Legislature(2001 - 2002)
03/04/2002 09:10 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
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SENATE BILL NO. 340
"An Act relating to treatment of permanent fund dividends for
purposes of determining eligibility for certain benefits; and
providing for an effective date."
SENATOR RANDY PHILLIPS, sponsor, testified that the hold harmless
clause has been a "spur under the saddle" for some of his
constituents. He noted a predicted increase of $37 million over FY
02 Medicaid expenditures and stated this bill attempts to
"alleviate some of that burden." He explained this bill eliminates
the hold harmless provision for all but Social Security Insurance
(SSI) and Adult Public Assistance (APA) recipients. The remaining
recipients of public assistance would decide whether to receive an
Alaska permanent fund dividend or public assistance payments.
Senator Phillips noted this bill would generate approximately $6
million, which he pointed out would offset the state's revenue
shortfall.
TAMARA COOK, Director, Division of Legal and Research Services,
Legislative Affairs Agency, testified in Juneau that all Alaskans
qualify for public assistance, although some programs are based on
need. She stated that current statute provides that a person
receiving a permanent fund dividend is not disqualified from also
receiving public assistance benefits in the event the dividend
increases the person's income above that allowed for the program.
She noted statute directs state agencies to disregard dividend
income when calculating eligibility for state-operated programs.
She said in cases involving federal programs that require dividends
to be included as income, current state statute provides that the
state "make up the difference" so the recipient does not experience
a decrease in the amount of aide under these programs.
Ms. Cook explained this bill repeals the broad provision that
authorizes the state to hold harmless any program administered by
the Department of Health and Social Services. She stated the bill
provides that the state would continue to hold harmless only those
individuals who receive benefits from two programs: supplemental
security income from the federal Social Security Administration and
the state-operated APA program. She noted these programs primarily
serve physically disabled, mentally disabled, the blind and certain
seniors. With these exceptions, she continued, recipients of public
assistance under other eligibility criteria and who do receive a
permanent fund dividend would "suffer the consequences" of an
increase of their economic ability as a result of the dividend. She
stated the recipient could make the choice, and noted the programs
provide counseling for recipients regarding the affects of applying
for a dividend.
Senator Phillips referenced a chart titled "Hold Harmless" [copy on
file] that outlines the $5,953,800 total estimated savings of this
legislation. He suggested this could be applied to the $37 million
Medicaid increase and subsequently for, "the very people who have
been benefiting" from the Medicaid program.
Co-Chair Kelly informed the Committee that the "transfer mechanism"
necessary for this application is not included in this bill;
however an amendment would be drafted to include it.
Senator Olson asked how recipients would know whether they are
"borderline" for discontinued benefits if they accept a dividend.
Ms. Cook responded that program administrators would review
recipients' finances and provide counseling on the matter. She was
unaware of the details of this counseling, but assured that it does
occur. She agreed a recipient must make the decision whether to
file for a dividend early in the year.
Senator Olson predicted this would be cumbersome.
Ms. Cook responded the Department would have to address this. She
reiterated this exercise is already undertaken, although it would
have to occur more often and for more programs.
Senator Hoffman requested the witness expand upon the impact this
would have for recipients of Temporary Assistance for Needy
Families (TANF) services.
Ms. Cook did not know and deferred to the Department of Health and
Social Services. She emphasized the hold harmless provision is
"drafted with a very broad brush," in that it could be applied to
any existing and future program. This bill, she noted, limits the
provision to the two aforementioned programs. She suggested other,
yet unidentified programs, could be added if desired.
Senator Hoffman referenced the Hold Harmless chart and asked about
the Contractual Services program that is indicated would remain
covered under the hold harmless provision.
JIM NORDLAND, Director, Division of Public Assistance, Department
of Health and Social Services, testified the Division has questions
as to what programs would be affected by this legislation. He
presumed that the Alaska Temporary Assistance Program (ATAP), food
stamps and possibly Medicaid would be affected. He was unsure about
the reference to contractual services.
Senator Austerman asked if children's permanent funds would be
included in the calculation of a parent's income.
Ms. Cook answered yes; the major programs calculate total household
income in determining eligibility.
Senator Olson asked about the $4.1 million expenditure for ATAP
referenced on the chart and asked what specific services would be
affected by this legislation.
Mr. Nordland explained ATAP is the "basic cash welfare program" for
poor families with children in Alaska.
Senator Ward expressed that this bill would not affect the actual
programs. It would not eliminate any services; rather it would
require recipients to choose between receiving a dividend or the
services.
Mr. Nordland understood that is the intention of the bill.
Mr. Nordland next gave testimony on the bill, which he
characterized as seemingly simple, but actually complicated. He
stated that currently, the department is not allowed to consider
permanent fund dividend income against eligibility for public
assistance programs. This bill, he understood, removes this
restriction and gives an option, but does not require, the
Department to consider the dividend as income.
Mr. Nordland stated the Department would therefore choose to
continue to utilize the hold harmless provision; because of this, a
fiscal note has not been prepared. He said that because this
legislation would no longer allow use of the permanent fund
earnings reserve fund to offset the hold harmless provision, the
Department would utilize general funds to cover the $3.1 million
cost. He continued that if the bill were amended to require the
Department to consider permanent fund dividends as income, the
fiscal note would be zero, as those recipients would not receive
benefits during the month that the dividend was received. He added
that the recipients would regain eligibility the following month
and benefits would resume.
Mr. Nordland stated the hold harmless provision was originally
implemented so poor families in Alaska would receive the same
benefits from the permanent fund dividend as all Alaskans. He
informed that the total annual income, including permanent fund
dividends, of the average family served by public assistance
programs is still below the federal poverty level. He granted that
the amount of the dividends are increasing, but stressed these
funds are often used for such modest purchases as clothing,
educational opportunities, eyeglasses and dental care, and beds for
children.
Mr. Nordland reminded that this issue has been considered in the
past. He pointed out the provision would not increase the general
fund, but rather would withdraw less from the permanent fund
dividend program. He calculated this would result in an increase of
approximately $13 to each dividend. He predicted most Alaskans
would defer that amount to poor families.
Co-Chair Kelly informed that the intent of the sponsor is to
transfer the savings of this legislation from the permanent fund to
the general fund.
Mr. Nordland noted a "dramatic decline" in the caseload of public
assistance programs and subsequent reduction of the amount taken
from the permanent fund to offset the hold harmless provision. At
the same time, he pointed out the dividend payments have increased.
Mr. Nordland added that the permanent fund dividends of 37 percent
of TANF clients are garnished. He warned that some families would
therefore receive neither public assistance benefits for one month
nor a dividend. He spoke to "timing", pointing out that public
assistance payments are mailed on the first of each month, while
permanent fund dividends are issued on the fifteenth; those
families would be without any income for two weeks.
Mr. Nordland mentioned the "administrative hassle" of removing a
recipient from public assistance programs for one month only to re-
enlist them the following month.
Mr. Nordland concluded the Department "stands by" the hold harmless
provision and opposes this bill.
Co-Chair Kelly understood that Denali KidCare provides dental and
eye care services.
Mr. Nordland affirmed these services are provided for children but
not for their parents.
Senator Ward asked how many recipients of public assistance do not
qualify for a permanent fund dividend. He also asked what form of
counseling the Department provides to recipients to inform them
that applying for a dividend would disqualify them from receiving
public assistance benefits.
Mr. Nordland was unsure of the answer to the first question. He
responded that because of the hold harmless provision, such
counseling is unnecessary and therefore not provided.
Senator Ward asked if the Department informs recipients that they
are eligible to receive both a dividend and benefits, or if the
Department "is silent" on the matter.
Mr. Nordland responded the Department essentially "is silent". He
stated if the legislation stipulated the recipient had to make a
choice, the Department would have to consider the matter. He
expressed it is hard for him to conceive of an instance where the
Department would counsel a family to forgo the dividend in favor of
continuing to receive public assistance benefits because of the
amount of money involved. He qualified this matter has not been
determined yet and his answer is unofficial.
Senator Green asked why dividends were subject to a hold harmless
provision, as she considered dividends income.
Mr. Nordland replied this issue has been discussed in the context
of, "at what time is a poor person not poor any more." He suggested
the distinction be made at the point where additional income raises
a person's total income above the federal poverty level, or the
amount determined to be "what it takes for a family to live".
Co-Chair Kelly referenced a $50,000 dividend paid to shareholders
of the CIRI Native Corporation. He wanted to know how those
shareholders who continued receiving public assistance spent those
funds. He also wanted to know how other shareholders used that
dividend to "improve themselves" to become "productive members of
our state."
Mr. Nordland relayed that the Cook Inlet Tribal Council provided
counseling to shareholders to help them utilize the dividend in
such a way as to remain self-sufficient.
Senator Green asked if this legislation would apply to non-cash
benefits available to public assistance recipients, such as work
services, food stamps and Medicaid.
Mr. Nordland was unsure. He added childcare support as another
work-related benefit and stated the Department supports continuing
to provide these services regardless of permanent fund dividend
income.
Senator Green referenced other proposed federal legislation and
asked if it would allow a dividend recipient to continue receiving
work-related services.
Mr. Nordland replied that bill would give the Department "more
flexibility in that regard".
SUSAN SULLIVAN, Division of Child Support Enforcement, Department
of Revenue, testified via teleconference from Anchorage that during
the time a custodial parent receives public assistance, the
Division retains any child support collected on behalf of that
payment. She stated this amounted to $1.9 million in October of the
previous year. She pointed out that under SB 340, the state would
not retain any until the custodial parent has been paid in full for
current support in arrears. She informed the average arrear owned
to custodial parents is approximately $15,000.
JOHN MALLONEE, Division of Child Support Enforcement, Department of
Revenue, testified via teleconference from Anchorage to reiterate
Ms. Sullivan's testimony
Co-Chair Kelly informed that Senator Phillips working with the
Division of Legal and Research Services to address the fund
transfer issue.
Senator Phillips replied an amendment would be available later in
the day.
Senator Ward asked about the $455,000 Contractual Services program
listed on the aforementioned chart.
Senator Phillips explained this is a reimbursable services
agreement (RSA) between the Department of Health and Social
Services and the Department of Administration for the day-to-day
operations of the hold harmless provision.
Senator Ward asked if the amount of this RSA could be reduced given
that the workload would decrease.
Senator Phillips deferred to the Departments.
Co-Chair Kelly asked Senator Phillips to research the matter.
Co-Chair Kelly ordered the bill HELD in Committee.
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