK 99551 Telephone: (907) 825-4428 POSITION STATEMENT: Testified against HB 230. GARY CHRISTENSEN, Director of Business Affairs North Slope School District P.O. Box 169 Barrow, AK 99723 Telephone: (907) 852-5311 POSITION STATEMENT: Testified against HB 230. BOB VAN SLYKE, Superintendent Juneau School District 10014 Crazy Horse Drive Juneau, AK 99801 Telephone: (907) 463-1700 POSITION STATEMENT: Testified against HB 230. JIM NORDLUND, Director Division of Public Assistance Department of Health and Social Services 350 Main Street, Suite 309 Juneau, AK 99801 Telephone: (907) 465-3347 POSITION STATEMENT: Testified against HB 228. ANGIE SALERNO, Executive Director National Association of Social Workers, Alaska Chapter 1727 Wickersham Drive Anchorage, AK 99507 Telephone: (907) 563-4502 POSITION STATEMENT: Testified against HB 228. CURTIS LOMAS, Program Officer Welfare Reform Program, Div. of Public Assistance Department of Health and Social Services 350 Main Street, Room 317 Juneau, AK 99801 Telephone: (907) 465-3347 POSITION STATEMENT: Testified against HB 228. PREVIOUS ACTION BILL: HB 230 SHORT TITLE: APPROP: FY 96 & FY 97 EDUCATION PROGRAMS SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES JRN-DATE JRN-PG ACTION 03/03/95 566 (H) READ THE FIRST TIME - REFERRAL(S) 03/03/95 566 (H) HES, FINANCE 03/14/95 (H) HES AT 02:00 PM CAPITOL 106  BILL: HB 228 SHORT TITLE: REDUCTION IN PUBLIC ASSISTANCE PAYMENTS SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES JRN-DATE JRN-PG ACTION 03/03/95 565 (H) READ THE FIRST TIME - REFERRAL(S) 03/03/95 565 (H) HES, FINANCE 03/14/95 (H) HES AT 02:00 PM CAPITOL 106 ACTION NARRATIVE TAPE 95-19, SIDE A Number 000 CO-CHAIR CON BUNDE called the meeting of the House Health, Education and Social Services standing committee to order at 2:08 p.m. Present at the call to order were Representatives Bunde, Toohey, Robinson, Brice, and Vezey. He announced that a quorum was present, read the calendar, and stated that the meeting was on teleconference. He asked that testimony be limited to two minutes due to the large number of sites on teleconference. HHES - 03/14/95 HB 230 - APPROP: FY 96 & FY 97 EDUCATION PROGRAMS Number 080 REPRESENTATIVE MARK HANLEY said one of the reasons he is testifying in favor of a bill sponsored by the HESS committee is because this bill fits into Representative Hanley's overall plan submitted earlier. He asked if HESS Committee members had a copy of the press release that was distributed. This press release explains that 75 percent of the spending in the state's budget occurs in three areas: Education, health and social services, and employee salaries and benefits. Number 113 REPRESENTATIVE HANLEY said trying to make significant reductions to the budget while not touching 75 percent of the budget makes it very difficult to significantly reduce the budget. The state is trying to close the $500 million fiscal gap, which is one of the major problems Representative Hanley perceives the state is presently facing. REPRESENTATIVE HANLEY said a bill was discussed that would flat- fund education as part of an attempt to help school districts plan for their budgets. This bill addresses two concurrent years, to fund both this year and next year. Basically, Section 1 of the bill is the same as Section 2. Section 1 goes into effect for fiscal year (FY) 1996, and Section 2 takes effect for FY 97. Number 174 REPRESENTATIVE HANLEY asked HESS Committee members to notice that dollar amounts are essentially the same as in the current year's budget. Single-site schools are included as they were for the current year. Therefore, the same dollar amount will be flowing through the formula. This is not to say that everyone will get the same dollar amount. This is because as students increase, the formula readjusts the allocations within the foundation formula. Therefore, school districts will receive varying amounts of money. REPRESENTATIVE HANLEY explained that if all schools had the exact same number of students in the school district, they would all get the same dollar amount. However, some will have more, and some will have less. That will change the allocations. The money is out of the constitutional budget reserve, largely because two year funding cannot totally be paid for out of the general fund. REPRESENTATIVE HANLEY said some people are concerned about flat- funding. Essentially, with projected increases in next year's budget, this may mean about a $60,000 instructional unit. That is about accurate with projections concerning increased student numbers. Number 257 REPRESENTATIVE HANLEY said this is a base-level funding, and districts do have an ability to plan. This is important. He suggested that, if the price of oil drops $3.00 per barrel, people may want to consider this as a base-level of funding. If the price of oil drops, legislators next year may be back and they would not be suggesting flat funding. They would be forced to consider reductions in budgets. Right now, however, the dollars per barrel prices are relatively stable. REPRESENTATIVE HANLEY suspects there will be more money available in the future, for those people who want to add more money to the budget. There will be opportunities in the future. Whether suggestions to add money are adopted or not is an option. This bill does at least give all districts what Representative Hanley feels is a base level. They can plan for two years. It will not be easy, but closing the fiscal gap is not going to be easy on anyone. REPRESENTATIVE HANLEY said as budget caps are released, there are going to be a lot of other programs around the state experiencing reductions. There will also be many other people who are concerned about their budgets. However, Representative Hanley would like to remind everyone that the state is facing a $550 million deficit. If anyone has suggestions as to how the state can reach its goal of $70 million below last year and still increase funding, whether this is in education or any other area, Representative Hanley is more than willing to listen. REPRESENTATIVE HANLEY said full finance will also be reallocating money within the different budgets if it is appropriate. This bill is part of the plan, and it is important that this issue be moved forward and discussion is initiated. Representative Hanley had to go back to the Finance Committee meeting, however, he would try to return to the HESS Committee meeting later. Number 380 CO-CHAIR BUNDE said Representative Hanley is the Co-Chair of the Finance Committee. He was asked to speak before the HESS Committee because the Finance Committee is assisting in the coming year's budget construction. He has access to all the factors that impact the state's budget and the education budget. CO-CHAIR BUNDE announced that he did not plan to move HB 230 out of committee today. Public testimony is being taken, and HB 230 will be addressed again in the future. CO-CHAIR BUNDE announced that Representative Rokeberg and Representative Davis arrived at the meeting at 2:12 p.m. Number 484 DICK SWARNER, Executive Director of Business Management, Kenai Peninsula Borough School District (KPBSD), testified via teleconference that the KPBSD is opposed to HB 230. The district, over the years, has experienced growth. The district also continues to grow. This bill would be detrimental to a district such as his that is growing so fast. MR. SWARNER asked to share some facts with the committee. The KPBSD appreciates and understands the state's finance problems. The district believes education should share the responsibility of trying to bring the state budget into balance. However, HB 230 goes too far in that the bill asks the KPBSD to absorb inflation and an increased number of students. The district has been doing that for a number of years, and things are getting difficult "in the trenches." MR. SWARNER said over the last ten years, the district's total budget has gone up 29.8 percent. Enrollment has increased 28 percent. Cost per pupil, over a ten-year period, has only increased 1.44 percent. Number 612 MR. SWARNER said the Consumer Price Index (CPI) in Anchorage has increased 35.5 percent. The local taxes in Mr. Swarner's district have increased 48.1 percent, and the state foundation funding has only increased 24.3 percent. Mr. Swarner said education is one of the basic services mandated by the state Constitution. The legislature needs to trim things back, and it is going to have to do what has been done in the school districts--it must prioritize services. MR. SWARNER thought the optional state programs need to be eliminated before basic services are eliminated. That is the situation the state is getting into now. In order for the KPBSD to balance its budget for the current year, it is looking into making reductions. They must try to do the same things this year with $2.3 million less for next year. That number figures in the increased number of pupils without absorbing that cost. Number 703 CO-CHAIR BUNDE reiterated the state is facing a $500 million challenge. Mr. Swarner had said the state should eliminate some options. Co-Chair Bunde asked if there were options in the schools that could be eliminated, such as the athletic program or band. He also asked what other options should be eliminated from the state budget before education is addressed. MR. SWARNER said since he is in education, he follows politics to a certain degree. Everybody says they are fed up with the federal government. But there are a lot of things in the district's budget that are mandated. To date, Mr. Swarner has not seen any change in those mandates. Districts are mandated with Occupational Health and Safety Administration (OSHA) laws, special education laws, sex equity training, alcohol training, Environmental Protection Agency (EPA) rules and Department of Environmental Conservation (DEC) rules. Number 781 MR. SWARNER said none of these mandates are going away. Still, the legislature is asking the districts to run their budgets with less money and still contend with the mandates. Mr. Swarner said some of the mandates need to disappear to give the districts the latitude to operate in a more efficient manner. CO-CHAIR BUNDE hoped the legislature has the option of addressing the unfunded federal mandates. Of course, those items must be addressed in an arena other than the HESS Committee. However, Co- Chair Bunde shares this goal with Mr. Swarner. Number 820 REPRESENTATIVE GARY DAVIS asked about the proposed extra foundation units for the Kenai School District. He asked how many additional units were being anticipated. MR. SWARNER said that 20 additional units are being anticipated. CO-CHAIR BUNDE asked if that meant 20 additional classrooms, and Mr. Swarner answered when all the numbers are worked through the formula and special education, bilingual assistance and other mandates are included, as well as the increased enrollment, there are 20 additional instructional units over the current year's figure. Number 892 ROBERT DOYLE, Finance Director, Matanuska-Susitna (Mat-Su) Borough School District, supported all Mr. Swarner's comments and concerns with HB 230. Mr. Doyle explained there is a projected increase in student enrollment next year for his district as well. Currently, enrollment was 11,880. Last year, enrollment was 11,300, and next year, projected enrollment is 12,378. In two years, that is an increase of 1,000 children. MR. DOYLE said the total budget this year did not increase from last year. The district held the line and tried to work more efficiently with a lot less money. It is unfair to ask the district to do that again with 500 more children. There are 500 total classrooms in the district. If the enrollment increase cannot be funded, the net effect would be the increase in every class size by one. That costs a little over $1 million. Number 965 MR. DOYLE said the cumulative effects need to be carefully weighed by the state. There are federal cuts being discussed, and there are local tax concerns. The cumulative effects between the cuts on the local level, the state level and the federal level can impact the children in many ways. MR. DOYLE said 80 percent of his district's budget is tied up in personnel. The district has already gone to self-insurance programs, and has considered, but not passed many other significant reforms. The district is trying to do things more efficiently to same money. The district is cutting things that are not directly in the classroom and that do not affect the children. Number 1000 MR. DOYLE said that the efficient use of existing budgets can be jeopardized by unfunded mandates. Mr. Doyle said he is not new to the state of Alaska. He moved to Alaska in 1968 and graduated from East Anchorage High School. At that time there was no oil money in the state, and many of the school programs that may be faced with cuts, such as band and athletics, were in place. Class size was significantly smaller and many school programs were offered. MR. DOYLE said today, students who travel for extracurricular activities must sleep on gym floors, travel by bus and bring their own meals. When Mr. Doyle attended school, students flew on planes, stayed on hotels and ate meals paid for by the school. Mr. Doyle again reminded HESS Committee members that there was no oil revenue money then. MR. DOYLE said he is concerned that legislators are only looking at the expenditure side of the budget, and they are not studying revenue generation. If cuts have to be made, they should be made equitably across all districts. However, for Mr. Doyle's district, the cut on the foundation unit would amount to about $1.2 million. There is also going to be a $250,000 cut on the district's transportation budget. Mr. Doyle is not exactly sure how the nutritional services budget is going to be perceived. Number 1070 MR. DOYLE said when those are added all up with the contemplated cuts at the local level, schools are not going to be the same next year. CO-CHAIR BUNDE shared Mr. Doyle's frustration, and he knows that both Kenai-Soldotna and the Matanuska-Susitna Borough School Districts have been doing an extraordinary job of stretching dollars and running efficient programs. However, as Mr. Doyle pointed out, when funding is reduced it must be spread across the board in an equitable fashion. It seems ironic that some of the more efficient districts are asked to do more with less, however, the legislature cannot hold certain groups harmless. CO-CHAIR BUNDE said he was in Anchorage in 1968 as well. He worked for the school system and remembers that there were only 150,000 people in Anchorage at that time. That probably made a significant difference. In addition, Alaskans paid an income tax at that time. Co-Chair Bunde still thought it was a pretty good place to live. Number 1138 REPRESENTATIVE NORMAN ROKEBERG recalled that Mr. Doyle's district spends 80 percent of its budget on personnel. MR. DOYLE said 82 percent includes all salaries and benefits. The district is totally self-insured, it does not buy health insurance. The district spends about $4,500 per employee to guarantee all their health insurance coverage. Mr. Doyle offered to mail the HESS Committee members a budget package. This would include all the facts and figures reviewed by their Citizen's Advisory Committee. REPRESENTATIVE ROKEBERG explained the reason he asked is because he has heard many different figures. He has heard that Anchorage spends about 87 percent on personnel, and that other districts in the state spend upwards of 90 percent. He commended Mr. Doyle's district for its efficiency. CO-CHAIR BUNDE thanked Mr. Doyle and asked him to please send the district's budget information. Co-Chair Bunde also announced that more sites were now on teleconference. Number 1208 ALICE WALSH, PTA president, Cottonwood Creek Elementary School, testified via teleconference. She read a statement prepared by Marie Burton, principal of Cottonwood Creek Elementary School: "The Matanuksa-Susitna Community cannot afford a reduction in funding in our schools. It would directly reflect on the quality of education that our children receive. Many of our students need to be served with fewer resources in an already dangerously overcrowded system. HB 230 is an irresponsible and inconveniently timed action. If the framers of this bill were truly dedicated to serving the community they represent, they should have sought appropriate input from the citizens of the communities that HB 230 directly reflects on. "A reduction in our funds for our schools will be an obstacle that this economically limited community cannot endure. Our schools struggle not only with providing a quality education with already limited funds, but also with the violent and destructive social problems of our community as well. "In addition, I find it very disturbing that when the four biggest school districts are on spring break, the opportunity is taken to sidestep the very people you represent." Number 1279 CO-CHAIR BUNDE asked Ms. Walsh to pass the message onto the principal that the timing of this hearing had nothing to do with spring break. The legislative process simply allowed for the bill to be heard at this time. Co-Chair Bunde then addressed the idea that the HESS Committee members have not consulted the people most directly affected by HB 230. For the past three years, all committee members have been hearing from people throughout the state, "Cut the budget, get the spending in line." CO-CHAIR BUNDE said 65 percent of the people in this state do not have children in school. Those people have a right to be heard also. Number 1304 PAM McCAUL, parent, PTA president and former vice-president, high school varsity coach, testified via teleconference that her varsity team is totally unfunded by anyone other than their own resources. They have no support from the school, other than the principal and vice-principal who stand behind the team. She read a prepared statement: "As a parent volunteer putting in at least 25 hours a week and an untold amount of my own pocket money, I work as a PTA president and vice-president, and I am here to tell the makers of HB 230 they have gone too far. To ignore everyone that this cut reflects on is underhanded and under the table. It is truly falling (indisc.). "As a group you decided that you deserved a raise of $150 to $200 per day in per diem. Now you cut school children $200 a year. How do you justify this? I see it this way: Every day a school child gets to fund a legislator for a day. I, as an adult taxpayer, find that reprehensible. If this is how Juneau is going to represent the school children of Alaska, their future, and spend my tax dollars, we need to make some drastic changes. Obviously, your priorities do not lie in educating the future or in operating above the board. It lies in your own pocket, and obviously the 65 percent who do not have children in school. Take a good close look at HB 230, it will come back to haunt you all. Your yes votes will be noted. I will follow this closely and I will bring it up publicly whenever I am given an opportunity. Thank you." Number 1385 CO-CHAIR BUNDE observed that he did not think her perceptions match his own or are necessarily accurate. He felt this was true particularly in reference to Ms. McCaul's tax dollars. Co-Chair Bunde did not think the average citizen pays much in state taxes in this state. Number 1401 MELINDA BROOKS, Mat-Su District Budget Committee member, testified via teleconference. She did not know how the district can afford this kind of cut. They are already in terrible, terrible financial difficulty. She agrees with Co-Chair Bunde that Alaska residents do not pay enough taxes. She thinks it is about time that is changed. CO-CHAIR BUNDE does not think that cuts can be absorbed without harm. He agrees with most people who testify on that. Number 1455 CAROL KANE, taxpayer, property owner, educator and Alaska resident testified via teleconference. She thanked HESS Committee members for the opportunity to speak and for their efforts. She and her husband value the quality of life in Alaska and have decided to spend the rest of their lives here. She has had the opportunity to have a leadership role in education through professional organizations at the local, state and national level. She is proud to be an Alaskan educator. MS. KANE believes that Alaska provides exemplary educational programs for students regardless of where they live, or their ethnic origin. Educators today have met and will strive to meet the challenges in the future presented by society. Ms. Kane said teachers have accepted full responsibility to provide curricular and co-curricular programs which will enable students to become productive citizens of the 21st century. Number 1497 MS. KANE added that out of necessity, and because educators are empathetic caregivers, they provide family life support by escalating proportions. She is alarmed to realize the current language proposed in HB 230 would result in a reduction in the funding level for FY 96 and FY 97. MS. KANE said for FY 96, the current level of funding should be no less than the currently funded level for FY 95. The education of students in this state must not be held hostage because funding has not been allocated to meet constitutional obligations. To allow adequate planning and assessment, Ms. Kane proposed that the state look at options to determine how education will be funded after the next fiscal year and in the future. MS. KANE said the current funding allocation, with high emphasis on property owners, must be revisited. Because the people she represents educate all children, it would seem equitable that a combination of revenue resources be utilized to come up with a more fair and appropriate funding formula. MS. KANE said she does not believe in a free ride. In Alaska people must pay their dues by generating new funding and reallocating that which is already utilized in revenues. Number 1551 MS. KANE proposed that revenue sources might include a combination of the following based on percentage allocations for a full education formula: A percentage from federal resources, a percentage from an education tax to be paid by every citizen (senior citizens exempt at 60 years), a percentage from the permanent fund to be paid by every citizen (no exemptions for senior citizens, and a percentage from property taxes to be paid by all property owners (not personal property). MS. KANE said where possible, education appropriations would go directly to the school district and not through the borough political structure. The state should provide a funding structure for a two year budget appropriation for every district. This would eliminate the annual "knee jerk" panic that encompasses the public, educators, and legislators. The expanded two year funding allocation would allow for better planning and an improved educational community. Number 1596 MS. KANE said she is willing to work with a committee to review this funding dilemma and hopefully develop a new formula that would result in long-term stability. Collectively, the people of the state can provide what Alaska's children need today for tomorrow's work force. CO-CHAIR BUNDE thanked Ms. Kane for the constructive suggestions, and asked if she would fax them to the HESS Committee members. Number 1620 LARRY HEALY, Educator, Mat-Su School District, testified via teleconference. He said his wife is also employed by the district. Therefore, "on one hand" his opinion may slightly biased. On the other hand, he is a taxpayer and he has been in Alaska for 18 years. He is closer to a senior citizen than he is to a middle- aged man, and he does not have any children in school. However, he does believe that people such as himself have an obligation to Alaska's young for an education. MR. HEALY said he does not mind paying his share of the property tax, income tax, or other ways the state can raise revenue. Number 1653 MR. HEALY asked to briefly describe the situation in Mat-Su to the HESS Committee members. For the past four years, he has seen the Mat-Su school district downsize the number of employees. That can be understood in terms of the number of employees per students. As the HESS Committee members are aware, the Mat-Su school district's enrollment is increasing. MR. HEALY added that the district has cut out a number of significant education programs due to the budget plans. One example of the cuts has been limits on maintenance programs in the schools. Maintenance has been delayed in critical areas. The district has reduced some of the foreign language programs, etc. At the same time, there has been an increase in students, and the numbers show Mat-Su is the fastest growing school district in the state. MR. HEALY said the district has an obligation to parents who are bringing students to the district. On the other hand, the district's students have an increasing number of needs. The students today are far different than the students of years past. Number 1707 MR. HEALY continued by saying the district needs to help its teachers meet those needs. There are a number of approaches that need to be studied, all of which are going to take time, effort and money to maintain the quality of services and the quality of life for the people in the valley. MR. HEALY said he, like Ms. Kane, supports the mechanisms that she described to generate revenue and deal with the budget. However, he hopes the legislature would solve this problem, especially in terms of the needs of the children and the society, by dealing with it as more of a responsibility rather than a budget problem. Mr. Healy noted, however, that he does realize there is a budget problem. Number 1740 REPRESENTATIVE ROKEBERG asked Mr. Healy to what the district attributes this 4 percent to 5 percent growth in student population in the Mat-Su Valley. He asked if there was some sort of economic activity occurring to cause this population growth. MR. HEALY answered that it is a mystery to many people. The Mat-Su Valley, however, has a good reputation as a school district. In addition, there is a four-lane highway leading to Anchorage that has given people the ability to acquire housing at a reduced cost in the Mat-Su valley. There is a large commuting population and that seems to be increasing. Number 1768 MR. HEALY said there is also a large population of slope workers in the Mat-Su Valley. This is where the slope workers look for housing because this is closer to the streams and wilderness they like to visit when they are off the slope. MR. HEALY did not know if there was any increase in industry or business in the valley. There is an increase in tourism, and there are probably some other areas that are growing that Mr. Healy does not know about. He added that many small businesses are coming to the valley. He asked Ms. Kane if she had any ideas about the population growth. Number 1798 MS. KANE added that in talking to local realtors and business people she has met, she has found the quality of the Mat-Su schools are definitely an attraction, and are a reason people are moving to the valley. The valley provides an opportunity for people to work in the Anchorage area and still enjoy a rural lifestyle. MS. KANE said there is a real effort on the part of the business community to attract businesses to come to this area, and also to increase tourism. The valley is beautiful, and there are a lot of dedicated people who are trying to provide services to the community. Number 1841 MR. HEALY said one of the areas studied in demographics is the continual increase in low income and free/reduced lunch applications over the past three years. The numbers have gone from about 22 percent to 30 percent. CO-CHAIR BUNDE encouraged the schools to poll all the new people moving to an area and ask how many of them are interested in paying taxes to support the school system. It would be very helpful to the legislature. Co-Chair Bunde said the thrust of Representative Rokeberg's comment was that the legislators have two imminent challenges: To cut spending and to generate revenue. Resource development is one of the ways to generate revenue. Co-Chair Bunde said support from the community is very helpful. MS. KANE added that during public hearings on the school district budget, people came forward to say they are willing to pay taxes to support the schools. CO-CHAIR BUNDE said he would see if people who do not have children in school have opinions on the subject. Number 1887 REPRESENTATIVE TOM BRICE had a comment on growth in the Mat-Su. A lot of that does have to do with renewed interest in agriculture. LINDA STOLL, parent, testified via teleconference. She said one of her children graduated from a Mat-Su high school last year, and another child will graduate this year. She is very relieved they are done with their public education. They have both been accepted at good colleges, and thanks to the high quality of their high school experience, they are attending college partially funded by scholarships. These scholarships are both athletic and academic. MS. STOLL has a daughter who is just entering high school, and she fears that if HB 230 should pass, her daughter will not have the same opportunities her siblings have had. She feels her daughter's education will not be of the same high quality that her other children were able to receive. Number 1930 MS. STOLL added that limiting classes and limiting extracurricular activities, which passage of this bill will encourage, will all have the effect of limiting her daughter's future. This is an unacceptable choice for her daughter and for all students. MS. STOLL continued by saying that with devastating cuts planned at the national level for many programs that deal with children, the state's decision to further jeopardize educational opportunity cannot be made. If budget cuts must be borne, she asked that the cuts not be borne by the state's youngest and most vulnerable citizens. Number 1950 CO-CHAIR BUNDE reminded Ms. Stoll and all people on teleconference that suggestions on programs the state can do without are very helpful. KEITH EVANS, Superintendent, Dillingham City Schools, testified via teleconference. He said the school is a single-site school of about 500 students. The school's ability to absorb a great many cuts that seem to be coming its way is very limited. This bill would appear to make additional cuts to the school. Mr. Evans does not perceive that his school is going to have a big increase in enrollment--the increase will be minor. However, certainly the funds available to the Dillingham district will diminish due to the effects of HB 230. MR. EVANS strongly supported Ms. Kane's statements concerning funding. He said his district is looking at already cutting about $250,000 for next year's budget. The district has already looked at the city to combine their business offices and maintenance support in an effort to be more sufficient. MR. EVANS said the district has been forced to not support student activities and athletics. About $90,000 is now being raised by local community groups and interested citizens. If the federal government cuts the lunch program, Dillingham's program will go out the window because it cannot absorb $29,000 in cuts. Number 2010 MR. EVANS said his district is very concerned about existing with the basic programs, and more cuts will be quite devastating for his district. CO-CHAIR BUNDE noted that HB 230 does include funding for single- site schools. Another bill which addresses more efficient spending has provisions for consolidating or closing some of the small schools. Co-Chair Bunde said Mr. Evans should study that issue, however, he does not have to comment on that subject today. Written comment would certainly be welcome. Number 2042 BRUCE BACHEN, President, Sitka School Board (SSB), testified via teleconference. He said his district spends the least amount of money per student. His district tries to do the most with the least. He has been through about five budget cycles, and he must tell the HESS Committee members what it is like right now compared to the last few years. MR. BACHEN said the SSB held a total of about 12 hours of hearings with the public. These hearings were attended by about 150 people. This attendance is by far the largest the SSB had ever experienced. Mr. Bachen said there is a real sense of frustration. Cuts have been made and people have had enough. This year, the public demanded that the SSB produce a needs-based budget. The outcome of that was somewhat surprising to everyone. MR. BACHEN said the new budget showed that the SSB is about ten percent below what it needs to be to have what people are demanding. Some of the cost increases are coming from special education, and this was mandated by the state. If a student needs special education, they receive an Individual Educational Program, and the district is obligated to pay for those services. The state pays about 55 cents on the dollar, and the district pays the rest. MR. BACHEN said therefore, what is going on with increasing special education demands is that funding for other programs is being taken away. Number 2106 MR. BACHEN said the Sitka School District (SSD) is about $1.1 million short, and HB 230 would further exacerbate the problems of the SSD, and decrease funding further by about $300,000. Mr. Bachen thinks the caps need to be studied. That is another problem coming for Sitka in terms of what the population wants to spend on education. Mr. Bachen said the SSD is against HB 230 the way it is currently written. He is in support of the Governor's position. The SSD recognizes the state is growing, and he asks that funding be kept comparable to where it has been on a per student basis. Number 2134 CO-CHAIR BUNDE observed that the Governor's budget will cut $8 million (best case scenario) from a $500 million deficit. Co-Chair Bunde said he does not need modern math to tell him the state would be broke before the deficit could be addressed if that route was taken. Number 2149 CAROL MEARS, Legislative Chair, Fairbanks District Council PTA, testified via teleconference. She thanked the HESS Committee members for the chance to speak. She also said she is totally against any cuts in the foundation formula. She continued that Alaska's children have been feeling the pain of cuts through this formula for years. Inflation has been putting the squeeze on the spending power of the dollar. MS. MEARS said, "Shame on you folks for even considering squeezing more out of their education." Every year, there are more and more cuts to school district operating budgets. These cuts are in everything from administration, to teachers, to programs and supplies. These cuts directly affect the education of Alaska's children. MS. MEARS said the cuts being considered would mean the equivalent of cutting an additional 30 teachers in the Fairbanks North Star Borough School District. Raise the Pupil-Teacher ratio (PTR) or cut all librarians, nurses and counselors. Cut the entire vocational education program or cut band, orchestra and general music. These are the kinds of decisions that HB 230 would force her school district to make. Number 2184 MS. MEARS said the district is already having to whittle away at these programs. The district has been very responsible in setting class size as a priority, cutting administration where it can. This year's proposal includes cutting an assistant superintendent, a central office secretary, a personnel director, a principal, and 1.5 administrative interns. MS. MEARS said administration in her district is lean and is becoming less effective to the point that it will directly affect the children in the classroom. On top of this, the legislators are saying there should be no extra funding for these students. It is the state's responsibility to fund education for all Alaska's children. Children of new residents qualify as children of Alaska, too. It would be grossly negligent to not recognize that. MS. MEARS said Fairbanks is looking at growth in the student population due to mining operations. Freezing supplemental funding will be detrimental to the education of all the children. She again shamed the HESS Committee members for considering further cuts. She thanked the members for the opportunity to speak, but added that they should "pick on somebody your own size." Number 2230 CO-CHAIR BUNDE asked Ms. Mears to remember that HESS Committee members are trying to do a job, and education is the largest single expenditure in the state. The committee is perfectly willing to accept suggestions on other programs to cut so education might be left alone. Number 2250 JOHN TONGEN, President, Alaska Association of School Business Officials, testified via teleconference. He said in the 1987-88 school year, the current foundation funding program was established with an instructional unit value of $60,000. If, at that time, an inflation-proofing mechanism was implemented, similar to what occurs with the permanent fund, the current instructional unit would be worth an excess of $76,000. Of course, that did not occur. MR. TONGEN said in fact, the opposite occurred. The purchasing power for the current instructional unit (IU) is worth less than $50,000. The Alaska educational dollar continues to erode away. The state has an obligation to provide basic services, and education is a basic service. That is where the priorities for the dollar should be. Mr. Tongen thanked the HESS Committee members for the opportunity to provide input. TAPE 95-19, SIDE B Number 000 CO-CHAIR BUNDE noted that if the foundation formula was $68,000 the state would be bankrupt today. Number 044 LELAND DISHMAN, Superintendent, Yupiit School District, testified via teleconference from Akiachak. He said he had to chuckle at the folks who didn't know where all the kids were coming from in Mat- Su, but he suggested they find a 10th grade biology book and find out. MR. DISHMAN said since 1990, his district's enrollment has increased about 23 percent. He said the purchasing power has eroded, and the migrant education program has decimated many of the district's programs. He said he thinks people voted wrong on the national level this year, but he hopes that mistake was not repeated at the local level. Number 097 MR. DISHMAN wished he could say he pays taxes to help pay for education. Someone paid for his education in Tennessee by paying property taxes. His family was too poor to pay any taxes, however. He is glad, therefore, to pay his share to educate the upcoming group. MR. DISHMAN thought most of that 65 percent of people without children, to which Co-Chair Bunde referred, did have an opportunity to go to school. More than likely, someone paid for their education. Those people would probably not be too bitter about reciprocating. MR. DISHMAN asked the HESS Committee members to look long and hard at reducing the foundation units. He said that Ms. Kane made some good points, and so did Mr. Tongen. It is almost impossible to deliver anywhere close to the services previously provided by the schools on today's budgets. Number 158 MR. DISHMAN said in rural Alaska, they are strapped with tremendous costs and distance. It costs a great deal for anything bought, and then the products must be flown to Akiachak. Consolidation is always a good idea as long as it is the other guy. He suggested that the Anchorage legislator who would like to see the consolidation of small rural schools consider consolidation of the legislators from Anchorage. Mr. Dishman can see no reason why so many are needed, although perhaps they are. Mr. Dishman said that it would be great if they can justify their positions. MR. DISHMAN asked the HESS Committee members to look long and hard at this bill, to study income tax possibilities and other revenue sources, and to remember that most of the wealth in the state of Alaska comes from rural Alaska. Most of the wealth comes from Prudhoe Bay, the forest and the rivers throughout rural Alaska. The rural folks have generously shared their wealth with everyone in the state for many years. Mr. Dishman thinks perhaps that the rural folks have been too generous. Most of the people in Anchorage think the wealth belongs to them. MR. DISHMAN repeated his request for the HESS Committee members to study the bill long and hard, and to remember the children. They are Alaska's future. He asked them to remember all children, not just those in Anchorage, Juneau and Mat-Su. No child's education should be placed ahead of another child's. Number 248 CO-CHAIR BUNDE noted that legislators who are not from Anchorage seemed to be in agreement with the idea of consolidating the Anchorage legislature. He also noted that there are 21 schools in Alaska with 12 or fewer students. Each of those schools costs $160,000. The 21 legislators from Anchorage do not cost $160,000 a piece. Number 280 GARY CHRISTENSEN, Director of Business Affairs, North Slope School District, testified via teleconference. He wanted to echo a few of the topics that had been previously mentioned. The foundation program, for the last eight years, has had the unit value of $60,000 to $61,000. It has not been inflation-proofed. The district has, in effect, lost a substantial amount of purchasing power. That has squeezed out any excesses that may have existed in the school district budgets across the state. MR. CHRISTENSEN asked HESS Committee members to keep that in mind. He also asked them to consider that there is really not much more to be squeezed out. Number 396 BOB VAN SLYKE, Superintendent, Juneau School District, thanked the HESS Committee members for the opportunity to speak. He said budget constraints are not new to the district. Last year the district had to cut the operating budget or maintain the current level of funding. This resulted in the district cutting back on the maintenance level from about $2.5 million. As a result, the district has 40 fewer teachers this year for about the same number of students as the previous year. MR. VAN SLYKE has had to increase class sizes to an average of 27 students per teacher at the elementary level, 26 to 1 at the middle school level and 27 to 1 at the high school level. When one calculates into the equation, preparation time that is traditional for secondary school teachers, the district is running 32 and 33 to 1 as an average class size in the middle and high schools. Number 464 MR. VAN SLYKE said the district has pared everything it can from its budget. It has very few people now, relative to total staff, that are untenured. If the district is to survive additional constraints in terms of revenue, the district is going to be "in a world of hurt." MR. VAN SLYKE said as it is, commitments for the coming year in terms of increases in health insurance costs and normal increases in operations, the district has had to look at ways to slash the budget by an additional $1.5 million for this year. MR. VAN SLYKE added that now, if the district is faced with losing another $500,000 from state funds based on HB 230, plus the accompanying reduced capability of the city and borough to provide the district with funds by another $100,000, the district is going to have to cut another $600,000 from the budget. The only place the district has to make those cuts is in those few remaining untenured teachers. This will further increase class size. MR. VAN SLYKE said the district has run out of room. The district is in collective bargaining, and it is trying to do the best it can in that regard. Mr. Van Slyke asked the HESS Committee members to look carefully at what is being proposed. Number 570 CO-CHAIR BUNDE assured Mr. Van Slyke that HESS Committee members are looking very carefully at the bill. Co-Chair Bunde said he has a great deal of sympathy with all those that testified, and the challenges they are facing as individual school districts. As tragic as these stories are, they do not diminish the challenge the state is facing. Co-Chair Bunde said the purpose of a hearing is to work together to come up with the least onerous way to address the challenges that face the state as a whole. CO-CHAIR BUNDE said everyone is going to be impacted negatively in some fashion, and the HESS Committee members want to make the impact as painless as possible. MR. VAN SLYKE said that the adults will survive, but it is not a good deal for the children. That is the concern of the district. Number 630 REPRESENTATIVE ROKEBERG recalled that Mr. Van Slyke indicated last year the district had a $2.5 million cutback, and this year it is experiencing another $1.5 million decrease. He asked if that was correct, and what had caused that. Representative Rokeberg thought that the state had been increasing, not decreasing funding the last two years. MR. VAN SLYKE said the state has not increased the funding for his district in the last two years. The district had an increase in FY 93 to a $61,000 IU. However, revenue has been relatively flat, but costs have continued to increase. It would have taken $2.5 million last year to have a maintenance level operation. Therefore, operations had to be slashed by that amount to stay within the revenue. MR. VAN SLYKE continued that in the coming year, given the costs that are built in, the district would need an additional $1.5 million immediately to have a maintenance level operation. In other words, if a district does not have enough money for a maintenance level operation, cuts must be made. Number 699 REPRESENTATIVE ROKEBERG asked if that was to say the state was responsible for the district's personnel, bargaining and other contracts; and if every time teacher and personnel salaries are raised, the state is responsible for paying for those raises? MR. VAN SLYKE said the district is doing the best it can, but it is not all just bargaining. There are other costs that have gone up as well. REPRESENTATIVE ROKEBERG said that he was from the private sector, and it seems like everybody in the public sector feels they have a right to cost-adjusted, inflatable dollars. That just doesn't happen in the private sector, and it seems like that is an attitude in the public sector. Number 732 MR. VAN SLYKE said the district is doing the best it can to hold the line. There are some things that he would be glad to comment on if the district was not right in the middle of bargaining. However, the intent of the district, should it get some monetary relief, is to reduce class size. The district will do everything it can to avoid increasing class size further. REPRESENTATIVE ROKEBERG said that there are many people in the private sector who have been actually cutting wages and salaries for the last few years. MR. VAN SLYKE said again there are things he cannot comment on because the district is in the middle of bargaining. CO-CHAIR BUNDE hoped the message that less money is available is not lost on the other side of the bargaining table. Number 777 CO-CHAIR TOOHEY did not want to belabor the point, but she said everyone realizes that 87 percent of the school budget is in teacher salaries and benefits, and this is not acceptable. However, knowing that the state faces a $550 million gap, she asked Mr. Van Slyke to realize that this is not the last of the cuts. She wanted to make it clear that this is painful for everyone. Everyone will survive. MR. VAN SLYKE hoped the district could have some time to work this out. CO-CHAIR TOOHEY said she would love to provide that time, but everyone has known this was coming for the last ten years. The state is at the edge of the cliff right now, and the state must make cuts. It has no choice. MR. VAN SLYKE said there are disagreements on that point. Some people see that the state has choices, or people would not be testifying. Number 833 REPRESENTATIVE ROKEBERG said he has heard figures anecdotally about the Juneau district's personnel share. MR. VAN SLYKE said that all personnel, not just teachers, comprise 91 percent of the budget. CO-CHAIR BUNDE closed the public hearing on HB 230. It will be heard again on Thursday. An at-ease was taken at 3:15 p.m. Number 885 CO-CHAIR BUNDE called the meeting back to order at 3:25 p.m. HHES - 03/14/95 HB 228 - REDUCTION IN PUBLIC ASSISTANCE PAYMENTS Number 899 JIM NORDLUND, Director, Division of Public Assistance, Department of Health and Social Services (DHSS), acknowledged that he was once a representative of Representative Rokeberg's district. He recognized that he and Representative Rokeberg had a good contest, of which Representative Rokeberg was the victor. Mr. Nordlund wished Representative Rokeberg much success in his job. MR. NORDLUND said in his new capacity he does not see himself as partisan or competitive in what takes place in the legislature, rather, his job is to work with both legislative parties to move welfare reform forward. This is going to be a big issue. Number 933 MR. NORDLUND said that he would like to testify on HB 228. This bill is known as the ratable reduction for Assistance to Families with Dependent Children (AFDC) and Adult Public Assistance (APA). While the Administration does not have a written position statement on this bill, he can say with a great deal of confidence that the Administration is opposed to this measure. Mr. Nordlund understands the commitment behind the bill, and he does not think it is not a mean-spirited measure on the part of the bill's sponsors. MR. NORDLUND understands the motivation of the bill is one of trying to reduce the state budget. However, there are other ways of reducing the state budget in terms of welfare payments than reducing benefit levels. The approach of the Knowles Administration is one of reducing the caseload. The calculations are made a little differently, but basically the bottom line could be the same. Less money will be spent on welfare payments. Number 1012 MR. NORDLUND said his office is promoting caseload reduction by finding work for people, particularly in private sector jobs, and getting them off the welfare rolls. The Governor's blueprint for welfare reform is riddled with ideas about moving people from welfare to work. Combined with caseload reduction through jobs, Mr. Nordlund's division will continue to be vigilant to insure benefit payments are accurate. There is always a little bit of error that causes additional benefits to be paid out that should not be. MR. NORDLUND said his office will also continue to be vigilant concerning misuse and fraud that takes place within the system. This is not a budget hearing, but his office has put a budget before the House Finance Committee which shows that the requested AFDC budget is being reduced this year. This is due to the continued efforts to move people into jobs, to make sure payments are accurate, and to insure there is no fraud. Number 1072 MR. NORDLUND mentioned that his staff has been working with the HESS Committee members to make sure that what the HESS Committee plans to do with the bill in terms of benefit reductions are accurate. There were some problems with that. A staff member would testify when the committee came to discussion of that part of the bill. There are federal limits concerning how much payments can be reduced. In some cases, the bill went too far in the original draft. Mr. Nordlund understands that is the reason for the Committee Substitute (CS). MR. NORDLUND commented on the cuts to APA. The Adult Public Assistance program is assistance that goes to blind, aged and disabled adults. Those are people who cannot reasonably find work. They are, by definition, the truly needy. They are the most needy in the state. The APA cuts in this bill are particularly troublesome to Mr. Nordlund for that reason. Number 1126 MR. NORDLUND noted that the sponsor statement contains some wording he would like to correct. The statement says, "Health and Social Services, along with education and state employee benefits and salaries have traditionally been left out of budget reductions." In terms of social services cuts, HB 67, which passed several years ago, was a budget reduction to both AFDC and APA. MR. NORDLUND's office has calculated that the savings for the upcoming fiscal year, FY 96, due to the passage of that bill, will be about $15 million. This saves payments that would otherwise be made if that law had not gone into effect. There definitely have been budget reductions in welfare payments in the past legislature. Number 1188 CO-CHAIR BUNDE thanked Mr. Nordlund for his vigorous pursuit of fraud. One of the problems with welfare reform is public confidence in the system. Pursuing potential fraud raises the public's confidence and makes them more comfortable with the program. REPRESENTATIVE DAVIS said it was nice to see Mr. Nordlund and wished him good luck in his current position. It is the understanding of Representative Davis that the Knowles Administration currently agrees with the disparity in the state's basic AFDC payments compared to the next level of spending in the United States, as seen in Connecticut. Number 1230 MR. NORDLUND said the Administration has not taken a position on the level of benefits in Alaska versus any other state. Mr. Nordlund knows that Alaska is ranked very high in terms of payment amounts, if not the highest. The position of the Administration is that need must be studied. It is an attitude of "we don't care how they do it on the Outside." There are needy people in the state, and it must be determined what is an adequate amount of money to support those people. MR. NORDLUND passed out a sheet which contained the results of an analysis of the APA program. The sheet showed in a typical case, how much recipients get in APA, how much they get in food stamps, and how much they get in federal Supplemental Security Income (SSI), which is a complement to APA. By making some assumptions about what recipients pay in rent, utilities and food, Mr. Nordlund's office determined that a typical recipient family then has $46 left over each month. This $46 would be for transportation, clothing, household and personal care items. Number 1290 MR. NORDLUND said therefore, Alaska might be high compared to other states, but certainly Alaska's recipients are not living "high off the hog" on the assistance paid by Alaska. Mr. Nordlund personally thinks the assistance is adequate, but not too much. CO-CHAIR TOOHEY asked if the chart showed APA, and if the chart assumed it was a family of two. MR. NORDLUND said the analysis was based on a household consisting of a single disabled individual residing in a one-bedroom. The analysis also was based on a nonsubsidized housing unit in Anchorage. A different chart shows what the figures would be like in a subsidized housing unit. In addition, the same sort of analysis is going to be done for AFDC. Number 1350 ANGIE SALERNO, Executive Director, National Association of Social Workers, testified via teleconference. She spoke in opposition to HB 228. She sees this bill as short-sighted social and fiscal policy. This bill is justified by sponsors and supporters as necessary because the state is facing a budget crisis. They also feel a budget gap must be closed. While this is true, and everyone understands that state spending must be brought more closely to state income, it is not true the place to start is with programs that serve poor families and individuals who are elderly or disabled. MS. SALERNO said such statements are misleading at best. Every dollar cut from these programs result in the loss of a federal dollar. Both of these dollars are then lost to the Alaska economy. In return for this false economy, more citizens lose the opportunity for decent productive lives. In addition, the goal of the AFDC program is undermined. Poor families will be less able to care for their families. Number 1403 MS. SALERNO said cutting the social welfare budget is bad business for Alaska. She thanked Director Nordlund for offering a spirit of cooperation and hope for real answers to reform, and for offering some figures on the reality of living off welfare. Ms. Salerno added that welfare has already taken cuts in the last legislative session. Ms. Salerno offered to answer any questions. REPRESENTATIVE DAVIS said that Ms. Salerno made the statement that welfare was not the place to start cutting the deficit. Representative Davis said the legislature has not started with welfare. Seventy-five percent of the state's budget relates to wages, welfare and education. As indicated, with the exception of the $24 a month basic cut from welfare two years ago, all of the other cuts that have been addressed in the last four or five years have come from the remaining 25 percent of the general funds. REPRESENTATIVE DAVIS said welfare is not the place to start, it is just the fact that areas that have not been addressed in the past are now being placed on the table for study. Representative Davis appreciates the problems, concerns and the different degrees of values that are placed on the legislature's attempts. The HESS Committee members will be considering all those. Number 1492 MS. SALERNO said she agreed that everyone has to take cuts. She suggested the state not think about any more cuts. The state should think about enhancing revenues. She said many people are not afraid of the word taxes. People are not taxed highly in this state. She said the permanent fund could be capped. There are options. She said cuts are going to damage the state. That day, HESS Committee members had already considered HB 230, in which education may be cut, and now welfare. She asked that the HESS Committee members think about what kind of state they want in the end. CO-CHAIR BUNDE observed that the decisions are not personally hard to make. The problem lies in finding the majority of people who agree on a course of action. Number 1543 REPRESENTATIVE ROBINSON asked someone to explain last year's cuts. She wanted to know how much they were and other information. CO-CHAIR BUNDE said the cuts took place two years ago. CURTIS LOMAS, Program Officer, Division of Public Assistance, said he did not come with a detailed analysis to speak to Representative Robinson's question, but he can certainly characterize the cuts for her. The cuts occurred in October 1993 as a result of legislation that was sponsored by Governor Hickel. The legislation went through a lot of debate and the cuts originally proposed were substantially larger. MR. LOMAS said the benefit reduction in AFDC payments was roughly 4 percent. That is the closest he can come to an estimate off the top of his head. The cuts were not the same in every category, but the cuts netted out to approximately a 4 percent decrease. The benefit reductions in APA were roughly on the order of 3.5 percent. Number 1600 CO-CHAIR BUNDE suggested that more specific details and accurate numbers could be provided by Ms. Lomas later. MR. LOMAS said the other piece of that bill was that the statutory automatic Cost of Living Allowance (COLA) increases that had previously been awarded annually became subject to the budgetary discretion of the legislature and have not been awarded since. CO-CHAIR TOOHEY said the reduction came to about $12 to $15 every month. CO-CHAIR BUNDE said he has heard up to $24, but he is sure that depends on the inflation factor. MR. LOMAS said typically, previous cuts amounted to about $27 for an AFDC family of three. If they had no other income, their assistance went down about $27 per month. Number 1645 CO-CHAIR BUNDE asked Mr. Lomas to address the fact that the original version of HB 228 is not in compliance with federal law. Therefore, there is a blank CS in the bill packets. He said the HESS Committee members are not asking Mr. Lomas to support the bill, they are just asking him to speak on the need for a CS. MR. LOMAS said he discussed the problems identified with the committee staff for a few days, and the CS results from those discussions. The staff also asked Mr. Lomas to talk with the drafter in Legislative Legal. Two fundamental changes occurred. The first is that the provision in the original bill on line 10 of page 1, which referred to effective dates has been changed. MR. LOMAS said the original bill language would have had the reductions go into effect on July 1 or the effective date of the legislation, whichever is earlier. Both the Attorney General's office and Legislative Legal opined that is illegal. That is making the law go into effect before the law goes into effect. That provision has been eliminated, and the changes would go into effect as of the effective date of the Act. Number 1705 MR. LOMAS said the other change was on line 12 of page 1 of the original version of the bill. The amount listed there is $451.00. That provision came up against the 1988 federal floor. There is a provision in federal law that requires states to maintain their benefit level to a family without an income at the level in effect as of May 1988 or face denial of approval for a Medicaid state plan. MR. LOMAS said recently, the state of California put benefit cuts into effect that are below that level. California was then required by the federal courts to restore benefits to the previous level. Number 1746 MR. LOMAS said there were some changes to AFDC benefit levels. The changes to one and two affected 1993 and the same piece of legislation that was being previously referred to. Also, Mr. Lomas made some technical changes to the standards to bring Alaska's program in compliance with other federal law requirements. The federal law had been pressuring the agency for years to change the way the standards were structured in two areas. MR. LOMAS said the first area was that of families that included only eligible children, and no eligible adults. Those are normally families in which a child or children are living with a relative who is not a parent. Under those circumstances, the caretaker and adult is not required to be needy in his or her own right. Only the children's needs are covered. MR. LOMAS said for years, Alaska had paid one child in that situation twice as much as two children, and then incremented for each additional child at a much smaller amount. It was the same increment that was used in families which included an adult for each additional child. Number 1795 MR. LOMAS said the federal government had problems with Alaska paying more for the first child than for each additional child. So the change in the standards in 1993 had the increment for the second child in families that had no needy adult the same as the increment for each additional child in other families. In order to not violate the federal floor when making that change, the payment for a family of one needy child increased. This was because the state could not reduce the payment for a family of two children below the amount paid in 1988. MR. LOMAS said as a result, the standard was changed to what can be seen in the original version of the statute--to $452 for one child. The increment that was put in place at that time was $102 for each additional child. This brought the total payment for two children living with a non-needy relative to $554. The federal floor is $550. That is the amount paid for two children in that situation in 1988. In effect, the original version of the bill would bring the payment for two children down to $451 plus $87, which is a total of $538, which is below the 1988 floor. Number 1855 MR. LOMAS continued that in order to bring payment levels down to the minimum allowable under the maintenance of effort provision, which Mr. Lomas understood was the will of the committee, it is necessary to increase the amount of payment for one child to $463 so the $87 increment for the second child does not violate the 1988 floor of $550. MR. LOMAS said that is the shortest way to explain those changes. In effect, this is a problem that occurred back in 1993, and this is a fallout from that. The impact is relatively minor. The overall impact of the reductions in the original version of the bill on the assistance payments budget component was 7.1 percent in total payments. The impact of the CS version is 7.0 percent. Therefore, the practical impact of the changes is relatively minor. MR. LOMAS said these cases that actually would receive an increase of $11 a month, account for 1.5 percent of all the children on AFDC. Number 1950 REPRESENTATIVE BRICE asked what the average benefit is for AFDC and APA recipients. It needs to be made clear that there is a big difference between maximum benefit being discussed here and the average benefit paid out. MR. LOMAS said the average benefit under current law for 1996 is projected at $788. That includes all variations in family size and type. This legislation would bring that down to $733. There will be an average reduction of $55 per month. REPRESENTATIVE BRICE said in Section 1 on page 2, lines 7 or 8, the words "or a single person household that does not consist of a dependent child" are being taken out. This bill is taking these words out of statute. MR. LOMAS said he can see how people might object to that language being in there, and that might lead people to believe that is to cover people who are not parents. Mr. Lomas said the reason the language is in there is because federal law requires that in very specific circumstances the state has to pay AFDC benefits to an individual who does not have a child who is included in the AFDC case. That is if the only child in the home meets all the requirements of being a dependent child for AFDC purposes, but instead receives SSI benefits because the child is disabled. MR. LOMAS continued that in those circumstances, the AFDC grant includes only the needs of the adult caretaker because the child's needs are met through the SSI program. Number 1999 REPRESENTATIVE BRICE said therefore, basically those children are no longer eligible to receive any type of benefit by striking that language. MR. LOMAS said as he reads the remaining language, what is left sets the maximum standard for various categories of individuals. It does not prohibit the department from making payments to men or women whose only child receives SSI assistance. It merely eliminates the specificity of the standard. In practical effect, in order to continue to comply with federal law, Mr. Lomas thinks the state will continue to make payments to those individuals and use the state's regulatory authority to do so. Number 2030 CO-CHAIR BUNDE moved to adopt the CS, but announced it is not the Chair's intention to move the bill today. The bill would be addressed again on Thursday. REPRESENTATIVE ROKEBERG said he has not read the bill in-depth, and he is having trouble identifying where the APA line item is. He asked if the amount was not being specified. CO-CHAIR BUNDE read, "to comply with federal requirements, reduce the maximum state contribution..." REPRESENTATIVE ROKEBERG asked if that was a variable amount of APA. CO-CHAIR TOOHEY moved that CSHB 228 be adopted. CO-CHAIR BUNDE asked that the motion be held for just a minute, and asked Mr. Lomas to address Representative Rokeberg's concerns. Number 2083 MR. LOMAS said the language basically effects a 10 percent reduction in APA payments whether it is the maximum level or someone is receiving benefits below the maximum level because the amount of benefits is calculated by subtracting the income from the maximum level. REPRESENTATIVE ROKEBERG asked if there was a variable of factors present. In an individual case, there are going to be variations. CO-CHAIR BUNDE said there is a motion before the committee to adopt the CS for HB 228. There were no objections and the CS was adopted. He asked for further discussion. Number 2112 REPRESENTATIVE BRICE asked how the need standard in the state is affected by all the discussion about reduction of this benefit and that benefit. There should not be any effect on the need standard. Representative Brice asked about the process necessary to increase the need standard. MR. LOMAS said the need standard is set in regulation. What was done when the level maximums were reduced in 1993, is that the needs standard was maintained at the current level. This was largely because if the needs standard is reduced, there are going to be some people receiving very small grants who lose their eligibility for a payment, and thereby lose their eligibility for Medicaid coverage. MR. LOMAS said the legislature expressed, in 1993, a will to reduce the benefit payment level without causing anyone to lose eligibility. Based on that, the same needs standards were kept in regulation. That applies both to AFDC and APA. TAPE 95-20, SIDE A Number 000 CO-CHAIR BUNDE reminded the HESS Committee members and the audience that the bill was being held until Thursday. REPRESENTATIVE ROKEBERG asked about the bills that are coming forward on the permanent fund dividend and hold harmless issues. He asked if Mr. Nordlund and Mr. Lomas will be involved in testifying on those issues. MR. NORDLUND said those bills affect his division. Some of those bills were actually winding their way through the legislative process before Mr. Nordlund was hired to his current position. Mr. Lomas is the primary testifier on those topics. REPRESENTATIVE ROKEBERG asked for the record if anyone had requested Mr. Lomas provide some sort of impact flow charts that could be readily discernible to legislators to show the effects of the various aspects of the proposed legislation on the general fund. He asked if such charts were being worked on. MR. LOMAS said there has been several requests for such charts. Other bills have held up that work, but that is something his office hopes to have out in the next week or so. Some information has been developed for the Senate Finance Committee. There are additional pieces to be developed that should be available. Number 122 CO-CHAIR BUNDE observed that these bills are in a state of flux, and perhaps addressing them in the Finance Committee might be the best place so Mr. Lomas does not do work that is perhaps not necessary. REPRESENTATIVE ROKEBERG asked if those bills were going to be heard before the HESS Committee. CO-CHAIR BUNDE said those bills are well beyond the HESS Committee. CO-CHAIR TOOHEY said probably, Representative Hanley has already requested such numbers. Number 174 ADJOURNMENT CO-CHAIR BUNDE adjourned the meeting at 3:58 p.m.