Legislature(2017 - 2018)ADAMS ROOM 519
02/22/2018 01:30 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Joint Presentation with the House Resources Committee | |
| HB321 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 286 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 321 | TELECONFERENCED | |
| += | HB 285 | TELECONFERENCED | |
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."
3:08:48 PM
Co-Chair Seaton wanted to start with public testimony on
the supplemental bill.
Co-Chair Seaton OPENED and CLOSED Public Testimony.
3:09:59 PM
AT EASE
3:10:16 PM
RECONVENED
Co-Chair Seaton indicated that no one had signed up to
provide testimony on HB 321. He asked for comments from
committee members.
Representative Thompson was opposed to rushing the
supplemental bill out of committee. He wanted a couple more
days to properly vet the bill. He thought it was necessary
to have further discussion about certain items in the bill.
Co-Chair Seaton asked if Representative Thompson had
certain items he wanted to discuss. He conveyed that only
one issue was brought up. He explained that any of the
items all 4 co-chairs could not agree on as necessary to go
in the fast-track budget were not included. The amount of
$170 million had come down to $49 million. He suggested
discussing the item Representative Wilson had brought up
concerning corrections. Representative Thompson had the
same question as Representative Wilson. He asked for
clarification on the related item.
Co-Chair Seaton recalled that Representative Wilson had a
question that was addressed to the department for feedback.
The department had replied with a letter. Hopefully the
department had been responsive. He asked Representative
Wilson if she wanted to discuss the issue.
Representative Wilson met with DOC and understood the
portion regarding population management. She wanted to put
on the record that the $10 million did not have anything to
do with SB 91. However, it had to do with the controversial
fiscal note associated with SB 91. She clarified that when
Palmer was closed, there was not a reduction in personnel.
Rather, personnel were placed into other institutions.
Historically, halfway house money had been used as an
offset, although the money was reduced by a significant
amount of $8 million. Currently there was no extra cushion
funds to rely on. She did not understand about the medical
costs associated with prisoners. She wanted to better
understand about the growth in the number. She reported
there had been an increase of $10 million in healthcare
costs. She noted there was a supplemental request of $10
million in the current legislation. There was also another
$10 million request for FY 19. She was unsure what drove
the increase. She specifically wanted to know where the
growth was derived. She remarked that $10 million was a
significant amount of money. She was aware that 2-3 people
had been sent out of state because of high medical costs. A
few more prisoners might be sent out-of-state. She was
looking for a breakdown of the population management.
Co-Chair Seaton did not want to get confused, as the
committee was currently dealing with the supplemental for
FY 18. Representative Wilson wanted to ensure that it was
not a one-time deal. Co-Chair Seaton invited the Department
of Corrections to respond.
APRIL WILKERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF CORRECTIONS, asked Representative
Wilson to repeat her question. She noted that Laura Brooks
from the department was also available to provide more
detail on the populations that the department was seeing.
Co-Chair Seaton mentioned a memo from the Department of
Corrections dated, February 21, 2018 specifically
addressing the question. It was a three-page response to
the question.
Representative Wilson asked about the actuals, and about
what the department anticipated spending.
Ms. Wilkerson replied that the total budget for the
physical healthcare component in FY 18 was $30 million. In
FY 17 the department spent just over $43.5 million. She
noted that the department received a supplemental in FY 17
and it made up an additional $3 million through existing
authorization within the Health and Rehabilitation RDU. She
expected a shortfall of $11.7 million. The department
anticipated making up the difference between the
supplemental ask of $10.3 million, the difference of which
would be made up within the existing authority. The
shortfalls were currently within personal services, the
contractual line, and the commodity line. The department
was asking for the same amount to be added to the FY 17
budget because a shortfall of a minimum of $10.3 million
was expected. She thought Laura Brooks could speak to the
actuals.
3:18:36 PM
LAURA BROOKS, DIVISION OPERATIONS MANAGER, HEALTH AND
REHABILITATION SERVICES, DEPARTMENT OF CORRECTIONS (via
teleconference), thought the question was about why the
department's costs had increased. She conveyed that one of
the things that had greatly influenced the department's
budget was the treatment of Hepatitis C in the facilities.
For the first time there was a cure. However, the
medication was incredibly expensive. She reported that when
the department first started treating inmates, the cost for
a 12-week regimen was about $120,000. The amount dropped
down to about $74,000 in the prior year, and it dropped
again in the current year to between $25,000 to $30,000. A
person might think that because the cost of the medication
had dropped, the standard of care would broaden. She
explained that individuals were treated based on the degree
of illness and on the degree of fibrosis versus a 4-tier
system. It used to be the department would treat the most
severe at level 4. However, the standard had changed, and
the department was now treating levels 3 and 4. Therefore,
while the cost of the medication had decreased, the number
of patients that were being treated had increased. In the
current year, the department was expecting to treat about
20 patients with the medication at an unbudgeted cost of
$540,000. In the following year, the department anticipated
that up to 200 inmate patients would be treated, equating
to an unbudgeted cost of $5.4 million. She reiterated that
while the cost of medications treating Hepatitis C had gone
down, the need had risen.
Ms. Brooks highlighted that the overall costs of
pharmaceuticals had risen dramatically. Over the previous 5
years she had seen an increase in medication costs of
almost 60 percent. Although the department had done a
tremendous amount to streamline and reduce the number of
prescriptions written (about 12 percent), there was still a
10 percent increase in the overall cost of pharmaceuticals
impacting the department's budget substantially. As
Representative Wilson indicated, the department never knew
who would walk through the door. The department had had
cancer patients that had run up costs in the hundreds of
thousands of dollars who were pre-trial inmates with very
serious charges. There was no option to send them out of
state, to send them to a community residential center
(CRC), or to enroll them in pretrial electronic monitoring
(EM). The costs had to be paid by the department. Although
Medicaid had been a benefit to the department covering the
stays of inmates who were hospitalized for 24 hours or
more, the largest increase was the fee for service costs.
The department was spending about $800,000 per month on
fees for services to vendors outside of the facility. She
cited examples such as going to an orthopedic specialist, a
day surgery, a colonoscopy, or an eye exam. She also
thought a change in prison population had influenced the
rise in healthcare costs. Inmates were coming to the state
sicker, with untreated medical conditions that were further
complicated by substance abuse like opiate abuse. Opiate
abuse was having a noticeable impact on emergency room
visits. The department had over 840 visits costing anywhere
from $700 to $5,000 per visit, sometimes more.
3:23:33 PM
Representative Wilson asked for expenses to-date in the
areas of personal services, services, and commodities. They
were the areas in which the department was requesting
increases. She was looking at page 3. Ms. Brooks did not
have the FY 18 year-to-date figures on hand. She had last
year's numbers.
Representative Wilson was trying to figure out how much the
department had already spent. Co-Chair Seaton relayed that
the supplemental budget was projecting through the end of
the year. It did not reflect the actuals already incurred
to-date. He suggested having someone from the Legislative
Finance Division come to the testifiers table. He relayed
that the committee was not working with FY 18 actuals.
Representative Wilson suggested that the department already
knew its numbers because it had determined a supplemental
number to request. The department already knew its
population management numbers. She wanted the information
as it pertained to health services. She wondered if the
division had already overspent.
3:26:28 PM
Ms. Wilkerson reported that although she did not have the
actual breakout of numbers, she confirmed that the
department had spent just over $20 million of a $30 million
budget. The division did not have negative appropriations.
There was a difference between the current $11.7 million
shortfall and the difference in the supplemental having
spent just over $20 million of a $30 million budget. The
department did not have negative appropriations presently.
Of the department's personal services, it had spent about
$15 million. Under the contractual line, the department had
spent just under $10.7 million. Under the commodity line
the department was just under the $2 million mark. She
could provide the actual report. She noted that of the
department's medical costs, some of its providers were 6
months to 9 months out. She could not confirm that the
expenditures were through 100 percent of the billings
received to-date. They were through the invoices received
within her office. The department was aware of anticipated
items that made up the anticipated shortfall.
Representative Wilson was just trying to understand where
the money was going.
Co-Chair Seaton added that the supplemental was to get the
state through the end of the year. The figures were not
known. He commented that the figures were projections
except for the amounts already expended. He continued to
remark about the varying numbers.
Representative Pruitt thought the supplemental request
spoke more about the Department of Corrections' management
over the prior year. The department had asked for an
additional $10 million for institutional operations. He
pointed to the department's comments about the budget
reductions being taken in anticipation of a reduction of
the daily prison population of 1257 starting on July 1st.
The daily reduction was around 500 which reflected a 757-
person difference. He also highlighted that the anticipated
savings would not be attainable until the projected
reductions of SB 91 could be achieved. He indicated that
the original number was projected by the department with
the understanding that certain aspects of SB 91 would not
be in place. However, the department was off by 757
individuals. He thought the discrepancy brought the
management of DOC into question. He wondered how the
legislature could trust the accuracy of the department's
information.
Ms. Wilkerson understood Representative Pruitt's concern,
as the department shared his concerns. Within the fiscal
note, the department tried to accurately represent that the
funding reduction was an annual immediate reduction while
the projected population would be achieved over a period of
time. The department knew it was behind the curve. At the
bottom of the fiscal note, the department identified that a
supplemental would be needed if the reductions did not
occur. The department did not see the immediate drop in
population as anticipated.
3:31:46 PM
Representative Pruitt asked why the initial numbers
provided to the legislature were "best case scenario"
numbers and used to plan the budget. He thought that the
department's fiscal note should have reflected more
realistic numbers. He noted that the changes made in SB 54
[Legislation passed in 2017 regarding crimes, sentencing,
and probation] did not go into effect in time to change the
department's numbers. The numbers were affected by not
being able to attain something. He suggested that the
department should have communicated that it could not meet
its goals. Having the full information would have allowed
the legislature to make a better-informed decision on SB 91
[An omnibus crime bill passed by the legislature in 2016]
and for budget planning purposes for the following year.
Ms. Wilkerson replied that the department had been very
hopeful about achieving its intended reductions. Two
factors played a role in the department's circumstance.
First, the inmate population had not reduced as the
department had anticipated due to its difficulties with
community placements. Second, there was a reduction to the
FY 18 budget in the amount of $8.1 million of existing
authority to backfill the institutions. The additional
reduction had burdened the department and left it without
sufficient operational funding.
Representative Pruitt mentioned hearing about less use of
halfway houses and electronic Monitoring. The state had not
seen the usage of halfway houses in the capacity that was
expected to generate savings. He asked about the
commissioner's and leadership's policy decisions and why
things had not shifted. Ms. Wilkerson deferred to the
commissioner of the department.
Representative Wilson had additional questions regarding
the bill. She referred to page 6, line 20 of the work draft
which mentioned $322,000 for paying judgements and
settlements. She asked for more details.
3:35:53 PM
AT EASE
3:36:51 PM
RECONVENED
Co-Chair Seaton relayed there was only one case which was a
Department of Environmental Conservation employment case.
Representative Wilson pointed to Section 7(b) where it
talked about fund capitalization. Funds in the amount of
$30 million were being appropriated from the ACHI fund to
the Community Assistance fund. She thought that, through
legislation, the community assistance fund was being paid
with Power Cost Equalization funds based on a formula
contained in the bill. She wondered why the state would use
health money. She referenced a previous occurrence in which
$55 million of the funds were used and partially repaid.
She thought it would be better to leave the funds in place.
She asked if the money would be paid out or left in its
current fund.
Co-Chair Seaton explained that $30 million was deposited
annually into the community assistance program from the PCE
fund, if available, to allow for the same payout each year.
The problem was due to a gap year in which the governor put
$30 million from PCE funds into the FY 18 budget but
nothing for the FY 19 budget. The legislature would be
placed in the same situation of not having known funds for
the following year. Therefore, in the proposed work draft,
one-time ACHIA money was taken and placed into the
supplemental for FY 18. Intent language was included that
specified that $30 million could be taken from the PCE fund
to fund FY 19. The bill would fulfill the legislative
intent to have $30 million deposited into the fund each
year in order to stabilize the Community Assistance
Program. Rather than trying to cross fiscal years, they
wanted to take the FY 19 budget and utilize the PCE excess
earnings of $30 million in statute for the fiscal year in
which they were preparing the budget. They would take the
one-time money from ACHIA and put it into the $30 million
that was not appropriated for FY 18 in the form of a
supplemental appropriation. The municipalities and
communities would know the amount of money they would
receive annually.
Representative Wilson asked how much money the PCE Fund
made in the current year. She also wondered about how much
was paid out of the PCE fund.
3:40:09 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
answered that it was not the current year, but it was the
previous year. In FY 17 the earnings were about $112
million which more than paid for the cost of the PCE
program - roughly $35 million. It left a substantial amount
for community assistance in the amount of $30 million. The
money was intended to be deposited in FY 19 in order to
know at the beginning of the fiscal year that the FY 19
deposit was covered by FY 17 earnings. As communities
prepared their FY 20 budgets they would know well in
advance that the money would be there. He explained that
the other use of the PCE earnings of $112 million after $30
million was used for community assistance $25 million could
be used towards energy programs. The governor had split the
$25 million between supplemental in FY 19 [and another
year]. The Office of Management and Budget indicated that
there would be a change making the $25 million occur all in
FY 19 just as all of the PCE earnings from FY 17 went to fY
19 community assistance. It was a matter of which fiscal
year the money was assigned. The idea behind the
legislation was to get the community assistance program
back on track using earnings from the second prior year. In
FY 19 the deposit would be based on FY 17 earnings.
Similarly, energy program deposits made in FY 19 would be
based on FY 17 earnings. However, it left a hole for FY 18,
which needed to be filled in the supplemental process. The
governor had proposed using the PCE earnings in FY 18. The
Legislative Finance Division thought the proposal did not
follow the intent of the law passed 2 years prior. He
thought it was a matter of timing and finding fund sources
to fill the shortage in Community Assistance funding.
Representative Wilson asked for the balance in the ACHIA
fund once the $30 million was removed.
3:43:33 PM
Mr. Teal thought it was important to focus on how much
excess was in the fund. He detailed that the state had made
3 deposits of about $60 million each, one of which was for
FY 17. He reported $55 million flowing out in FY 17. Only
$30 million was needed and $25 million was refunded. He
continued that $60 million was deposited in FY 18. He
reiterated that there were 3 deposits; one for FY 16, one
for FY 17, and one for FY 18 through FY 22. The state
obtained a waiver from the federal government for a 5-year
program. The expectation was for the state to receive
federal payments for the reinsurance plan. The amount of
$55 million for FY 18 - FY 22 took up $55 million leaving 3
deposits to the fund and only 2 withdraws. The total amount
of excess funding was about $93 million. The Legislative
Finance Division recommended that the state might want to
spend about $80 million rather than the full amount because
it was uncertain how much the federal government would pay
from one year to the next. He thought it would be better
for there to be more money available 3-4 years from now
rather than finding out additional deposits were necessary.
The bottom line was that there was about $93 million in the
fund to be used for one-time expenditures. Co-Chair Seaton
added a comment about one-time money.
3:46:10 PM
Representative Neuman understood the fast-track
supplemental was being discussed relating to line 34 on the
spreadsheet. He had a question beyond that. He referred to
page 13, line 49 having to do with the open-ended
appropriation for statutory designated program receipts for
the AKLNG fund. The Legislative Finance Division notes
stated that it was open-ended language that would allow the
investments to be deposited into the AKLNG project and
spent without further appropriations.
Co-Chair Seaton interrupted Representative Neuman
indicating that the item was not presently on the table.
Representative Neuman understood and had clarified himself
at the beginning of his question. The way he understood the
language, it conveyed that the administration could enter
into an agreement with Sinopec or China Gas and the
legislature would not have any say in how the money was
spent or appropriated. He asked if he was correct.
Co-Chair Seaton did not want to discuss the budget that was
not on the table currently. The only thing before the
committee was the fast-track supplemental. He reiterated
that he wanted to keep the focus on the fast-track
supplemental.
Representative Wilson referred to page 7, Section 9. She
asked why the word "reduced" was being changed to
"adjusted."
Representative Guttenberg asked if Representative Wilson
was referring to the bill or the spreadsheet.
Representative Wilson responded that she was talking about
the bill. She reiterated her question.
3:49:12 PM
JOAN BROWN, STAFF, REPRESENTATIVE PAUL SEATON, responded
that the change was due to some of the monetary terms which
currently included furlough days. In other words, it was
not just a cash adjustment. The number of furlough days
could be adjusted, resulting in the number going up or
down.
Representative Wilson asked about the ratifications of
certain expenditures on page 9, Section 10. Ms. Brown
responded that generally there were ratifications in the
supplemental every year. Usually they were in the capital
budget bill at the end of session. They were clean-up
transactions to the accounting system. The funds had
already been spent, and there was no additional cost. The
ratifications did not add to the cost of the bill. It was
an accounting clean-up transaction.
Representative Wilson asked why 2010 and 2011 were
included. She asked if something had been missed. Ms. Brown
could not say definitively why there were so many old
transactions. If revenue was expected to be received that
would have cleaned things up, the adjustments could drag
on.
Representative Wilson suggested it could possibly be
federal funds that were expected. In other words, general
fund money was spent in the hope of another type of funding
being received but had not been obtained to-date. Ms. Brown
agreed.
Representative Pruitt wanted to return to the fund source
change regarding community revenue sharing. He referred to
page 6, line 13 of the bill and page 19 of the spreadsheet.
He thought money that was earned in FY 17 was applied to
FY 19. He asked about the earnings in FY 16 and how they
could have been applied in the current year [FY 18]. He
wondered why a draw from the PCE fund was necessary.
Mr. Teal responded that the earnings were only about $8
million or $9 million. The amount was insufficient to pay
for the PCE program. There were no excess earnings
available to make the FY 18 deposit for community
assistance. He continued to explain that with no excess
money, the governor did not ask for a deposit from PCE. He
also did not make a general fund deposit to the community
assistance fund. The legislature did not make a deposit
either. If a deposit was not made before June of the
current year the distribution to communities in FY 19 would
be $20 million rather than $30 million.
3:53:59 PM
Representative Pruitt remarked that there was a policy call
made by not funding community assistance. He wondered why
the governor did not introduce it [an amendment]. He asked
about the initial thought process.
Mr. Teal could not comment on the governor's thought
process or policy decision. He could only confirm that the
appropriation was not included in the budget. It was the
basis for discussions between the chairman's office and the
governor's office. The governor indicated his support for
the community assistance program and wanted money
deposited. However, he did not submit an amendment making
the deposit. If the legislature decided to make the
deposit, it would show an additional $30 million of
spending. He was not sure the legislature was willing to do
that in the prior year, which resulted in the appropriation
being placed in the supplemental bill.
Co-Chair Seaton added that there had been an appropriation
to spend some money. He explained that $30 million went
into the fund and came out as an amount calculated based on
how much money was in the fund. In the prior year, there
was an appropriation offered to add an appropriation
amount, rather than adding to the fund, which would have
brought the amount back up to the level it had been the
previous year.
Representative Pruitt asked if the amount was smaller. He
thought the amount was $8 million. Co-Chair Seaton replied
that it was about $8.3 million. He added that if the money
had been in the fund, only about one-third would have been
spent because it was the third distribution. It was added
to the amount appropriated with a third taken out of the
fund and $8 million added. The legislature did not have to
find $30 million to place in the fund and then remove one-
third of it. The legislature only took what was needed to
make the past payment.
Representative Pruitt did not like appropriating funds
through the supplemental because he thought the
supplemental process was typically overlooked by the
public. Co-Chair Seaton commented that he had brought the
matter up so that the public could understand that the
legislature had not capitalized the fund with $30 million
in the prior year. Instead, the legislature had
supplemented the payment. Currently, the legislature was
doing the capitalization.
3:58:45 PM
AT EASE
4:00:37 PM
RECONVENED
Co-Chair Seaton announced that it was Mr. Teal's birthday
and presented him with a present.
4:02:37 PM
AT EASE
4:04:22 PM
RECONVENED
Vice-Chair Gara MOVED to report CSHB 321(FIN) out of
Committee with individual recommendations.
Representative Wilson OBJECTED.
Representative Kawasaki indicated that it had been a while
since he had seen a fast-track supplemental and understood
the discomfort of some members to pass such legislation
prior to discussing the budget. Historically, it had been
how things were done for several years. He expressed
appreciation for the work that had been done by both bodies
in finding the agreement points on the items in the bill.
He understood there would be a bolder discussion about the
supplementals in general. He noted that the FY 19 budget
discussions were ongoing. He would support moving the bill
from committee.
Representative Pruitt understood wanting to pass an
appropriation bill on things that the legislature agreed
on. However, he was concerned with the use of the term
"Fast-track" as it implied that there would not be the
opportunity to properly vet it and offer amendments. The
movement of the bill at such a quick pace did not allow for
the public to properly weigh in on the policy calls being
made. He did not understand why more time was not being
provided. The appropriation was sizable at $65 million. It
appeared the request was less because of the money received
from the Alaska Comprehensive Health Insurance Association
(ACHIA) program. He reiterated his hesitancy to support the
bill because of the process. He would be opposing the
legislation.
Representative Wilson was concerned with the quickness of
the process. One of her concerns had to do with the
Department of Corrections portion. She had received the
numbers regarding population management. She was aware the
department had a payroll date to meet and would not
otherwise meet it. She mentioned the $10 million
supplemental request from the prior year and another
anticipated. She thought it equated to a significant amount
of money going out without a discussion about what could be
done to save money. She was fine with fast-tracking
anything as long as she could explain the legislature's
actions to her constituents. She would be objecting because
she did not agree with some of the items and because of the
advanced pace of the bill.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Foster,
Seaton
OPPOSED: Wilson, Pruitt, Thompson, Neuman
The MOTION PASSED (7/4).
CSHB 321(FIN) was REPORTED out of committee with four "do
pass" recommendations, three "no recommendation"
recommendations, and four "amend" recommendations.
4:12:45 PM
AT EASE
4:14:05 PM
RECONVENED
Co-Chair Seaton indicated that the subcommittee report and
amendments for the Office of the Governor would be
addressed on the following day's agenda.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Dr.Wenran Jiang information.pdf |
HFIN 2/22/2018 1:30:00 PM |
HFIN Presentation |
| Wenran Jiang Alaska PPT Feb 22 2018.pdf |
HFIN 2/22/2018 1:30:00 PM |
|
| HB 321 DOC Supplemental Response.pdf |
HFIN 2/22/2018 1:30:00 PM |
HB 321 |