Legislature(2015 - 2016)SENATE FINANCE 532
02/24/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB30 | |
| SB46 | |
| SB6 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 6 | TELECONFERENCED | |
| *+ | SB 46 | TELECONFERENCED | |
| += | SB 30 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 46
"An Act relating to the Alaska Municipal Bond Bank
Authority; authorizing the Alaska Municipal Bond Bank
Authority to issue bonds or notes for a regional
health organization; and providing for an effective
date."
9:10:10 AM
Senator Hoffman announced that SB 46 was introduced because
of the number one rating of the Yukon Kuskokwim Health
Corporation in a national federal government outreach
program to improve health care out of 37 participants. The
bill would allow the corporation to increase its size from
a 90,000 square foot hospital adding an additional 130,000
square feet. The addition would more than double the size
of the hospital, which would, over time provide 200 new
permanent positions in the health care field. The
legislation would drastically improve the health care of
the largest Alaska Native population in the state.
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, referred to
the backup materials available to the members and also some
individuals present to answer any questions.
Mr. Grussendorf looked at the Sectional Analysis (copy on
file). He wondered if he should address every new section.
Co-Chair MacKinnon replied that she would like to know the
intent of the sections.
Mr. Grussendorf continued to discuss the Sectional
Analysis.
Section 1. Amends AS 44.85.005 to include legislative
findings relating to health care and nonprofit
regional health organizations.
Mr. Grussendorf shared that page 2, line 6 was stating that
the health care organizations were using the local
municipalities to access the bonds, but it added another
procedure in the process. He looked at line 8, which was
related to the nonprofit regional organizations access to
the bond bank.
Mr. Grussendorf looked at Section 2:
Amends AS 44.85.101(a) to include a policy to assist
regional health organizations.
9:16:19 AM
Senator Olson assumed that all 638 contractors were defined
as the Regional Health Corporation. Mr. Grussendorf agreed
to provide a copy of the definition.
Co-Chair MacKinnon stated that there was a description of a
variety of items. She believed Section 6 of the bill would
the definition of "regional health organization" would be
described in AS 18.28.100(6). She explained that the
definition had a criteria for the Regional Health 4000. She
felt that the definition should have further examination.
Senator Olson surmised that the specific definitions were
not included in the presentation. Mr. Grussendorf replied
in the affirmative.
Senator Olson understood that the legislation opened up the
ability for a 368 contractor that provided health benefits
to the region to access construction bonds. Mr. Grussendorf
replied in the affirmative and deferred to Mr. Winkelman
for more information. He stressed that the application
process still required the due diligence.
Senator Olson surmised that the bill cleared up the
ambiguity as to whether the communities had authority to
apply for the bonds. Mr. Grussendorf responded that the
communities did not currently have the authority to bond,
and the legislation allowed the corporations to access the
bond.
Senator Olson remarked that there were many facilities that
were in need of improvement. He wondered if the legislation
allowed for other 360 contractors to access the bonds. Mr.
Grussendorf replied in the affirmative.
Senator Olson shared that there was a health organization
in his district that was closed because of inadequate
facilities. He wanted to ensure that those organizations
could access the bonds through this legislation. Mr.
Grussendorf responded that he believed that those
organizations could access the bonds.
Senator Dunleavy looked at page 4, line 9, and surmised
that there could be several health organizations that would
request a $250 million bond package. Senator Hoffman
deferred to Mr. Mitchell.
9:22:08 AM
DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK, stated that the intent of the legislation was to
create one $250 million cap for the potential lending
authority.
Senator Dunleavy wondered if the $250 million was total
lending authority for all requests combined or total per
request. Mr. Mitchell responded that the $250 million was
the total lending authority for all requests. He furthered
that, if there was ambiguity, the bill should have an
amendment to ensure that it was a total limit.
Senator Dunleavy requested that the wording of the
legislation may have some ambiguity, so the language may
need to have an amendment.
Co-Chair Kelly wondered if other health care organizations
could apply for the bond, or if the legislation only
applied to the Yukon Kuskokwim Delta. Mr. Mitchel replied
that it was an authorization that would be available for
any organization that qualified within the definition.
Senator Dunleavy remarked that the $250 million was the
cap, and wondered if an organization could apply for the
entire $250 million. Mr. Mitchell responded that an
organization could apply for the entire $250 million.
Senator Dunleavy concluded that the $250 million was the
total available for one entity or twenty entities. Mr.
Mitchell agreed.
Senator Dunleavy looked at page 5, line 4, and queried the
definition of "special fund." Mr. Mitchell replied that it
was language that would allow for a pledge of an enterprise
activity within the overarching organization. He stated
that every application must undergo a credit review
process.
Senator Dunleavy wondered what the types of revenue the
corporations could pledge. Mr. Mitchell replied that they
could pledge other revenues like Medicare, Medicaid,
insurance, or individual payments.
Co-Chair Kelly wondered how the bill would be compensated.
He understood that the bill was compensated through lease
payments. Mr. Grussendorf deferred to Mr. Winkelman.
Senator Olson stated that he had questions for Mr.
Mitchell.
9:27:05 AM
TREY ACTESON, CEO, SOUTHEAST ALASKA POWER AGENCY, testified
in support of amending the legislation. He felt that the
access to the bond bank should also include joint action
agencies. He stated that the Southeast Alaska Power Agency
(SEPA) was a not-for-profit joint action agency that was an
umbrella organization of the municipalities. He stated that
SEPA was formed to serve the wholesale power needs of three
municipalities, including Petersburg, Ketchikan, and
Wrangell.
Senator Olson wondered remarked that the legislation would
provide better health care, and he felt that the amendment
would provide electricity at a cheaper rate. Mr. Acteson
replied that the amendment would allow the agency to borrow
money at a lower rate.
Senator Olson asked if he was incorrect in his summation.
Mr. Acteson misunderstood the question.
Senator Olson stressed that the legislation was intended to
provide construction dollars to health care facilities that
were in need of better facilities. He understood the
amendment as not providing electricity, but rather cheaper
electricity to those that already have electricity. He did
not see the value of a life-health situation within the
amendment. He felt that the amendment would interfere with
the bill's intention. Mr. Acteson replied that the
amendment would bring cheaper power.
Co-Chair Kelly remarked that the cap was $250 million.
Co-Chair MacKinnon commented that there was always a
concern that additions to the bill may not be helpful to
advancing the bill.
Vice-Chair Micciche agreed that allowing the amendment
would fit the bond bank mission, but he wondered if the
objective was met by the SETS fund. He felt that there was
another fit that would be better for SEPA. Mr. Acteson
replied that there were some limitations that did not fit
the needs of SEPA. He felt that the SETS fund was more
expensive. He remarked that access through this legislation
would provide the lowest cost option to serve the municipal
power needs.
9:33:21 AM
Co-Chair Kelly wondered how the agency was different than
other power organizations. Mr. Acteson replied that SEPA
was created to serve projects in the municipal area. He
stated that SEPA was created through state statute, but
felt that there may have been an oversight in the original
transition.
Co-Chair Kelly surmised that SEPA was not listed as an
option.
Vice-Chair Micciche understood that SEPA was not interested
in the $250 million cap, but rather wanted access to the
bond bank. Mr. Acteson agreed.
Senator Olson apologized for his aggressive exception.
Senator Dunleavy wondered if there would be a cap for other
groups.
Co-Chair MacKinnon explained that there would be a cap for
other entities, but that amount had not yet been discussed.
9:36:47 AM
DAN WINKELMAN, PRESIDENT AND CEO, YUKON KUSKOKWIM HEALTH
CORPORATION, (YKHC) testified in support of the
legislation. He stressed that the access to the bond bank
was important for the residents of the Yukon Kuskokwim
Delta for increased permanent high paying jobs and increase
the healthcare services. He stressed that the bill did not
have any impact on the state general fund.
Co-Chair Kelly queried the details of the payment
mechanisms. Mr. Winkelman replied that the payments would
be made through the third party resources: copays, private
insurance, etc. A trust account would be set up, and the
revenue streams would be pledged to the bond bank.
Senator Hoffman remarked that the corporation would
normally access the bond bank through the municipalities.
He wondered how YKHC worked with the other communities to
conclude that this was a better alternative. Mr. Winkelman
replied that his predecessor had worked to the Bethel on
bonding. He remarked that bonding was complicated, and
there were some communities that did not want to bond,
because they would essentially act as a conduit for the
corporation's application.
9:43:16 AM
Senator Olson commented that the mortality rate had
declined drastically in Bethel. He remarked that there were
some plans to make the best health center in the state. Mr.
Winkelman replied that the plan was to renovate the
existing hospital, and build a 130,000 square foot primary
care clinic.
Senator Olson stressed that Bethel should move toward
becoming a medical hub. He wondered how much of the $250
million cap would be needed for the renovations. Mr.
Winkelman replied that the project could was close to the
cap.
Senator Olson queried the plans if there were other
contractors who had expressed interest in the funds. Mr.
Winkelman deferred to Mr. Mitchell, and furthered that as
the payments were made to the bond bank, the money may
become available to other organizations.
Senator Olson asked if there were other 638 contractors
that were qualified under the current listed requirements.
Mr. Winkelman responded that if the large regional
organizations would meet the requirements.
9:49:17 AM
Senator Dunleavy queried the definition of "special fund."
Mr. Winkelman replied that he believed that the municipal
bond bank must have a recapture mechanism. The special fund
would be the third party collections, and the organization
would pledge its revenue stream to the bond bank.
Co-Chair Kelly asked for a definition of a "638
contractor." Mr. Winkelman replied that it referred to
Public Law 638, which was the Indian Self Determination Act
that allowed for the formulation of the native
corporations.
Co-Chair MacKinnon wondered how many participants were 100
percent covered by Indian Health Service. Mr. Winkelman
asked for a question restatement.
Co-Chair MacKinnon asked how much of the revenue stream was
100 percent Medicaid reimbursed dollars from the Indian
Health Service. Mr. Winkelman replied that the collections
for the current year was $70 million, which would be
pledged to the Municipal Bond Bank.
Co-Chair MacKinnon thought that federal dollars could not
be used as a backer for the revenue stream. Mr. Winkelman
agreed, and clarified that the funds would be in a trust,
and the trust would be pledged directly to the bond bank.
He stated that the trust included Medicaid, Medicare,
private insurance, and self pays.
Co-Chair MacKinnon queried how much of the services were
100 percent covered by Medicaid. Mr. Winkelman agreed to
provide that information.
Senator Olson remarked that it would be difficult to find
the exact percentage of those covered by Medicaid.
Co-Chair MacKinnon stressed that the state had never
entered into an agreement with a non-government agency to
use the credit of the state.
9:54:28 AM
Co-Chair Kelly wanted to ensure that the use of Medicaid,
or other funds from the federal government were not counted
multiple times in savings.
Co-Chair MacKinnon understood that there were great health
care needs in Alaska.
Co-Chair Kelly commented that there should be an
understanding that the savings were in a place that the
state could oversee.
Co-Chair MacKinnon kept the public testimony open.
Vice-Chair Micciche wondered who paid the debt if the
borrower defaults. Mr. Mitchell replied that the bond bank
program was structured with a moral obligation debt to the
state. A fund of approximately $50 million in the case of a
possible default.
Vice-Chair Micciche surmised that the state's sequester of
Medicaid and other state payments would protect against
default. He stressed that the state was obligated for
repayment any time there was a default on a bond bank loan.
Mr. Mitchell replied in the affirmative.
9:59:38 AM
Co-Chair MacKinnon wondered what would be required to
increase the authority to add the $250 million for the
corporation's request. Mr. Mitchell responded that it
depended on the debt structure. He stated that the reserve
fund was funded to the maximum tax, so there was an
Internal Revenue Service (IRS) limit on the size of the
reserve and still qualify to issue tax exempt bonds. He
shared that they were at 125 percent of average debt
service. The program was very mature, so the bonds were
issued regularly for 40 years. He remarked that the
outstanding debt declined each year.
Senator Dunleavy queried the list of the three largest
projects that recently had access to the bond bank. Mr.
Mitchell replied that the largest recent project was the
Blue Lake Hydroelectric Project in Sitka. The next highest
project was in the City of Ketchikan Hospital. The third
largest was the current project.
Senator Dunleavy wondered if the corporation was eyeing the
$250 million strictly for the project, or was the money for
any and all health corporation projects. Mr. Mitchell
replied that the amount was available to any and all health
corporation projects. He furthered that the corporation was
eyeing the entire amount.
Senator Dunleavy asked if the corporation wanted the entire
$250 million. Mr. Mitchell replied in the affirmative.
Senator Dunleavy remarked that, if the corporation received
the $250 million, it would be by far the largest project
funded by the bond bank. Mr. Mitchell replied in the
affirmative.
Co-Chair MacKinnon looked at page 4, line 7 of the
legislation, and remarked that the existing statute stated
that the principle amount should not exceed $87 million.
She wondered if that was a cap for an individual project
request, or a cap for the fund. Mr. Mitchell replied that
it was the authorization that was established the prior
year for UA for power and heat projects.
Co-Chair MacKinnon wondered if there was a cap on projects
that were presented to the municipal bond bank. She
remarked that the larger entities probably would not
approach the bank. Mr. Mitchell replied that there was a
$1.5 million limit for municipalities.
10:06:27 AM
Senator Dunleavy felt that the process was backward. He
wondered if part of Mr. Mitchell's role was to evaluate
risk. Mr. Mitchell replied that there was an external
financial advisor to evaluate risk.
Senator Dunleavy queried the concerns for the state
regarding the $250 million bond. Mr. Mitchell replied that
it was a large project. He stated that if the commissioner
of the Department of Health and Social Services (DHSS)
provided information that says that the project was
beneficial to the state, he would move the project further
toward advancement.
Senator Dunleavy wondered if it was possible for the
committee to hear an opinion from DHSS and the risk.
Co-Chair MacKinnon felt that the outlooks from DHSS was
mandatory. She did not know how DHSS would substantiate the
cost savings, because they were anticipated cost savings.
She felt that the conversation should be tied to Medicaid
regarding anticipated health cost savings.
Co-Chair Kelly wondered if there were additional comments.
Mr. Mitchell replied that the statute was intended to stand
over time, rather than a one-time opportunity for the
particular organization.
Vice-Chair Micciche supported the project. He wondered if
there were concerns about continued legislation that had
modifications to the bond bank. Mr. Mitchell responded that
the concern was the reason for the specific limitation in
the statute, which provided an opportunity to consider a
new undertaking for the bond bank. He felt that the state
should limit its credit extension, even on a moral
obligation basis. He felt that the legislation provided a
tie between the state and organization to allow for the
bond possibility.
Vice-Chair Micciche asked if there was a concern that other
entities would desire legislation to access the bond bank.
Mr. Mitchell stated that he was concerned with that
possibility. He stressed that there should be a strong
consideration of the needs of the state when determining
alternative financing potential for the bond bank program.
10:12:22 AM
Senator Olson queried the number of times that the bond
bank needed to access the reserve fund. Mr. Mitchell
replied that the bond bank had never accessed the reserve
fund.
Senator Olson wondered how many other entities met the
qualifications for the loan. Mr. Mitchell replied that he
was not aware of any other entities that would qualify for
this particular loan.
Senator Dunleavy noted that a testifier had already
attempted to amend the bill. He remarked that there may be
a rush to take advantage of the bond bank.
Vice-Chair Micciche remarked that part of the agreement was
that the facilities were owned by a municipality to tax to
pay the debt. He wondered how this situation was different
from the municipality. Mr. Mitchell responded that there
was a service area that had approved a general obligation
on itself. He stated that the larger municipalities that
used the loan for purposes of financing enterprise
activities was beneficial to the bond bank, as there was a
statutory ability to intercept state aid that would
otherwise flow to the municipality.
10:17:28 AM
Vice-Chair Micciche wondered if there was power to tax
based on the greater insurance to the ability pay or lesser
insurance to the ability to pay. Mr. Mitchell responded
that the power to tax was a greater insurance to the
ability to pay, and was a credit enhancement.
Vice-Chair Micciche felt that there would be hesitant to
interrupt a revenue stream on a bond, when considering that
future health services could suffer in the region. Mr.
Mitchell agreed.
Co-Chair MacKinnon wondered why the capital item request
was not included in the fiscal note. Mr. Mitchell replied
that the money would be borrowed, so the reserve fund was
approximately one-third bond funding and two-thirds cash
funding.
Co-Chair MacKinnon wondered if the reserve was two-thirds
bond. Mr. Mitchell clarified that the reserve was two-
thirds cash.
Co-Chair MacKinnon looked at page 2, line 6, and wondered
if there were many municipalities that provided partnership
services with nonprofit organizations to deliver health
care. Mr. Mitchell responded that there were a number of
hospitals that were owned by municipalities and then were
operated by nonprofits. There was only one nonprofit that
owned and operated a health facility, which was Wildflower
Court.
Co-Chair MacKinnon questioned the word "many" versus the
word "some." She wondered who was affected by the
legislation, with the $250 million proposition. Mr.
Mitchell acknowledged the question.
Co-Chair MacKinnon wondered if there should be a
certificate of participation (COP) in the application, or
was there a higher interest rate. Mr. Mitchell replied that
a COP would be an opportunity for the state to operate and
pay for an improvement. The project within the legislation
would use a form of credit enhancement provided by the
state to lower the cost, so the organization could pay for
their own improvement.
10:22:35 AM
Co-Chair MacKinnon looked at page 5, line 9, and wondered
if there should be a limit on the definition for a regional
health organization.
Vice-Chair Micciche commented that he understood the
attempt of the legislation, and supported the concept. He
wanted to ensure that the integrity of the bond bank was
protected.
Senator Hoffman understood that the finances of the concept
must be fully vetted, and remarked that the bond bank had
an outstanding history of vetting proposals. He stressed
that the communities that used the health center span
across an area of land equivalent to the state of
Washington. There were 56 communities that were
predominantly Alaska Native, with the lowest education rate
and highest needs for medical attention. Some of the
boundaries against transportation and communication limited
the access to the health care facilities. He felt that the
legislation provided an opportunity to improve the health
care of those individuals. The participation of the
corporation would be selected to expand a health care
facility to a world class level facility. He furthered that
there would be an increase of 200 new permanent positions
in the hospital. He stressed that the improved health care
would have great benefit, and the economy would be enhanced
by providing the jobs.
10:30:53 AM
Senator Olson felt that the measure was a preventive move
by the corporation, because there were great infant
mortality, drug abuse, and suicide rates in the region of
the state. He commended the organization for this proposal.
Senator Dunleavy requested a presentation on bond concepts
for the state.
SB 46 was HEARD and HELD in committee for further
consideration.
10:32:50 AM
AT EASE
10:32:55 AM
RECONVENED