Legislature(2001 - 2002)
02/20/2001 07:01 PM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 74
"An Act making supplemental and other appropriations; and
providing for an effective date."
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Department of Health and Social Services
Section 5 (a)
Department of Health and Social Services
Energy Assistance Program Budget Review Unit (BRU)
Additional federal funds for Low Income Heating and Energy
Assistance (LIHEAP) grants.
$3,351,300 federal funds
JANET CLARKE, Director, Division of Administrative Services,
Department of Health and Social Services, testified that these
federal funds are a result three unbudgeted releases in December
2000. One release, she explained, came about after an increase in
the block grant by the US Congress as a result of the Balanced
Budget Act. She stated that the other two increases relate to
contingency funds that were released to all 50 states due to the
high costs of fuel.
Ms. Clarke remarked that the entire amount would be distributed as
grants to approximately 8,600 households and that all households
that qualify under the low-income guidelines would receive these
funds.
Section 5 (b)
Department of Health and Social Services
Medicaid BRU
Replace FY 01 funds, which had to be used in July to pay prior
year Medicaid claims to assure continuous payment of claims in
April.
$8,970,100 federal funds
$6,030,000 statutory designated program receipts
Ms. Clarke testified this request is for claims received in June
2000, which the department did not have sufficient authorization to
pay. She noted that the item has been "pushed forward" into FY 01.
Co-Chair Donley asked if the department, "used 2001 funds to pay
off 2000 debt."
Ms. Clarke explained that in the state's accounting system, the
Medicaid program is operated on a "cash-basis". She elaborated that
the department pays bills when they are received rather than the
date of service. She stated that these bills were received in June
2000, and that because the department did not have adequate funds
to pay them, the department delayed payment until July 2001.
Senator Leman wanted to know if any of the payments made were for
services not authorized by the legislature within the last two
years.
Ms Clarke assured that they were not. She stated that the services
are all authorized under the Medicaid statute.
Senator Green asked if the supplemental request arose from an
underestimate of the need for services, the number of patients
served, or increased expenses.
Ms. Clark replied all were a factor and remarked that the
department "severely underestimated" the amount of Medicaid claims
in FY 00. She noted that although the legislature appropriated a
supplemental request during the last legislative session, the cost
of Medicaid services consistently rose above what the department
predicted.
Senator Green commented that $22 million was appropriated the
previous session and, added to the $15 million request before the
Committee, the FY 00 underestimation totals $37 million.
Ms. Clarke stressed that the original appropriation was based on
the lowest possible caseload and expenditure scenario.
Senator Green wanted to know if the increases were a reflection in
the number of people requiring services, if more services were
being provided to a static number of patients, a matter of
increased medical costs, or a combination.
Ms. Clarke replied that it is a combination of an increase in the
number of patients being served and higher medical costs. She noted
the increases in pharmaceutical costs plus the increased
utilization of medical services.
Senator Green asked if a particular state or federal action
accounted for the increase in the number of participants.
BOB LABBE, Director, Division of Medical Assistance, Department of
Health and Social Services, explained that federal requirements
play a part in the increase. He gave prescription drug mandates as
an example where the state has little choices. He also noted the
increasing costs of health care for the disabled along with the
larger elderly caseload. However, he pointed out the legislative
decision to expand coverage to more children under the KidCare
program. He stated that medical costs are going up faster than
anticipated and that the percentage increases are consistent across
the nation.
Senator Green asked how much of the underestimation is attributed
to KidCare costs.
Mr. Labbe responded it would take time to get that information.
Senator Green requested those figures.
Co-Chair Donley asked for an explanation of the $6,030,000
statutory designated program receipts (SDPR). "Where did that
number come from?" he asked.
Ms. Clarke offered a brief explanation of the Pro-share program.
Co-Chair Donley expressed that he was more interested in knowing
why that dollar amount was requested.
Ms. Clarke responded that the $15 million that the department could
not pay in FY 01 is a combination of federal funds and state
matching funds. She explained the $6 million SDPR would be used as
a state match to claim the $8.9 million federal funds, which is a
60/40 percent ratio. She continued that the revenue, or the cash
the department would receive for the SDPR, comes from the Pro-share
program.
Co-Chair Donley again asked if the $6 million figure is an estimate
and if the state already has that amount in SDPRs.
Ms. Clarke referred to testimony given the previous legislative
session where the department stated that the Pro-share receipts it
could generate are governed by the "upper limit calculation." She
reminded that if the department pays out $18 million, $10 million
is returned which could be freed for state match purposes. She said
the department calculated that upper limit in the spring of 2000 to
be $20 million. She relayed that over the previous summer, the
federal government became interested in states' use of the Pro-
share funds and considered shutting down the program. As a result,
she stated that the department recalculated its upper limit as $28
million in July 2000.
Ms. Clark spoke of the overlap between the state and federal fiscal
years. She remarked that it is in the state's best interest to make
an additional Pro-share payment to offset the increased upper limit
calculation during the first quarter of the state's FY 01, which is
the final quarter of the federal fiscal year.
Senator Wilken relayed that his office has been contacted several
times with complaints that the Family Centered Services has been
closed for the remainder of the fiscal year due to lack of funds.
He asked if any of the supplemental appropriation would be used to
reopen the center
Ms. Clarke replied that the facility was impacted by the
department's action the previous summer to immediately pay all
valid Medicaid claims. She admitted that there was a "gap in
payment" to nonprofit agencies such as the Family Centered Services
and as a result of cash-flow problems.
Senator Wilken wanted to know if the facility would be further
affected before the end of FY 01.
Ms. Clarke stated that assistance, including technical training and
support, has been given to the facility to ensure the Medicaid
claims are correct so they could be paid promptly.
Mr. Labbe added that several meetings have been held and a plan was
being devised to maintain the facility's viability. He warned that
without adequate funding through the supplemental budget, there
would continue to be cash-flow problem in the Medicaid program,
which impacts the provider community.
Senator Wilken then asked if the $15 million requested in the
governor's fast track supplemental budget is adequate funding to
avoid future shut downs.
Mr. Labbe stated that the $15 million request only addresses the
Pro-share payment made in July 2000. He stressed that additional
funds were requested in SB 73, the regular supplemental budget
request.
Senator Green did not understand why this request needed to be
included in the fast track supplemental.
Ms. Clarke responded that the department has a cash-flow problem
with the Medicaid program because the department was making larger
Pro-share payments than anticipated.
Senator Green referred to the method under which Pro-share operates
and how the funds are reinvested, and asked if federal funds
replace state funds.
Co-Chair Kelly explained, "We are matching federal money with
federal money."
Senator Green then asked if there is a net use of state funds or if
the federal funds were just shifted.
Ms. Clarke replied that the state funds are needed initially to
make the first payment.
Senator Green wanted to know if the state really needed to expend
funds.
Ms. Clarke answered the state had to make the up-front payment to a
government operated hospital, which would retain ten-percent of
that payment and return 90-percent to the state. She continued that
the 90-percent could then be used as a state match to reimburse the
initial payment, and therefore requiring no general funds.
Senator Green found it difficult to consider this fast track
request, without also considering the regular supplemental request
at the same time. She expressed that the state could not continue
to pay for Medicaid in this manner. She was concerned about the
impact in the future.
Ms. Clarke stressed that the department operates the program in
accordance with all requirements and would continue to do so until
the rules change. She emphasized that eligible participants are
entitled to services.
Senator Green asked if the guidelines were set in federal mandate
or state statute.
Mr. Labbe replied that it is a combination of both and explained
there are mandatory services and mandatory client groups under the
federal Medicaid program and that there are also state options on
services and groups.
Senator Green wanted to know if the state has cost-containment
control only over the state-option portions of the program.
Mr. Labbe mentioned the options including reimbursement levels paid
to providers.
Senator Green asked if the state or the federal government
determines "how you get in the front door", or "who qualifies for
what services".
Mr. Labbe responded that the state chose to participate in the
Medicaid program several years after the federal system was
established. As a result, he said, in order to participate, the
state had to agree to cover certain people and to provide certain
services. He noted that the state added additional services and
groups of people who qualify for the program.
Senator Green then asked if the state has investigated cost
containment options to possibly curtail this "upward spiral".
Mr. Labbe shared that the department has a "fairly aggressive"
utilization management program and he detailed the provider reviews
conducted and software packages utilized. He stressed that Alaska
has one of the better systems in the county for editing incoming
claims from providers. He qualified that there is a large caseload
and general service costs. He spoke of the state statutes and
regulations that govern reimbursement for hospitals and nursing
homes. He opined that the state's reimbursement rates were "not
unreasonable".
Co-Chair Kelly referenced action taken by the legislature and the
department for FY 99 to refrain from funding abortions through the
state. He asked if the funds in question were being used for that
purpose.
Ms. Clarke responded that none of the funds contained in the fast
track supplemental were intended for that purpose.
Co-Chair Kelly then asked if during the exchange of Pro-share funds
with the federal government, the funds are always contained under
the Hyde Amendment or whether at any time they could be used for
public funding of abortion. He wanted to know, "does it ever change
from federal money?"
Ms. Clarke did not know.
Co-Chair Kelly requested the witness provide an answer sometime
during the legislative session.
Ms. Clarke delved into one reason this item was included in the
fast track supplemental. She stated that the US Congress has taken
steps to shut down the Pro-share program, and that the program is
in a transition stage. She pointed out that the Health Care
Financing Administration (HCFA) issued regulations in January 2001
that would severely curtail the Pro-share program. She shared that
the Department of Law advises that if the additional Pro-share
payment were made within 60 days, when the regulations become
effective, the payment would fall under the upper limit contained
in the current guidelines. If payment were delayed, she warned, the
payment would be subject to the updated regulations and therefore
only be eligible for $20 million federal funds.
Department of Revenue
Section 9 (b)
Department of Revenue
Administration and Support BRU
Emergency replacement of air conditioner in computer room
$31,500 general funds
MIKE MAHER, Director, Division of Administrative Services,
Department of Revenue, testified that the current system is over 19
years old and has been experiencing malfunctions. He spoke of
$13,000 in repairs invested in the system and the $3,000 to $4,000
damage caused to computer systems as a result of overheating
malfunctions. He shared that the servicing company has stressed
that the unit has exceeded its usefulness. He listed the permanent
fund program and the Tax Division as important programs that depend
upon the system.
Co-Chair Donley asked if the department had existing funds that
could be used for this purpose.
Mr. Maher responded that the department did not have dedicated
funds and had planned to upgrade the system to try to extend its
life for a couple more years, before the recent troubles arose.
Senator Leman referred to mineral deposits found in the water flow
system and wondered if that could be the cause of some of the
malfunctions.
Mr. Maher was unsure whether the system had a water filter, but
stated that part of the difficulties were with the water flow as
well as the building's booster pump failures, which automatically
cause the system to shut down.
Senator Leman asked if the corrosion of piping was a problem for
the entire building or just this area.
Mr. Maher answered that it was affecting the entire building, which
he stressed is over 30 years old.
Section 10 (a)
State Debt
Appropriate remaining balance of the general obligation bond
redemption fund to the debt retirement fund
$102,200 other funds (source not specified)
Section 10 (b)
State Debt
Additional appropriation needed to meet FY 01 debt service
obligations.
$639,800 general funds
DEVIN MITCHELL, Debt Manager, Treasury Division, Department of
Revenue stressed the need to meet the state's obligations related
to its Certificates of Participation in the School Debt
Reimbursement program. He testified that the reason this item is
included in the fast track supplemental request is because the
payment is due before the regular supplement funding is
appropriated. He warned that if the funds were not provided in a
timely manner, the state would be unable to pay on its obligations.
Mr. Mitchell explained that because two different programs utilize
the debt retirement fund, one being the School Debt Reimbursement
program, which reimburses municipalities for their debt, the state
has issued a large amount of debt in the past several years as a
result of HB 281 and SB 11 from the twenty-first legislative
session. He detailed that the Department of Education and Early
Development must make an appropriation request based on an
estimation of the required reimbursement based on the
municipalities' estimates of their annual debt issuance. He stated
that the Department of Education and Early Development's estimate
is $4 million, but that part of the appropriation appears to have
been accounted twice in the FY 01 budget. He stated that the
department had been able to use funds carried forward from previous
years to address this in the past, but that this would not be
possible in the current year, due to the double accounting of the
funds.
Department of Transportation and Public Facilities
Section 11 (4)
Department of Transportation and Public Facilities
Northern Region Facilities BRU
Deadhorse Combined Facilities project funded from the
Federal Aviation Administration lease
$53,600 federal funds
KURT PARKAN, Deputy Commissioner, Department of Transportation and
Public Facilities, testified that the department anticipated the
Federal Aviation Administration (FAA) funds for the joint use of
the Deadhorse facility for the FAA flight service station. He
stated that the department has a Memorandum of Understanding with
the FAA regarding the 35-year lease of a portion of the state-owned
facility. He added that the FAA pays the maintenance costs of that
building, which is the reason for this appropriation.
Section 11 (3)
Department of Transportation and Public Facilities
Capital BRU
Delong Mountain airport access study
$281,900 federal funds
Mr. Parkan detailed the "earmarked" project from the Alaska
Congressional delegation, which is located on the Chukchi Sea near
Kotzebue and serves as the port for the Red Dog Mine. He spoke of
the difficult access to the mine, noting that the funds would be
used to study the feasibility of constructing an airstrip to
provide access to the mine and surrounding communities. He stressed
the need for the fast track approval due to the impending lapse of
the grant.
Senator Austerman noted the $9.4 million construction estimate and
wanted assurance that there is no match requirement from the state.
Mr. Parkan affirmed that there is no state funding requirement and
listed other projects that also qualified. He stressed that the
department would not conduct the study but rather funnel the funds
to the Alaska Industrial Development and Export Authority (AIDEA).
Senator Wilken wanted to know if the constructed airport would be
restricted to certain users.
Mr. Parkan did not know specifically, but noted that facilities
built with federal funds are required to be publicly accessible.
Senator Wilken understood that the Delong Mountain Road is not
accessible for all users and requested the witness investigate the
matter.
Mr. Parkan agreed to do so.
Senator Wilken then asked who would maintain and operate the
facility once it was constructed.
Mr. Parkan responded that AIDEA is taking full responsibility and
would contract for that service.
Senator Wilken asked if the Red Dog Mine/Cominco would be
responsible.
Mr. Parkan stated he would ask about the relationship between AIDEA
and Cominco and whether the corporation would provide some
reimbursement.
Senator Wilken requested answers to these questions.
Senator Hoffman asked if this project were approved, would it
affect other airport projects contained in the six-year plan?
Mr. Parkan answered that it would not.
Section 11 (1)
Department of Transportation and Public Facilities
Capital BRU
Fairbanks International Airport equipment storage maintenance
facility to be funded with Passenger Facility Charges
$905,000 International Airports Revenue Fund
and
Section 11 (2)
Department of Transportation and Public Facilities
Capital BRU
Fairbanks International Airport safety and maintenance
equipment to be funded with Passenger Facility Charges
$1,065,000 International Airports Revenue Fund
Mr. Parkan explained that the state's international airports had
begun to charge Passenger Facility Charges (PFC) maintenance fees
to passengers after receiving approval from the FAA in October
1999. He shared that the department submitted a request to exempt
those travelers residing in communities not connected by a road
system and the subsequent decision to delay collection of the fees
until this exemption was enacted. He detailed the process of
gaining approval, which was received in April 2000.
Mr. Parkan then addressed the need for the fast track approval
caused by the FAA requirement that the state must expend funds
within two years of the initial approval date of October 1999. He
noted that the department must have a contract in place, and the
equipment purchased before the deadline. He continued that a second
reason for fast tracking the funds is to capture part of the summer
2001 construction season and build an enclosed building before
winter with final work completed during the winter of 2001. He said
that if the project were delayed a year, the cost of the project
would rise due to inflation.
Section 11 (5)
Department of Transportation and Public Facilities
Capital BRU
Copper River Highway work done under the Consent Agreement
$400,000 general funds
Mr. Parkan explained this is the final piece of the consent decree
of the lawsuit pertaining to construction along the highway and
that it would settle the lawsuit and allow construction projects to
continue. He warned that if this payment were not made, the matter
would return to court and all previous progress would be lost.
Senator Hoffman wanted to know the cost of not making this payment.
Mr. Parkan could not anticipate the amount, but noted that the
department's attorney's fees are "extraordinary" even when not
involved in a lawsuit.
Senator Hoffman wanted information from the Department of Law
regarding the consequences if the case were to continue.
Senator Green assumed that some of the Copper River Highway
projects included in the supplemental budget could have been
anticipated and therefore spared from the supplemental or fast
tracked budgets.
Mr. Parkan replied that discussions with the US Corps of Engineers
occurred in the fall of 2000 and that the funds should be
appropriated to capture the summer construction season.
Co-Chair Donley commented, "We're finally trying to build a road
somewhere and this is what happens."
SFC 01 # 19, Side B 07:48 PM
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