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