Legislature(2001 - 2002)
02/27/2001 09:04 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 73
"An Act making supplemental appropriations and making and
amending other appropriations; and providing for an effective
date."
SENATE BILL NO. 74
"An Act making supplemental and other appropriations; and
providing for an effective date."
Co-Chair Donley announced that no amendments would be taken at this
meeting, but the Committee would begin consideration of amendments
to the fast-track supplemental budget the next day.
The following items are included in SB 74 in the sections
indicated.
Department of Military and Veterans Affairs
Section 5
Department of Military and Veterans Affairs
Disaster Relief Fund Budget Request Unit (BRU)
Core services funding not provided in base budget and 50.0
increment for satellite imaging to assist in search and rescue
operations
$680,000 general funds
NICO BUS, Administrative Services Manager, Division of Support
Services, Department of Military and Veterans Affairs and
Department of Natural Resources, testified that the past several
years the Division of Emergency Services has been funded from the
disaster relief fund and that fund source is almost depleted.
Co-Chair Donley noted this supplemental request is an on-going
operating cost.
Mr. Bus affirmed and added that supplemental budget requests for
this division have been submitted for the past several years as
part of the funding process.
Co-Chair Donley asked if this is a replenishment of the disaster
relief fund.
Mr. Bus explained that the appropriation would be deposited into
the disaster relief fund then drawn from that account to pay for
operating staff and imaging expenses.
Co-Chair Donley wanted to know if this request includes funding for
staff in the upcoming fiscal year.
Mr. Bus affirmed and explained that this is the method the
department has been directed to take by the legislature. He
commented that the department would prefer to include this in the
regular operating budget.
Department of Education and Early Development
Section 6(a)
Department of Education and Early Development
Foundation BRU
Use balance in foundation program resulting from October
student count to offset shortfall in pupil transportation.
-$1,913,100 general funds
KAREN REHFELD, Director, Education Support Services, Department of
Education and Early Development, stated this is an adjustment to
the actual school count and the amount school districts spent and
received in federal impact aid.
Section 6(b)
Department of Education and Early Development
Pupil Transportation BRU
Current estimate of projected shortfall for pupil
transportation
$2,111,400 general funds
Ms. Rehfeld testified the department underestimated the amount
necessary to reimburse school districts for pupil transportation
costs already incurred in the current fiscal year.
Co-Chair Donley asked if the $1.913 million is a "moving target"
and if the amount could change.
Ms. Rehfeld replied this is the amount estimated at this date. She
noted that after the March 1 deadline for receipt of federal impact
aid, a more accurate figure would be available.
Co-Chair Donley asked when the updated figure would be known.
Ms. Rehfeld answered the calculations should be completed within a
couple of weeks after the March 1 deadline.
Section 6(c)
Department of Education and Early Development
Child Care Assistance and Licensing BRU
Increase federal Child Care Development Funds
$5,500,000 federal funds
Ms. Rehfeld informed this request is for the Division of Early
Development. She noted that these funds were incorrectly accounted
as excess inter-agency receipt authorization and added that there
is an increase in the amount of federal funds available for the
Child Care Development Funds.
Co-Chair Donley again questioned the reason this item is included
in the supplemental since the funds would not be expended in the
current fiscal year.
Ms. Rehfeld responded that of the $5.5 million, approximately $3.4
million relates to the fund source. She explained that this amount
is reflected as inter-agency receipts because up until this year,
the Department of Health and Social Services was the lead agency
for the Child Care Development Fund and the federal authorization
is included in that agency's budget. She continued that when the
budget transfer of these funds was made in the FY 01 operating
budget to the Department of Education and Early Development, not
enough transfer authorization was given to allow for carry-forwards
from the previous fiscal year as well as grant receipts.
Ms. Rehfeld also noted an additional $2 million federal funds
available to the department for live-change efforts and outreach
activities that could be utilized in the current fiscal year.
Senator Austerman referred to Section 6(b) and asked if the $2.1
million is available as a result of the pupil transportation
shortfall of FY 01.
Ms. Rehfeld affirmed.
Senator Austerman wanted to know if this request is to fund
contracts currently in effect.
Ms. Rehfeld affirmed.
Section 6(d)
Department of Education and Early Development
Special and Supplemental Services BRU
Increase federal Title I and Special Education funds.
$4,700,000 federal funds
Ms. Rehfeld spoke to the significant increases in federal funds
available for programs relating to Title One and special education.
She pointed out these funds are in the form of grants to the school
districts for the current year.
Co-Chair Donley wanted to know how the department determines which
school districts receive the grants.
Ms. Rehfeld spoke to the specific allocations within the federal
grants program that are based on the number of students living in
poverty and the number of students receiving certain public
services. She stated there is a formula used to make determinations
for the allocation of the funds.
Co-Chair Donley asked if the department has any discretion or if
the guidelines are strictly set.
Ms. Rehfeld answered that the formulation guidelines are
established by federal regulations or statute and are
predetermined.
Co-Chair Donley requested a list of the grant recipients.
Department of Natural Resources
Section 7
Department of Natural Resources
Fire Suppression BRU
Fund fixes fire suppression costs that were not in base budget
and variable costs incurred through fall fire season.
$4,768,400 general funds
$5,981,700 federal funds
NICO BUS stated this is a "routine request" and explained that each
year, the legislature funds approximately $3 million to cover
estimated costs for the start of the fire season. After the summer
fire season is completed, he said, the department reports to the
legislature the actual expenditures from July through December and
requests supplemental funds for anticipated expenditures relating
to fire activity in May and June.
Mr. Bus pointed out that the amount of federal funds is high
because the department was able to send many Alaskan firefighters
to other states to assist in their fires. He stated this helped to
offset some of the in-state fixed costs.
Senator Wilken asked for an explanation of the declaration of a
disaster emergency because of insufficient money. He said he
questioned the timing.
Mr. Bus explained that each year the state spends an average of $12
million on fire suppression although the legislature only approves
approximately $3 million in the original operating budget. When the
funds are depleted, he continued, the department must declare a
disaster in order to utilize additional funds to fight the fires.
Senator Wilken asked if this is an annual event.
Mr. Bus responded that it is actually a monthly event as a result
of recent legislation that requires the department to update the
disaster declaration every 30 days.
Senator Wilken asked if a disaster declaration is necessary to
access money unavailable in the normal budget process.
Mr. Bus replied that the statute authorizes the department to
access any available funds once the disaster has been declared. He
noted the declaration becomes the method that allows the department
to continue fighting fires.
Senator Wilken requested a copy of a disaster declaration.
Senator Leman asked how the department accounts for the cost of
fires fought on federal land.
Mr. Bus detailed the state is divided into two zones, northern and
southern. He stated that the state fights all fires in the southern
zone and determines actual land ownership afterwards. If the fire
occurred on federal land, he informed, the state bills the federal
government for reimbursement of the firefighting efforts. He also
noted that if the fire was located on Native-owned land, the United
States Bureau of Indian Affairs reimburses the state.
Senator Leman asked if the current budget shortfall would be
adjusted to account for costs that the federal government would
reimburse.
Mr. Bus assured that the federal funds would be reimbursed and that
most of the costs were incurred by fighting fires in the Lower 48.
Senator Austerman asked if the total firefighting budget is $12
million annually and how much of the total amount is federal funds.
Mr. Bus detailed the initial appropriation of $3.1 million general
funds and $5 million federal funds at the start of the fiscal year.
Senator Austerman asked the total expenditure at the end of the
fiscal year.
Mr. Bus answered that the average federal reimbursement is
approximately $5.5 million for firefighting activities.
Senator Austerman calculated the annual cost to be between $17 and
$18 million.
Senator Wilken created a timeline and recalled that $7 million was
appropriated in the FY 00 supplemental budget to pay the cost of
fighting fires in that fiscal year. He remembered that $3 million
was funded in the FY 01 regular operating budget. On September 22,
2001, he noted, a disaster emergency was declared, which allowed
access to $10,750,000 to cover expenditures for the remainder of FY
01. He wanted to know how the cost to fight fires for the remainder
of the fiscal year was known in September.
Mr. Bus replied that the department is required by statutes to
follow a financial plan, that fixed costs are already identified
and that the remaining fire activity for the calendar year is
estimated. He detailed the process of calculating the federal and
state obligations, the payroll, vendor expenses, etc., to determine
a financial plan. He pointed out that by December, fires are not
expected to occur before April or May of the following year.
Senator Wilken clarified that the supplemental request is not for
the cost of the actual firefighting expenses, but rather an
estimate of those costs. He understood the supplemental is to
reflect the actual cost of firefighting.
Mr. Bus replied that as of January 19, 2001, the department has
expended $5,450,000 and that fixed costs are known for the
remainder of the fiscal year. He stated that spending adjustments
would be made. He detailed the process of ratification conducted at
the end of the fiscal year and referred to Section 19(b) of the
bill.
Section 13
Department of Natural Resources
Recorders Office BRU
Increased costs of Palmer and Fairbanks Recorder's Office
leases, which expire this fiscal year.
$100,000 general funds
Mr. Bus informed that the Palmer Recorder's Office lease has
expired. He stated that the Department of Administration agreed
that the office should be combined with another located in Palmer
and that this has been done. He listed the initial cost of $26,000
for "build outs" and $24,000 for moving costs including utility
connections.
Mr. Bus added there is a similar situation in the Fairbanks office
with the lease expiring in May. He estimated $50,000 would be
expended in that effort.
Section 19(b)
Department of Natural Resources
Fire Suppression BRU
AR 37313-00 Fire Suppression
$4,299,492.91 general funds
Mr. Bus stated this is the final accounting for FY 00 and reflects
the actual amount expended in May and June of 2000.
Senator Austerman returned to Section 13 and wanted to know if the
Department of Administration handles leases for all agencies and if
that department would submit a supplemental request for the cost of
increased leases in facilities across the state.
Mr. Bus responded that normally when Department of Administration
renews a lease, it incurs the cost. In this event, he noted, the
Department of Natural Resources requested a negotiated lease
because new walls, electrical and other improvements were required
and that the Department of Natural Resources is responsible for
these expenses. He explained this is because the costs could not be
calculated into the square footage rate. He pointed out that
because of the negotiated lease, the cost per square foot was
reduced from $1.25 to $1.08.
Section 9(a) and (b)
Various Agencies
Increased Fuel Costs BRU
Increased fuel costs in various agencies for heating,
vehicles, aircraft, ferries, etc. due to higher oil and gas
prices.
$2,123,000 general funds
$ 457,600 International Airports Revenue Funds
Mr. Bus testified this item is to cover increased fuel costs for
the Division of Parks. He listed that $16,000 is needed for
facilities, and $37,000 for park vehicles. He noted the park
rangers is the only department program which additional funds are
requested to cover the increases in fuel costs.
Department of Public Safety
Section 9(a) and (b)
Various Agencies
Increased Fuel Costs BRU
Increased fuel costs in various agencies for heating,
vehicles, aircraft, ferries, etc. due to higher oil and gas
prices.
$2,123,000 general funds
$ 457,600 International Airports Revenue Funds
KEN BISCHOFF, Director, Division of Administrative Services,
Department of Public Safety, spoke of the increased operating costs
for the Division of Fish and Wildlife. He added that fuel costs
have also increased for aircraft operated by the Alaska State
Troopers.
Section 14(a)and(b)
Department of Public Safety
Fire Service Training BRU
Technical fund source change from statutory designated program
receipts to receipt supported services to fully fund a
Fairbanks Fire Service Training positions.
$0.0
Mr. Bischoff explained the advantage of changing the funding source
from fees charged for courses. He characterized the situation as "a
chicken and an egg" because fees could not be collected until the
program is established and the program needs funds to become
established. He detailed the request is to utilize revenue from
building plan review fees to start the program during this fiscal
year.
Section 18
Various Agencies
Miscellaneous Claims and Stale-dated Warrants BRU
Stale-dated warrants and miscellaneous claims.
$ 85,500 general funds
$141,100 federal funds
Mr. Bischoff listed the Department of Public Safety portion of this
item as $11,000 for billings received after the two-year stale date
period for which the department has authorization to pay the
claims.
Section 14(c)
Department of Public Safety
Capital BRU
Change scope of prior Crime Lab capital appropriation to allow
currently needed work.
$0.0
Mr. Bischoff explained this request it for authorization to allow
an existing appropriation to be used as matching funds to receive
$1,250,000 federal funds.
Co-Chair Donley asked if this is a language change to the original
budget to obtain additional federal funds.
Mr. Bischoff affirmed and explained it would reduce the amount of
state funds required to operate the crime lab
[Pause on the record.]
Co-Chair Donley requested the witness further explain this to staff
at a later time.
Senator Green asked if the change of program receipts requested in
Section 14(b) would apply in future years.
Mr. Bischoff replied this is a one-time request to receive the
funds in the current fiscal year.
Department of Revenue
Section 15
Department of Revenue
Municipal Bond Bank Authority BRU
Funding for costs of additional municipal bond sales.
$58,000 Muni Bond Bank Receipts
DEVON MITCHELL, Debt Manager, Treasury Division, and Executive
Director, Alaska Permanent Fund Corporation, Department of Revenue,
detailed the increased activity in the current year. He informed
that the bond bank budget is "demand driven" and is based on the
number of communities that request funding for loans. He noted the
existing allocation of $450,000 has not changed for several years.
Department of Law
Section 19(a)(7)
Department of Law
AR 13907-00 AHFC Outside Counsel
$340.83 federal funds
KATHRYN DAUGHHETEE, Director, Division of Administrative Services,
Department of Law, explained that this is an old reimbursable
services agreement (RSA) that the department is unable to collect
the revenue. She stated that the department had a contract for
outside council on behalf of the Alaska Housing Finance Corporation
(AHFC) dating from FY 97. She explained that the file was closed
and discarded and the department was unable to produce a bill for
the $340.83 for expenditures made by the department. She noted the
total amount of the contract was $300,000 and that this items is
minor.
Department of Labor and Workforce Development
Section 11
Department of Labor and Workforce Development
Workers' Compensation/Second Injury BRU
Increase Second Injury Fund authorization for unanticipated
increases in claim sizes and expansion of payouts resulting
from recent court decisions.
$325,700 Second Injury Fund
REMOND HENDERSON, Director, Division of Administrative Services,
Department of Labor and Workforce Development, testified that the
department is required to make some lump-some payments and needs
authorization from the legislature to do so.
Section 19(a)(2)
Department of Labor and Workforce Development (for former
Department of Community and Regional Affairs)
C&RA/1 Stop BRU
AR 52901-99 1-Stop/AJCN Staff Sup
$249.68 general funds
Mr. Henderson stated this item was "inherited" from the former
Department of Community and Regional Affairs. He explained it as a
correction of an over-receipt and that the Department of Labor and
Workforce Development needs authorization to receive the additional
federal funds.
Department of Law (cont.)
Section 10
Judgments and Claims
Law BRU
Judgments and claims.
$478,700 general funds
Co-Chair Donley stated that members could pose questions on
particular items.
Item #1: Stephen H. Williams Planned Parenthood of
Alaska, et al. vs. State of Alaska
Description: Unconstitutionality of statute limiting
partial birth abortions-Superior Court Award.
Date: 4/15/98
Award: $81,588.00 plus $27,507.45 interest as of 2/2/01,
totaling $109,095.45
BARBARA RITCHIE, Deputy Attorney General, Civil Division,
Department of Law, testified that the Alaska superior court awarded
the plaintiff attorney fees. She noted that the Criminal Division
of the department handled this case for the state. She stated this
case related to the constitutionality of a partial-birth abortion
statute passed by the legislature. She informed that the court
found the statute violates the Alaska Right to Privacy and Right to
Due Process and the state appealed this ruling to the Alaska
Supreme Court. The appeal was dismissed, she said, after the United
States Supreme Court issued a decision in a case involving almost
identical statutes in the State of Nebraska, which found the
Nebraska statute unconstitutional under the federal constitution.
Co-Chair Donley asked if the fees followed the standard guidelines
provided under Civil Rule 82, or if they are higher.
Ms. Ritchie believed that because this case involved public
interest litigants, the award qualified for reimbursement of full
reasonable attorneys fees.
Co-Chair Donley asked for comparison of the amount that would have
been awarded under Civil Rule 82 and the amount awarded in this
case and other public interest litigant cases.
Ms. Ritchie stated she would provide details to the Committee.
Senator Wilken asked why the interest is so high in this first case
compared to the other judgments in the budget request.
Ms. Ritchie explained the interest rate is calculated from the date
of the award in April 1998. She noted the judgment is not presented
to the legislature until the case is complete and meanwhile,
interest is accruing on the original judgment.
Senator Leman remembered attorney rates of $275 per hour paid for
judgments the previous fiscal year, which he thought was too high.
Ms. Ritchie responded that the hourly rate of appellate work is
$195 per hour, which is what was awarded in this case. She stated
the rate for work done in the superior court ranges from $110 and
$180 per hour. She said the reason the rates vary is because
Planned Parenthood had more than one attorney working on the case.
She assured these rates are within the normal range in Alaska.
Co-Chair Donley asked if any of the remaining cases involve
settlements for fees other than attorney fees.
Item #7: Overly vs. State of Alaska
Description: Settlement in whistleblower case
Date: 9/12/00
Award: $55,000, with no interest accrued as of 2/2/01
Ms. Ritchie explained this is a recommended settlement in an
employment case. She noted that part of the agreement provides that
no interest is paid. She detailed the case brought by Lieutenant
Colonial Overly of the Alaska National Guard, who allegedly
suffered discrimination and retaliation after whistle blowing. She
explained that this case is "fact specific" and that it depends
upon "who said what to whom" in that one party considered actions
to be insubordinate while another party did not.
SFC 01 # 26, Side B 09:50 AM
Ms. Ritchie told the Committee that management in this case took
disciplinary action against the employee accused of causing the
retaliation, and that this action was reviewed beforehand by their
attorneys as well as attorneys in Washington D.C.
Ms. Ritchie noted the whistle blowing involved alleged misuse of
government assets and hiring practices. She informed that this case
was settled and therefore, it remains undetermined whether the
charges meet the criteria set for whistle blowing.
Ms. Ritchie relayed that the Inspectors General from the military
evaluated the case and concluded the plaintiff had suffered "some
measure" of retaliation. She spoke of a concern that exposure of
the issue "could be significant. She also noted the plaintiff is
still employed by the Alaska National Guard and that the state
could get a better settlement figure in this situation then if the
employee discharged from the service and filed a claim on those
grounds.
Senator Hoffman asked what actions the department took to correct
the misconduct of the employee causing the retaliation.
Ms. Ritchie replied this was a situation where management thought
it took appropriate steps with regard to the employee. She shared
that the Department of Law attorney who worked on the case issued a
memorandum stating that further action should not be taken because
of the risk of a lawsuit brought by this employee.
Co-Chair Donley commented that the advice the Alaska National Guard
received from their attorneys was unacceptable because it would
cost the state $55,000.
Ms. Ritchie responded that the National Guard has in-house council
that does not work for the Department of Law. She pointed out these
attorneys do not litigate cases, and the Department of Law became
involved with the lawsuit was filed.
Co-Chair Donley questioned the legal advice or the actions taken by
the National Guard in this instance.
Ms. Ritchie reiterated there was a sequence of events that occurred
in this situation. She detailed the process of the plaintiff
bringing a complaint before the Air Force Board and ultimately
deciding to file a lawsuit.
Co-Chair Donley requested the Alaska National Guard be available at
next hearing to explain the case further. He stressed that the
departments involved in these claims should be addressing the
Committee rather than just the Department of Law.
Ms. Ritchie said she would make the request. She cautioned that an
executive session could be required since the case is still
pending.
Co-Chair Donley agreed.
Item #9: Northern Alaska Environmental Center and Sierra
Club NAEC/Sierra Club vs. State of Alaska
Description: Challenge to the Department of Natural
Resources' right of way permitting process for an
electric transmission line-Superior Court award
Date: 10/19/00
Award: $57,250.41, plus $3,187.20 interest as of 2/2/01,
totaling $60,437.61
Senator Hoffman noted that no changes in statutes, regulations or
policy are recommended. He pointed out that the matter is therefore
still open for liability.
Co-Chair Donley agreed.
Ms. Ritchie stressed that a whistle blower statute is in place and
that the department does not consider this statute to be flawed.
She cautioned that it is difficult to legislate how to evaluate
people's motives.
Co-Chair Donley commented that a factual case could be built that
proves an employer's action was not taken for improper motives,
such as retaliation against a whistle blower.
Ms. Ritchie replied that she would further study the matter.
Item #11: Tara Logsdon, Golter and Logdson Bennett vs.
State of Alaska
Description: Modification of child support in a "switched
custody"
Date: 7/28/00 and 8/24/00
Award: $1,103.39, plus $80.88 interest as of 2/2/01,
totaling $1,184.27
Ms. Ritchie stated this item relates to a standard $1,000 attorney
fees and court costs awarded to a plaintiff who prevails in the
appeals process.
Item #14: Alaska State Employees Association
(ASEA)/AFSCME Local 52 vs. State of Alaska
Description: Whether certain firefighters are required to
be members of the Alaska Air National Guard
Date: 11/17/00
Award: $4,813.00, plus $237.36 interest as of 2/2/01,
totaling $5,050.35
Co-Chair Donley noted this claim is for a small amount.
Department of Transportation and Public Facilities
Section 9(a) and (b)
Various Agencies
Increased Fuel Costs BRU
Increased fuel costs in various agencies for heating,
vehicles, aircraft, ferries, etc. due to higher oil and gas
prices.
$2,123,000 general funds
$ 457,600 International Airports Revenue Funds
KURT PARKAN, Deputy Commissioner, Department of Transportation and
Public Facilities, testified the department's portion of this
request amounts to $800,000 general funds and $457,600
International Airports Revenue Funds to apply to the three regions.
He stated the funds would cover costs for maintenance and
operations of state facilities as well as the Marine Highway System
(MHS).
Co-Chair Donley asked if the cost increases have been determined
using the actual fuel prices.
Mr. Parkan answered this has been done. As an example, he stated
the department estimated a fuel cost of $1.03 per gallon to operate
the MHS. He said that instead, the department paid almost $1.18 per
gallon for the first six months of the fiscal year. He noted that
in the Northern and Central Regions, the fuel costs have been
approximately 58-60% higher then projected.
Section 17(a)
Department of Transportation and Public Facilities
Central Region Facilities BRU
Retrofit or replace fuel day tanks in Central Region to avoid
Court Plaza-type fuel spills.
$34,000 general funds
and
Section 17(b)
Department of Transportation and Public Facilities
Northern Region Facilities BRU
Retrofit or replace fuel day tanks in Central Region to avoid
Court Plaza-type fuel spills.
$236,000 general funds
Mr. Parkan explained that after the oil spill in the Court Plaza
Building in Juneau, the department surveyed the day tank systems in
state-owned facilities in the Northern and Central Regions. He
relayed that tanks with similar faulty switches were identified in
several facilities. He said it was determined these should be
addressed before another spill occurred. He also noted that there
was another spill in a building in the Northern Region. He spoke of
the need for better monitoring systems on the tank switches.
Co-Chair Donley asked if the department considered using the 470
Fund to cover the cost of these upgrades.
Mr. Parkan said it had not.
Co-Chair Donley requested this be done.
Senator Hoffman asked if the survey was done on smaller buildings.
Mr. Parkan affirmed and listed facilities in Quartz Creek, Kodiak,
Dutch Harbor, and Bethel in the Central Region, and Shishmaref,
Saint Mary's and facilities located along the Railbelt in the
Northern Region. He noted that most of the facilities identified
are located in rural areas.
Section 17(c)
Department of Transportation and Public Facilities
Northern Region Facilities BRU
Operating costs for the Harborview Development Center.
$93,000 general funds
Mr. Parkan stated this item reflects costs incurred in past year,
including fuel increases not included in Section 9. He told of
preparations in converting the facility to separate the hospital
portion from the unused state-portion. He detailed the discovery of
asbestos, and necessary roof repairs, an emergency generator and a
fire alarm system that were required by the state fire marshal. He
pointed out that the department has been "handed the
responsibility" of the Harborview facility and has had to spend
funds from the department's maintenance budget to address the
aforementioned problems.
Senator Ward understood adequate funds were allocated in the
regular budget to make Harborview self-sufficient with the goal of
either closing the state-owned portion of the facility completely
or finding a different owner.
Mr. Parkan agreed and stressed that the intent is to dispose of the
facility with the hospital section operated by the City of Valdez.
He described how the original $235,000 appropriation has been used
for utilities and some of the repairs.
Senator Ward requested a blueprint of the existing facility in its
current layout. He referred to one he saw two years prior and
wanted to know how much of the facility remains unoccupied.
Mr. Parkan replied he would provide a blueprint and gave verbal
description of the hex portion of the facility that had been used
by the Department of Health and Social Services for developmentally
disabled and the portion used as a hospital, with a corridor
connecting the two. He noted the kitchen and dining room areas are
no longer needed.
Senator Ward questioned why the state continues to spend public
money for upkeep of an empty building while other buildings are
under funded.
Mr. Parkan responded that the department would not disagree with
that point.
Co-Chair Donley asked the consequences of not funding this request.
Mr. Parkan replied the funds would have to be taken from elsewhere
in the department's budget.
Co-Chair Donley hoped the department would not do that. He
preferred the department "give some warning" to the Legislative
Budget and Audit Committee or the Legislative Council if
overspending for a specific function is necessary.
Mr. Parkan agreed and noted the matter had been discussed with the
Alaska Representative of the district in which the facility is
located.
Department of Health and Social Services
Section 8(a)
Department of Health and Social Services
Medicaid BRU
Medicaid caseload growth of 7% and higher average cost per
month, particularly for hospital and pharmacy costs.
$ 9,124,700 general funds
$50,642,700 federal funds
$11,412,900 Statutory Designated Program Receipts
JANET CLARKE, Director, Division of Administrative Services,
Department of Health and Social Services, referenced wall charts
prepared to show some of the factors impacting the cost of the
Medicaid program. She instructed how the program is divided into
four groups: children, adults, disabled and elderly.
BOB LABBE, Director, Division of Medical Assistance, Department of
Health and Social Services, addressed the first group, children,
referring to a chart showing the increase in the number of eligible
participants due to expansions in the program. He noted it is
expected the growth would level out.
Senator Ward asked about the action that caused the large increase
in the cost of that action.
Mr. Labbe replied the action followed federal legislation that
created child health insurance program block grants to the states
to increase the eligibility from 130 percent of the poverty level
to 200 percent. He noted more applications were received as a
result of this change that was implemented in March 1999.
Senator Ward asked the actual cost of this increase.
Ms. Clarke responded that she would have to calculate the exact
amount. She assured that state receives an enhanced match rate of
72 percent in federal funding to address the increased
participation.
Senator Ward estimated the amount to be in the millions of dollars.
He voiced concern about the impact on the state's budget once the
federal funds are discontinued. He opined that returning to the 130
percent poverty level qualification is one option.
Mr. Labbe explained that since the state receives federal funding
at the higher match rate because of the percentage of poverty level
increase, that level could not be reduced. He also pointed out
that Alaska receives additional federal funds resulting from other
states not expending the block grants allocated to them. He did not
anticipate these grants would go away.
Senator Ward asked if the number of participants increased from
35,000 to 55,000 because of the change to the qualifying poverty
level percentage.
Mr. Labbe replied the annual number of children qualifying under
the new criteria is from 15,000 to 16,000 more then would have been
covered under the old rules. He noted outreach efforts that are a
part of the new program also accounts for some of the increase. He
spoke of marketing this program called Denali KidCare and the
streamlined application process that makes enrollment easier. He
stated that this process has also resulted in participation of
children who qualified under the previous percentage.
Senator Ward asked the number of new participants that would have
qualified for the program at the 130 percent poverty level
criteria.
Mr. Labbe answered that about half of the new participants would
have qualified under the previous rules.
Co-Chair Kelly asked how the department predicted that the growth
rate would even out.
Mr. Labbe recounted a previous expansion to the Medicaid program
implemented in the early 1990s when the qualification was raised
from 70 percent of the poverty level to 133 percent. He cited the
increase in participation for the first three years after
implementation after which the growth rate leveled off. He
ascertained this was due to market saturation.
Co-Chair Kelly spoke to earlier legislation that proposed to reduce
the qualification level to 130 percent, when it was discovered that
the level could be reduced no further than 158 percent of the
poverty level. He asked the reason for this.
Mr. Labbe replied the level could be reduced to 133 percent for
children up to age six and 100 percent for children six years and
older.
Co-Chair Kelly understood poverty levels for Alaska are calculated
with an additional 25 percent of the national average.
Mr. Labbe affirmed and noted this was a choice made through state
statute.
Mr. Labbe stressed that children are the least expensive clients
the program serves. He cited $2,000 to $2,500 a year is spent for
the average child versus $13,000 to $15,000 per year spent for a
disabled person.
Senator Wilken requested additional information about the expected
growth rates. He also wanted to know if there is any indication
that Denali KidCare is replacing other insurance.
Mr. Labbe replied there is no evidence showing this. He assured
that existing insurance coverage disqualifies a child from the
Denali KidCare. He further explained that a child is not eligible
for the program for a period of one year after discontinuation of
any insurance. He noted the department is already seeing a slowing
in the growth of the number of new participates in this program.
Senator Leman reminded how the legislature was initially "sold" on
the poverty level percentage increase. He remembered that the
legislature was warned that not participating in the expansion
would appear to the U.S. Congress to be a "bad faith effort". He
asked if the state has actually benefited from the lower general
fund match requirement, given the "incredible" increase in
participation.
Mr. Labbe was unsure and said he would have to research the matter.
He remembered that the match rate increase from 50 percent to 60
percent was part of the arrangement. He noted that the state saved
approximately $30 million on the first year this program was
implemented.
Senator Leman requested the information. He stated, "I think I
probably speak for several others-this growth is troubling
especially when you look at the costs associated with it."
Co-Chair Kelly noted the income level is higher in Alaska than in
the rest of the country.
Mr. Labbe agreed and detailed how the federal poverty level is
adjusted for Hawaii and Alaska. He stated that the poverty level is
Alaska is set at 125 percent of that for states in the Lower 48.
Senator Green shared that she has seen literature marketing the
Denali KidCare program at the U.S. Post Office and other public
government facilities and asked the cost of this outreach effort.
She commented that she had not predicted that this program would be
secondary to any other insurance coverage. She was unable to locate
any statements to show that Denali KidCare was designed to serve
children who have no other insurance. She asked if this were a
federal policy.
Mr. Labbe spoke to the different levels of eligibility for the
Denali KidCare program based on age and income in relation to the
poverty level. He stated that a child with insurance and an income
above 150 percent of the poverty level would not qualify, while a
child living below 150 percent would qualify for the Medicaid
program if they already have insurance. Those children with no
insurance and living below 150 percent of the poverty level, he
said, would be included in the block grant and the state would
receive a higher match percentage for funds spent for this group.
Mr. Labbe shared that the original intent was a premium system or
other form of cost sharing system for those participants living
above the 150 percent poverty level. However, he informed that the
federal government would not allow this method. He pointed out that
the regular Medicaid program does not consider existing insurance
coverage as a factor in participation.
Senator Green asked about participants in the Medicaid program that
were transferred to the Denali KidCare program to allow the state
to receive a higher percentage of federal funds.
Mr. Labbe responded that this was not allowed and that children
eligible for Medicaid could not be placed in the Denali KidCare
program instead. He qualified there are many complicated rules
governing the program and offered to detail them further.
Co-Chair Kelly commented that if the income requirement were
raised, children who had qualified for Medicaid would instead
qualify for Denali KidCare and the state could receive a higher
match rate. He opined that there is more incentive to serve those
with higher incomes and a less immediate need then those with
possibly a greater need. He assured he does not blame the
department for this since the federal government established these
rules.
Mr. Labbe agreed and noted the intent of the federal requirements
is to prevent states from serving Medicaid eligible participants
under the new program and subsequently collecting federal funds
based on the higher match rate.
Senator Green asserted that some other states are able to charge
participants for a portion of the cost and asked why this could not
be done in Alaska.
Mr. Labbe answered that because the block grant program is a part
of Medicaid, the Medicaid rules must be complied with.
SFC 01 # 27, Side A 10:37 AM
Mr. Labbe continued that some states have been able to implement a
form of cost sharing using state funds other then Medicaid matching
funds. He pointed out that other states have done extensive
demonstration projects working with Medicaid that expand
eligibility, and he described these. He qualified that these
projects have to show they are "budget neutral" for the federal
government in that the federal cost does not increase. He stressed
that he worked personally with representatives of the federal
office to try to devise a method for cost sharing and learned that
without federal statutory changes, this was not allowable.
Mr. Labbe then addressed the adult group of Medicaid participants.
He described these participants as parents of families who receive
temporary assistance as well as pregnant women. He noted a downward
trend in the number of these participants due to the welfare reform
efforts and the subsequent increase in the number of people going
off of welfare. He pointed out these participants are eligible to
continue receiving Medicaid benefits for 12 months after
discontinuing welfare if they have employment. He stressed that the
decreasing trend would level off as welfare reform is concluded.
Mr. Labbe next referenced a wall chart indicating the growth trends
of the number of elderly Medicaid participants. He noted that
although there are fewer participants in this group, the trend
continues to rise, as there are more seniors in the population and
more that more would access this program over time. He pointed out
that these clients are among the most expensive to serve with an
average cost of $10,000 per year. He stated that these participants
typically have Medicare as primary insurance, which covers
hospitals and physician expenses but does not include long-term
care or prescription drugs. He also informed that the state is
required to pay the Medicare premium for these participants, which
equals an additional $6 to $7 million each year.
Co-Chair Kelly asked what year would have a sharp incline in the
number of these participants with the aging of baby boom
generation.
Mr. Labbe could not give an exact answer, citing income
requirements as one reason. He explained that people tend to have
higher incomes at the time of their retirement. As people age
further, he said, nursing home care is more often necessary. He
also noted the phase-out of the Longevity Bonus Program would also
result in an increase in the number of Medicaid participants.
Mr. Labbe next told of the disabled Medicaid participants,
referencing another wall chart. He noted this category of
participants includes both children and adults. He stressed that
the program incurs the greatest cost in caring for this group of
participants. He informed that while many of these participants
qualify and receive Medicare benefits, many others do not. He
described the continual upward growth of the number of Medicaid
participants in this group and the expectation that this would not
change. He compared the increasing costs incurred by participants
in this group.
Co-Chair Kelly chaired the remainder of the meeting.
Ms. Clarke detailed the specifics influencing the cost increases,
citing another wall chart that shows the number of checks issued
each week. She examined the "check writes" of FY 00 and FY 01, to
date, indicating that issuances exceeded $10 million six times in
FY 00 compared to 14 times in the first half of FY 01. She assured
that the department makes every effort to correctly estimate
upcoming expenses. However, she stated that $22 million
supplemental funds were needed for FY 00 and that the baseline was
not adjusted when making projections for FY 01.
Co-Chair Kelly wanted to know the amount requested for these
expenses in the regular operating budget versus the amount the
legislature appropriated.
Ms. Clarke replied that the legislature appropriated the full
amount requested but that that figure was based on the lowest case
scenario.
Co-Chair Kelly asked if the governor's budget request historically
used a low case scenario.
Ms. Clarke replied that this had not been necessary in the past
because of the amount of federal funds received except during the
early 1990s when the program had a significant increase.
Ms. Clarke continued explaining the supplemental request is a
combination of the funding in the original budget based on a low
case scenario, costs that went above the projections and the
continuing increase of weekly expenditures.
Senator Green requested additional information about Planned
Parenthood et al versus the State of Alaska relating to Medicaid
funding for abortion services. She stated that the court ordered
the department to fund these services and gave it permission to
reallocate funds to do so. She asked where this money was
originally appropriated.
Ms. Clarke offered for the attorney who argued this case on behalf
of the state to speak to the Committee about the legal
technicalities. She summarized that the court ruled that the funds
were to be taken from within the Medicaid program.
Co-Chair Kelly asked if general funds directed by the legislature
to be used as matching funds to receive federal funds, were used to
cover the abortion services expenses.
Ms. Clarke affirmed.
Co-Chair Kelly gave a history of the situation saying the
legislature attempted to remove public funding of abortions from
budgets because abortion is a divisive issue. However, he stated,
the court ruled this was not permissible under the former General
Relief Medical program. He informed that the judge in this case
stipulated that any time public funds are spent for other pregnancy
related services, money must also be available for abortion
services. In response, he said, the legislature created a new
program "following the court's directive" using funds that are not
for pregnancy related services. He continued that as a result of
this, the court held the commissioner held in contempt of court for
following the legislature's directive. He asserted this is a
separation of powers issue independent of the pro-life/pro-choice
arguments. He said this is because the judge ruled that the
legislative power to appropriate money is no longer valid.
Ms. Clarke pointed out that the judge never actually found the
commissioner in contempt of court but instead ordered the
department to pay for the abortion services. She stated that the
rest of Co-Chair Kelly's statement is accurate.
Co-Chair Kelly understood the department is uncomfortable complying
with the judge's order because of the separation of powers issue.
Ms. Clarke agreed and told of the efforts undertaken in support of
the legislature's action. She remarked that although the department
does not necessarily agree with the legislative decision, the
department "believed" it was carrying out the legislative
directive.
Co-Chair Kelly requested the attorney address the issue before the
Committee. Co-Chair Kelly opined, "Judge Sen Tan is just one step
away from sitting at the head of this table and appropriating money
for the legislature because he has completely crossed the
separation of powers." He warned, "I think we're going to have a
big debate over this if we don't find a way to cure it." He hoped
the department would assist the legislature in this effort.
Senator Green spoke to her frustration that the state should be
able to impose similar restrictions as the federal government does
in prohibiting federal Medicaid funds to be used to pay for certain
abortion services under the Hyde Amendment. She stressed that
general funds allocated to be used, as matching funds for federal
Medicaid funding, should not be reallocated.
Ms. Clarke noted this was one of the arguments the department made
to the court.
Ms. Clarke referenced another wall chart that showed the amount
paid out to date for abortion services and the projected amount
needed for the remainder of the fiscal year. She listed the total
amount as $217,300.
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