Legislature(2017 - 2018)SENATE FINANCE 532
03/13/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB108 | |
| Presentation: Power Cost Equalization and Community Assistance Overiview - David Teal | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | SB 108 | TELECONFERENCED | |
SENATE BILL NO. 108
"An Act relating to the State Medical Board; relating
to the licensing of physicians, osteopaths, and
podiatrists; and providing for an effective date."
9:01:53 AM
Co-Chair MacKinnon recalled the history of discussions on
the bill in committee.
Vice-Chair Bishop MOVED to ADOPT proposed committee
substitute for SSSB 108, Work Draft 30-LS0740\T (Radford,
3/9/18).
Co-Chair MacKinnon OBJECTED for discussion.
JULI LUCKY, STAFF, SENATOR ANNA MACKINNON, recalled that
during a previous hearing on the bill, there had been an
issue regarding a possible trademark infringement using the
title "Certified Medical Assistant" or the initials "CMA."
Ms. Lucky discussed the Explanation of Changes for the
CSSSSB 108(FIN), (copy on file):
Page 3, lines 26-27: adds the ability for the
department to recognize a national certification to
satisfy "some or all of the qualifications for state
certification."
Ms. Lucky elaborated that the change allowed the board to
examine the national certification necessary to earn the
trademarked title and apply those qualification to state
certification.
Ms. Lucky continued to discuss the changes to the bill:
Page 4, lines 13-15: rewords section 5, which provides
a penalty for practicing without a license, to remove
the title "Certified Medical Assistant" and "C.M.A."
to avoid possible trademark infringement.
Page 6, lines 11-14: inserts a new section 13
clarifying that "certification" of the listed
professions is considered "licensure," ensuring that
these individuals have access to the Prescription Drug
Monitoring Program (PDMP).
Ms. Lucky explained that while the section was being
drafted it was noticed that the term "Certified Medical
Assistant" still appeared the bill; the amendment that will
be presented later in the meeting rewords the section to
say, "medical assistant certified."
Ms. Lucky continued to discuss the changes:
Technical and conforming changes are on:
? Page 4, lines 1-2; Page 4, line 10; Page 6,
line 5: reworded to remove the phrase "certified
medical assistant"
? Page 6, lines 28 & 29: changed section numbers
9:05:17 AM
Senator Stevens referenced a backlog of 290 applicants and
wondered how the approval of licensure would be sped up.
Ms. Lucky stated that the backlog was not addressed in the
CS.
Co-Chair MacKinnon interjected that once the CS was before
the committee the sponsor could be questioned.
Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO
further OBJECTION, it was so ordered. The CS for SSSB
108(FIN) was ADOPTED.
Senator Stevens restated his question.
Senator Giessel stated that there was nothing to guarantee
that the backlog would be completely alleviated. The bill
could allow for clean applications to be routinely approved
by the executive secretary.
Senator Stevens imagined Senator Giessel would monitor the
application approval process.
Senator Giessel replied in the affirmative.
Senator Olson asked if the sponsor was supportive of the
CS.
Senator Giessel answered in the affirmative.
Vice-Chair Bishop hoped that adding two more positions to
the process would enable more expeditious licensure.
9:08:08 AM
Co-Chair MacKinnon added that the fiscal note reflected a
receipt service function that would add two positions.
Vice-Chair Bishop MOVED to ADOPT Amendment 1:
OFFERED IN THE SENATE
BY SENATOR MACKINNON
TO: CSSSSB 108(FIN), Draft Version "T"
Page 6, line 14:
Delete "certified medical assistant"
Insert "medical assistant certified"
Co-Chair MacKinnon OBJECTED for discussion.
Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO
further OBJECTION, it was so ordered. Amendment 1 was
ADOPTED.
9:09:03 AM
Vice-Chair Bishop MOVED to report CSSSSB 108(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSSSSB 108(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal impact note
from Department of Commerce, Community and Economic
Development.
9:09:36 AM
AT EASE
9:13:05 AM
RECONVENED
Co-Chair MacKinnon recognized Former Representative Bill
Thomas, Former Speaker of The House John Harris, Former
Commissioner of Department of Labor and Workforce
Development Diane Blumer, in the gallery.
^PRESENTATION: POWER COST EQUALIZATION and COMMUNITY
ASSISTANCE OVERIVIEW - DAVID TEAL
9:13:37 AM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation, "Community Assistance and Power
Cost Equalization" (copy on file). He turned to Slide 2,
"Community Assistance Programs: Historical Distributions
(FY00-FY19)," which showed a bar graph depicting historical
distributions of the Power Cost Equalization (PCE) and
Community Assistance programs. He noted that the state had
offered various financial assistance programs to
communities since 1969. Some were dependent on need for
services, while others were based on state revenue,
population, and some on combined factors. Mr. Teal shared
that the programs had changed over time. The first twenty
years were a combination of the SAFE Communities program,
and state revenue sharing. He directed attention to the
left-hand bars on the graph, which showed the programs
operating simultaneously, SAFE Communities providing $20
million per year and state revenue providing $10 million.
He categorized those payments as low; in the 1980s payments
reached an excess of $100 million and at a time when the
budget was half of today's - resulting in a larger
proportion to communities. He relayed that over time the
payments decline to $30 million, which was where the graph
began.
Co-Chair MacKinnon asked whether the state had begun to
pick up costs for communities in other ways when the
payments declined.
Mr. Teal responded in the affirmative. He noted that the
two impacts were responsible for the reduced payout.
9:16:24 AM
Mr. Teal continued to address Slide 2. He shared that both
state revenue sharing and SAFE Communities terminated in
2003, leading to 5 years of Energy Assistance programs. The
first year, 2004, was temporary federal fiscal relief,
followed by small amounts of energy assistance, growing to
larger amounts of Municipal Community Energy Assistance. He
related that during the Energy Assistance years there had
been a debate over revenue sharing meant no state money
meant no money for distribution. That argument favored ad
hoc payments that were depended on the financial condition
of the state, making funding levels a year by year
decision. The other argument asserted that communities
needed money that they could count on in advance and that
the ad hoc method did not give communities time to plan for
their local budgets. He stated that the push was for long-
term predictable funding that resulted in the legislature
establishing the Community Assistance fund as a compromise.
Deposits to the fund depend on revenue, which have revenue
sharing elements, but distributions to communities did not
depend on revenue in the current year, rathe the balance in
the fund. This meant that communities had a reduced payout
of revenue in prior years had been low but there would be a
known amount that communities could loan for, with a 3-year
phase out. He said that there had been a $60 million payout
target, which had occurred for several years but in 2012-
2013, state revenue allowed for extra money to be added on
top of the fund distributions. Those payments have declined
as revenue had decline and the $60 million target was
fading.
9:19:41 AM
Mr. Teal turned to Slide 3, "Community Assistance Fund
Illustration," which showed a table that showed how the
Community Assistance Fund worked. He noted that each year
one-third of the balance of the fund was distributed. There
would be a $60 million distribution and a subsequent
deposit of $60 million to bring the fund back to the
starting point of $180 million. He relayed that with the
crash of oil prices, in FY 15 the legislature deposited
only $52 million, bringing the balance to $172 million,
with a distribution of $157.3 million. He pointed out that
no money had been deposited in FY 16, which had resulted in
a fund balance of $114 million, with a distribution of $38
million. He pointed out that communities knew of the
decline in distribution a year before receiving the funds.
He explained that the passage of SB 196 in 2016 had
provided an alternative source of funding; it could be
predicted that general funds were not a reliable source to
fund the revenue sharing element of the program, but
changing the name to Community Assistance would recognize
that the funding no longer depended on the amount of state
revenue available, Community Assistance was simply a
program providing assistance to communities. He added that
alternative funding for the program from came from earning
from the PCE endowment.
9:22:10 AM
Mr. Teal displayed Slide 4, "History of Power Cost
Equalization":
? Established in 1985 to assist rural residents with
energy costs
? At the time, urban communities benefited from state-
subsidized energy projects such as the Four Dam Pool
and Bradley Lake
? PCE Program directly subsidizes high energy costs
for ratepayers
Mr. Teal recognized that it might seem odd that the PCE
Fund and the Community Assistance Fund were related. He
recalled that during the late 1970s and late 1980s there
were large expenditures for energy projects, particularly
hydro projects that benefitted urban areas, and the
question was how rural areas could benefit from energy
projects and the funds that had been put into subsidized
power costs for urban areas. He explained that this was how
PCE was born. He related that it was difficult to have
large hydro projects that helped smaller areas because they
were dependent upon expensive diesel generation. The PCE
program took the average rates paid by residents in
Anchorage, Fairbanks, and Juneau and the difference between
the local communities' rates subsidized a portion of small
community payments, with the limit of usage of 500
kilowatts (equivalent of approximately a $50 electric bill
in urban centers).
Mr. Teal reviewed Slide 5, "PCE Fund":
? Until FY01, PCE was funded through annual GF
appropriations
? In FY01, $100 million from the sale of the Four
Dam Pool and from the CBR was used to capitalize the
PCE Endowment
? $182.8 million added in FY07 and $400 million added
in FY12
? GF funding was phased out and replaced with payouts
from the PCE Endowment
Mr. Teal said that until 2001, PCE had been funded through
annual appropriations of general funds, with a long period
when the funding was capped at $15.7 million annually
despite higher program costs, the program was prorated
during those years. In 2001, $100 million from the sale of
the Four Dam Pool and from the CBR, was appropriated to the
PCE endowment fund, another $182 million was added in 2007,
and $400 million was added in 2012. He said that the $400
million was enough to fully fund the PCE program but
because of the 3 to 4 year look back on the balance the
$400 million did not begin to fully fund the program until
the 3-year phase in, or look back period, was fully
implemented. He stated that 2015 was the first year that
the general fund subsidy to cover program costs was
eliminated.
9:26:08 AM
Mr. Teal showed Slide 6, "Power Cost Equalization Endowment
Fund (Includes SB 196)," which showed a data table entitled
'History and Projections (in Millions)." He reiterated that
SB 196 had passed in 2016 that allowed PCE earnings from
the endowment to be used for other purposes, specifically
including Community Assistance and Rural Energy programs.
He said that the rule was that if endowment earning in the
second prior year exceeded program costs, 70 percent of the
excess earning were available first to the Community
Assistance program (up to $30 million), then Rural Energy
programs (up to $25 million), and leftover funds would
remain in the endowment. He relayed that the program had
begun in FY 17 and looking back at the second prior year
earnings showed $33 million in earning to pay for $40
million in program costs, leaving nothing for Community
Assistance or energy programs.
Mr. Teal continued to look at Slide 6, noting that in FY
18, earnings were $8.9 million, less than the cost of the
program, with no money to distribute. He highlighted that
in FY 19, earnings on the endowment (from FY 17) were $112
million, with program costs at $33.1 million. There were
two things to consider: a huge increase in earnings, and a
decrease in program cost. He shared that the $112 million
in earnings left $79 million in excess after paying for the
PCE program; $55 million of the excess funds was first
distributed through the Community Assistance program,
followed by Rural Energy programs, leaving $24.2 in the
fund and bringing the balance to over $1 billion.
9:29:19 AM
Mr. Teal continued to discuss Slide 6. He stated that in
the future, a 6 percent earnings rate would generate some
funds, but not the full $30 million for Community
Assistance. He said that if the state were to earn 6
percent annually the amount of money for Community
Assistance would be roughly $20 million per year, leaving
the legislature to find an alternative source for the
mission $10 million, presumable general funds.
Mr. Teal changed the earnings amount on the graph from 6 to
seven percent. He observed that the change would allow
money to be deposited to the Community Assistance program;
it would take 4 or 5 years before the $30 million was
achieved, which would be distributed to Rural Energy
programs. He relayed that based on projected revenues of
the Permanent Fund, it was likely the Community Assistance
would not be fully funded from the PCE program for a number
of years. He stressed that earning was volatile, and some
years would be fully funded, but not for several years.
Senator Olson asked why there was such a spike in FY 17,
and what looked like a loss of $20 million.
Mr. Teal observed that there were variable earnings; in
some years the fund lost money and some years it made a lot
of money. He stressed that it depended heavily on
earnings.
9:32:36 AM
Co-Chair MacKinnon recalled that the Senate Finance
Committee had advanced 2 pieces of legislation that spoke
to the issue.
Co-Chair Hoffman thanked Co-Chair MacKinnon for her
guidance on SB 196, which had recognized the state's
financial problems and reduced the Revenue Sharing program
down to $30 million and renamed it the Community Assistance
program, while examining how the excess earnings of the PCE
endowment should be spent. He believed that the program
provided a mechanism where excess earning could be used for
additional programs. He queried the discussion as to
whether the PCE Endowment Fund was overcapitalized.
Mr. Teal thought it was important to define
'overcapitalized,' which he thought meant spinning off more
earnings than were necessary to support the intended
programs. He continued that looking at a 7 percent future
return, Community Assistance would not be fully funded
until 2024. He stated that after paying for PCE and
Community Assistance costs the endowment was supposed to be
spinning off enough to put $25 million into Rural Energy
programs. He lamented that the state was a long way from
reaching that goal. He did not believe that
overcapitalization would be an issue until as early as
2030.
9:36:04 AM
Senator von Imhof discussed the variability of earnings and
payments. She wondered whether there was a recommendation
to smooth out the payments and make them more predictable.
Mr. Teal thought that payouts to communities could be very
stable. He moved back to slide 3 and contended that as long
as the $30 million deposit was equal to the $30 million
payout - Community Assistance was extremely stable. He
related that the problem was that the PCE endowment was not
guaranteed to spin off enough money to meet the $30
million, which would require use of the general fund to
make up the difference. He said that if no more money was
allocated by the legislature, the fund balance and payout
would drop but communities would have a year to plan for
that and a 3-year phase out of the program. He did not
suggest that the Community Assistance program should live
of die by PCE earnings, which he believed would maintain
the volatility of the payments. He said that it would be up
to the legislature to deposit money into the Community
Assistance program in years in which earnings were
insufficient.
Senator von Imhof asked whether payments could still be
volatile, even with a larger endowment, because the market
was volatile. She hoped that management of the fund could
make it more stable.
9:39:30 AM
Co-Chair MacKinnon asked to isolate the two issues. She
said that PCE had undergone multiple changes over the past
5 years. One of those changes had been in the area of risk
reduction. She mentioned legislation sponsored by Co-Chair
Hoffman.
Co-Chair Hoffman thought the difference was from 7.5 to 6
percent estimate rate of return. The concept had been to
invest in less risky investment to provide the lower rate
of return.
Co-Chair MacKinnon reiterated that while the fund grew over
its first 15 years, the funds financial advisors were
deploying resources into investment portfolios that had
higher rates of return accompanied by greater risk. The
committee had passed a bill to reduce interest rates with
the goal of lowering risk and stabilizing earnings. She
admitted that she was surprised to see the growth in the
PCE endowment but believed that the pattern would not
continue. She stressed to the committee that in future
years Community Assistance would require a general fund
appropriation to keep the balance whole or prepare for the
3-year drown down of the program for communities.
Co-Chair MacKinnon returned to Slide 6. She noted that
total program costs remained fixed at 33.1 million after FY
19, which was lower than costs from FY 18. She wondered
whether the number was unrealistic. She asked whether the
PCE program was based on kilowatt hours used plus
administrative expenses or on a fixed dollar fee.
9:43:44 AM
Mr. Teal replied that future costs would be determined by
the price of fuel in rural areas because that would
determine the cost of electricity. He said that Juneau and
Anchorage had fairly fixed fuel prices; Fairbanks was more
reliant on fossil fuels and their price was higher and more
variable. He reiterated that future costs would depend on
fuel prices, he did not believe that administrative costs
would change from year to year. He said that the number was
not based on individual usage, 500 kilowatt hours per month
was minimal. He reiterated that the amount of the rate
subsidized was determined by the cost differences between
hydro and gas power versus diesel power.
9:46:53 AM
Co-Chair MacKinnon asked whether a cap on kilowatt usage
for individual consumers benefitting from PCE programs.
MEERA KOHLER, ALASKA VILLAGE ELECTRIC CO-OP, ANCHORAGE (via
teleconference), responded that the cap was 500 kilowatt
hours per month. She said that the floor was the base rate
that everyone had to pay, which was currently $.18 per
kilowatt hour. She furthered the PCE was calculated by 95
percent of the value of the difference between the
utilities cost of power and the $.18 floor. She said that
the typical rate in villages was $.21 to $.22 for the first
500 kilowatt hours. The price for some villages increased
to $.48, and as high as $.72, because fuel had to be flow
in.
Co-Chair MacKinnon noted the cap in the kilowatt usage.
9:49:16 AM
Senator Stevens stressed the energy benefits for Alaskans
that had been achieved over the previous 30 years. He
referenced the Bradly Lake Dam, which effected Homer and
the Kenai Peninsula. He spoke to the Terror Lake
Hydroelectric project, which had benefitted the area
greatly. He hoped that others could benefit from similar
projects in the future.
Vice-Chair Bishop discussed program costs and thought there
was a direct correlation between program costs and
allocations to rural energy programs. He lamented that
there was not more funding for energy projects in the
state.
Co-Chair MacKinnon agreed that energy projects had benefits
to offer the state.
9:51:43 AM
Senator Stevens relayed that Kodiak had reduced the use of
fuel to 1 percent and was at 99 percent renewable energy.
9:52:15 AM
Co-Chair MacKinnon mentioned tax credits, for urban areas
such as the Cook Inlet Basin. She discussed that tax
credits had been used to secure energy in the Railbelt
area, which provided lower cost energy than would have
otherwise been available. She noted that there was a reason
that the Senate had issued Cook Inlet Region tax credits to
incentivize the base and provide energy to the Railbelt.
She said that as the debate about whether the PCE fund
should be available for appropriation, or protected to
benefit all of Alaska, it was important to understand that
the state came together to invest in Cook Inlet.
9:54:07 AM
Senator Micciche thought almost every area of the state had
benefitted from energy programs. He thought much of PCE was
used to lower the cost of relatively unsustainable sources
of energy. He wondered if longer-term, sustainable
opportunities were not available in rural areas, could the
funds be used to fund other, ore sustainable projects.
Co-Chair Hoffman knew there were communities that were
considering the viability of getting off diesel and
considering hydro-power. He thought that changes in the
program could be made once the demand in rural areas had
been reduced.
9:56:52 AM
Co-Chair MacKinnon noted that Co-Chair Hoffman and herself
served on the Alaska Renewable Energy Advisory Board. She
noted that AEA had adopted criteria that examined the costs
of individual communities and the return on investment.
She thought the committee needed to be aware that the
environment was affected in a positive way, but not always
the cost of fuel supply. She said that if a state facility
was the center of a community it could be the anchor tenant
and cost savings were not realized. She elaborated on her
point about why costs did not always go down under energy
programs.
9:59:16 AM
Senator von Imhof summarized her understanding of the two
issues under discussion; revenue and expense. She expressed
appreciation for predictability.
10:01:02 AM
Mr. Teal surmised that the excess earnings were currently
determined by earnings, which were volatile, and the amount
available could be stabilized by moving to an endowment
model rather than an earnings model.
Mr. Teal looked back at the interactive graph that was
shown on slide 6. He said that if the state paid out 5
percent of market value there would be up to $20 million
per year, on a stable basis, available for Community
Assistance. He said that going to an endowment model could
make it so that general fund need is more stable. He added
that the endowment was currently large enough to consider
making the switch.
10:02:45 AM
Co-Chair MacKinnon reminded that the current year was
unique because of high earnings in FY 17. She stated that
there would be some money from PCE to help reduce the
general fund payment and maintain the program.
Senator Micciche looked at the table on slide 6 and was
curious about the average earnings from FY 04 to FY 17.
Co-Chair MacKinnon estimated 10 percent.
10:04:08 AM
AT EASE
10:04:23 AM
RECONVENED
Mr. Teal stated that the average earnings from FY 04 to FY
17 were roughly 9 percent.
Senator Micciche pointed out that an endowment model at 5
percent was proven to be an adequately conservative model.
Co-Chair MacKinnon stated that there was a former committee
member that had pointed out that there were individuals in
the state that did not benefit from the PCE program or the
Cook Inlet tax credits. There were people in rural parts of
Mat-Su that believed they did not benefit from investments
the state made in other energy sources.
10:06:22 AM
Senator Micciche thought that the credits had benefitted
Alaskans.
Co-Chair MacKinnon knew that there were many perspectives
on policy decisions made by the legislature. She thought
that the discussion of energy projects had been thorough
and inclusive.
Co-Chair Hoffman thought energy costs continued to be an
issue for all areas of the state. He thanked the committee
for working on the issue. He pointed out that even though
Alaska was a major provider of energy to other areas, the
state continued to have very high energy costs. He thought
that the state would benefit from a natural gas pipeline.
He thanked people in urban Alaska for recognizing and
supporting the energy needs of rural Alaskans.
10:10:26 AM
Senator Olson echoed the remarks of Co-Chair Hoffman. He
lamented that the rural population of Alaska was at risk
due to the cost of energy. He expressed thanks to his late
predecessor Senator Al Adams for his work on the issue.
10:11:31 AM
Co-Chair MacKinnon expressed her appreciation for members
of the committee who had worked in the issue, past and
present.
Co-Chair MacKinnon discussed housekeeping.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 3 13 18 SFC Power Cost Equalization and Community Assistance.pdf |
SFIN 3/13/2018 9:00:00 AM |
Power Cost Equalization and Community Assistance |
| SB 108 amendment T.1.pdf |
SFIN 3/13/2018 9:00:00 AM |
SB 108 |
| SB108 FIN CS work draft version T.pdf |
SFIN 3/13/2018 9:00:00 AM |
SB 108 |
| SB 108 FIN CS Summary.pdf |
SFIN 3/13/2018 9:00:00 AM |
SB 108 |