Legislature(1995 - 1996)
02/20/1996 01:13 PM House CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 20, 1996 1:13 p.m. MEMBERS PRESENT Representative Ivan Ivan, Co-Chair Representative Alan Austerman, Co-Chair Representative Kim Elton Representative Pete Kott MEMBERS ABSENT Representative Jerry Mackie Representative Al Vezey Representative Irene Nicholia COMMITTEE CALENDAR * HOUSE BILL NO. 401 "An Act authorizing the issuance and sale of revenue bonds to fund public wastewater systems, nonpoint source water pollution control projects, including solid waste management systems, and estuary conservation and management projects; authorizing the use of the Alaska clean water fund to pay and secure the bonds and to pay costs related to issuance and administration of the bonds; authorizing certain measures to secure payment of the bonds; and amending Alaska Rule of Civil Procedure 3." - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 400 "An Act relating to welfare reform by establishing the Alaska Family Independence Program; repealing the aid to families with dependent children and job opportunity and basic skills programs; relating to an exemption to Alaska Wage and Hour Act for certain work activities of the Alaska Family Independence Program; relating to the duty to support children of minor parents; relating to certain licenses and applications for a license for persons who are not in substantial compliance with orders, judgments, or payment schedules for child support; relating to an exemption to the state procurement code for certain services for the general relief program and Alaska Family Independence Program; relating to eligibility for day care benefits administered by the Department of Community and Regional Affairs; authorizing the Department of Health and Social Services to operate a public assistance program consistent with the Alaska Family Independence Program under federal waivers and providing certain immunity from liability for activities of that program; amending Alaska Rule of Civil Procedure 90.3; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 401 SHORT TITLE: REVENUE BONDS: WATER & WASTE PROJECTS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-DATE ACTION 01/08/96 2378 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2378 (H) CRA, STATE AFFAIRS, RESOURCES, FINANCE 01/08/96 2379 (H) 2 ZERO FISCAL NOTES (REV, DEC) 01/08/96 2379 (H) GOVERNOR'S TRANSMITTAL LETTER 02/20/96 (H) CRA AT 1:00 PM CAPITOL 124 BILL: HB 400 SHORT TITLE: WELFARE REFORM SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-DATE ACTION 01/08/96 2375 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2376 (H) CRA, STATE AFFAIRS, HES, FINANCE 01/08/96 2376 (H) 10 FNS (3-DCED, 5-DHSS, 2-LABOR) 01/08/96 2376 (H) 3 FISCAL NOTES (DOE, DPS, REV) 01/08/96 2376 (H) 5 ZERO FNS (ADM, DCRA, DEC, F&G, DHSS) 01/08/96 2376 (H) 3 ZERO FNS (LABOR, LAW, DPS) 01/08/96 2377 (H) GOVERNOR'S TRANSMITTAL LETTER 02/20/96 (H) CRA AT 1:00 PM CAPITOL 124 WITNESS REGISTER KEITH KELTON, Director Division of Facility Construction and Operation Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, Alaska 99801-1795 Telephone: (907) 465-5180 POSITION STATEMENT: Presented HB 401 on behalf of the Administration. MARIE SANSONE, Assistant Attorney General Natural Resources Section Civil Division (Juneau) Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Answered questions on HB 401. BERDA WILLSON, Assistant Manager Nome Joint Utilities City of Nome P.O. Box 70 Nome, Alaska 99762 Telephone: (907) 443-5288 POSITION STATEMENT: Supported HB 401. DIANA BENNETT, Finance Manager Anchorage Water and Wastewater Utility Municipality of Anchorage 3000 Arctic Boulevard Anchorage, Alaska 99503 Telephone: (907) 786-5623 POSITION STATEMENT: Supported HB 401. LEE SHARP, Attorney at Law Preston, Gates & Ellis 420 L Street, Suite 400 Anchorage, Alaska 99501-1937 Telephone: (907) 276-1969 POSITION STATEMENT: As bond counsel to the state, testified on HB 401. JAY LIVEY, Deputy Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, Alaska 99811-0601 Telephone: (907) 465-3030 POSITION STATEMENT: Presented department's position and answered questions on HB 400. JIM NORDLUND, Director Central Office Division of Public Assistance Department of Health and Social Services P.O. Box 110640 Juneau, Alaska 99811-0640 Telephone: (907) 465-3347 POSITION STATEMENT: Presented department's position and answered questions on HB 400. CAROL YAKISH, Social Worker Kodiak Area Native Association 402 Center Street Kodiak, Alaska 99615 Telephone: (907) 486-5725 POSITION STATEMENT: Testified on HB 400. LOUISE CHARLES, Administrator Job Opportunities and Basic Skills Program Tanana Chiefs Conference 122 First Avenue Fairbanks, Alaska 99701 Telephone: (907) 452-8251 POSITION STATEMENT: Supported HB 400. ANGELA SALERNO, Executive Director Alaska Chapter, National Association of Social Workers 1727 Wickersham Drive Anchorage, Alaska 99507 Telephone: (907) 563-4502 POSITION STATEMENT: Supported HB 400. GENE OTTENSTOER Victims of the State; and Guardians of Family Rights c/o P.O. Box 1059 Delta Junction, Alaska 99737 Telephone: (907) 895-4805 POSITION STATEMENT: Opposed HB 400. SINEAD PHIPPS Board of Directors Guardians of Family Rights c/o P.O. Box 704 Delta Junction, Alaska 99737 (No telephone listed) POSITION STATEMENT: Opposed HB 400. SHARON OLSEN, Chairperson Alaska Native Coalition on Employment and Training (ANCET) 320 West Willoughby Avenue, Suite 300 Juneau, Alaska 99802 Telephone: (907) 586-1432 POSITION STATEMENT: Testified on HB 400. DARLENE DEWEY, Child Care Coordinator Child Care and Development Block Grants Kawerak, Incorporated P.O. Box 948 Nome, Alaska 99762 Telephone: (907) 443-3763 POSITION STATEMENT: Testified on HB 400. BRENDA AKELKOK Bristol Bay Native Association P.O. Box 310 Dillingham, Alaska 99576 Telephone: (907) 842-5257 POSITION STATEMENT: Testified on HB 400. KRISTEN BOMENGEN, Assistant Attorney General Human Services Section Civil Division (Juneau) Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Answered questions on HB 400. ACTION NARRATIVE TAPE 96-14, SIDE A Number 0001 CO-CHAIR IVAN IVAN called the House Community and Regional Affairs Committee meeting to order at 1:13 p.m. Members present at the call to order were Representatives Ivan, Austerman, Elton and Kott. Members absent were Representatives Mackie, Vezey and Nicholia. HB 401 - REVENUE BONDS: WATER & WASTE PROJECTS Number 0059 CO-CHAIR IVAN noted that committee packets for HB 401 contained copies of the bill, a bill summary, a sectional analysis, zero fiscal notes from the Department of Environmental Conservation and the Department of Revenue and back-up material. Number 0140 KEITH KELTON, Director, Division of Facility Construction and Operation, Department of Environmental Conservation (DEC), presented HB 401 on behalf of the Administration, saying he was explaining both HB 401 and its companion bill, SB 207. He offered some background. In 1987, when the Clean Water Act was reauthorized, it was mandated to drop the construction grants program and shift it into a low-interest loan program for the construction of wastewater facilities. It also could apply to solid waste facilities where ground water contaminants were being treated, dealing with estuary contamination and controlling nonpoint source pollution. Number 0213 MR. KELTON explained that since 1989, DEC had administered the Alaska Clean Water Fund, a program set up to make those low- interest loans. The loans, which had fluctuating interest rates tied to the municipal bond index, were available to incorporated communities having a dedicated revenue stream to repay the loans. Typically, the loans were for twenty years, with interest rates of 4 - 5 percent; currently, they were at 3.75 percent. The loans were, therefore, a fairly attractive financing alternative as general fund grants diminished. To date, the fund had received approximately $80 million, a combination of state and federal dollars. Until the last two years, the demand for those funds had been less than the availability. However, that trend was reversing. Number 0305 MR. KELTON expressed that at the current rate of obligation, the fund would be used up in two years, except for the revolving portion that would come back. Twenty-one other states administered this "leveraged program," using the corpus of the fund as collateral and selling revenue bonds to leverage the account into more dollars. Mr. Kelton said DEC had worked with the Department of Law, bond counsel and the Department of Revenue to come up with a process that fit Alaska's needs. Number 0373 MR. KELTON referred to the top half of a wall chart and said, "This describes the program that we currently have in place, the Alaska Clean Water Fund, which is capitalized 80 percent by federal dollars, 20 percent by state." He referred to the blue center portion, representing current funds, and said, "Of that $80 million, approximately $50 million has been loaned to 24 recipients. In your packets, you will find a list of the communities that currently have received loans." He added that the only requirements were being incorporated and having a dedicated revenue stream. After the fund loaned money to municipal projects, the repayment stream recycled back into the program. That was what was in place right now, he said. The $30 million that was left would be gone in two years unless something was done to "leverage" that money, he added. Number 0463 MR. KELTON indicated that HB 401 set up a bond redemption fund, which would then pay the bond issuance costs to the state bond committee. That committee would issue bonds for purchase by investors with the proceeds returning to a bigger Alaska Clean Water Fund. Those funds would recycle back through projects with the repayment stream returning to the bond redemption fund to pay off the bonds, and so forth. There was the possibility of making that $30 million into a much larger number and funding more projects statewide. Although the program was not restricted to any community, by virtue of the fact that it required a dedicated payment stream, it primarily benefited larger, incorporated communities. Mr. Kelton indicated there was a list of participating communities in the bill packet. Number 0570 CO-CHAIR AUSTERMAN referred to the $50 million in loans already made and asked, "When does that cycle back in, so that there's not a need to go out and buy more bonds?" MR. KELTON replied that the whole repayment stream, as well as additional federal capitalization, was dedicated to paying off the bonds. The $50 million already out there was a big incentive to the bond-buying market, he said, since that repayment stream was already dedicated. That, in addition to the $30 million currently unobligated, would provide the corpus to the fund. Number 0615 CO-CHAIR AUSTERMAN asked if Mr. Kelton was saying the total $80 million of the original fund was going to be the corpus. MR. KELTON clarified that the $30 million "just sitting there" would be the main collateral. However, there was money coming back from the original $50 million already loaned to communities; that repayment stream, with interest, returned to the fund and provided assurance to the bond purchasers that the state had the ability to repay those bonds. Number 0675 CO-CHAIR AUSTERMAN asked how big the bonds under discussion were. Specifically, he was curious where the $50 million would go after it was paid back. MR. KELTON replied it would go to new projects. It would continue to recycle. This was one of the questions the Senate committee had as well, he said, explaining, "We're working on two amendments right now in their Senate CRA committee that will provide the cap that you're talking about. The language has not been approved yet in the Senate CRA committee, but we're expecting it to be heard tomorrow, and one of the proposals is that they would establish a $15 million-per-year cap on the amount of revenue bonds that could be sold, up to $100 million total. This would allow a finite maximum the state would be able to go in debt on, even though this particular proposal does not require the full faith and credit of the state. They're revenue bonds and, basically, the communities are the ones who are establishing their full faith and credit." Number 0753 REPRESENTATIVE PETE KOTT asked Mr. Kelton to explain the process as it existed today, without the new legislation. MR. KELTON expressed that the program currently provided low- interest loans from the $80 million combination of state and federal dollars. As those funds came back as principal and interest, they were again available for loans. All HB 401 did was to establish a larger pot of money through the sale of revenue bonds. The administration of the program would proceed exactly as before. Number 0828 REPRESENTATIVE KOTT asked whether, as the fund was depleted, money would come back to municipalities, keeping that pool of money at the present level, at least. MR. KELTON replied, "We definitely expect it will revolve. The level will be somewhat dependent on how many bonds are sold." He said they expected it to stabilize and be a revolving loan fund, providing a fund in the neighborhood of $10 million to $15 million per year. Number 0872 REPRESENTATIVE KIM ELTON stated that his understanding was, "At the present time, we have a loan fund that's capitalized with about $80 million. $50 million of that is already out in loans to municipalities, leaving $30 million yet to be allocated. Under this bonding proposal, and if we accept the caps that are being discussed on the other side, you would have the authority, over a period of time, to build up your loan fund from the $80 million that you have now to $180 million at some point in the future, assuming that the caps that are being discussed on the other side are imposed." Number 0872 MR. KELTON said that was correct. REPRESENTATIVE ELTON continued, saying, "So that you'd have a revolving loan fund that was partially capitalized with federal dollars/state dollars/bond dollars, and the pool was $180 million instead of $80 million." MR. KELTON indicated that was also correct. He added, "We do expect that the reauthorization of the Clean Water Act, which is up again, will include additional federal appropriations into this, so with a state match, it could ultimately grow above that level." Number 0950 CO-CHAIR AUSTERMAN asked Mr. Kelton what he saw as the dollar need. He said, "If, in the last few years, you've been able to keep the $30 million in there and not have to spend it, but now you say that there's becoming more of a demand, at some point in time, the revolving aspect of this thing, where the $50 million comes back in and is reloaned, is an ongoing process." He asked if more than $80 million was needed if it was on a revolving loan basis. Number 0981 MR. KELTON replied that additional loans would be limited to the repayment stream "once the first amount is out there." With repayment on a 20-year cycle, only 1/20th of that would come back in any given year. After the money was cycled once, there would no longer be $80 million until it started coming back. Number 1018 CO-CHAIR AUSTERMAN said that got back to his original question about how long the cycle time was. MR. KELTON responded that they were 20-year loans. He pointed out that the committee packets contained, in addition to the list of projects where money had been loaned, a list of communities that had expressed interest in receiving loans. Currently, that list involved approximately $78 million. He added, "There is no certainty or an obligation on their part that they would ever need to apply for those loans, but that's an expression of interest at this date. We do this on an annual basis. Some of these projects will get grants; some of them will fall by the wayside for other reasons. But at the current rate, which is $13 million a year, we will be out of that corpus of $30 million within a two-year period. We're trying to expand our capability of providing loan funds to communities while we still have this corpus available. Once this corpus is loaned, we no longer have the collateral available to sell these revenue bonds. Passage of this legislation this year will enhance the ability of this legislation to be effective, because the smaller that gets, the less leveraging we'll have available." Number 1126 CO-CHAIR IVAN said he understood there were two situations. Currently, the Village Safe Water Program made grants to rural water and sewer projects. In contrast, this program was geared towards those built-up communities like Anchorage that had the necessary payback capability, through property taxes or other revenue streams. Co-Chair Ivan asked if this would free up funds for water and sewer projects, especially the Village Safe Water Program, which funded rural areas lacking payback capability. Number 1180 MR. KELTON replied he would not presume how money might be appropriated by the legislature. However, the legislature certainly had the potential, if part of the capital budget demand were assumed by the loan program, of making additional limited dollars in the capital budget available to other communities. Number 1215 CO-CHAIR IVAN referred to the 50/50 municipal matching grant and asked if this program would free up funds from the municipal matching grants as they were today. For example, he believed the average provided was $25,000 per community for use as a matching grant towards community projects. Number 1255 MR. KELTON asked if Co-Chair Ivan was talking about the Governor's matching grants program or DEC's. CO-CHAIR IVAN replied, "the current capital matching grant program." MR. KELTON thought it best to use the two programs in conjunction with each other. This would provide the ability to increase the amount of dollars available to local projects. If a community was short of money after receiving a matching grant, it would certainly be eligible to borrow the balance from the loan program, he said. He thought the main place it saved was in the capital budget that was approved, outside of the matching grants program. Number 1298 CO-CHAIR IVAN referred to Mr. Kelton's mention of estuary conservation. MR. KELTON clarified that was estuary pollution control or correction. Although it was eligible, they had never received an application for estuary enhancement. However, it was written into the federal law, which the state was mandated to repeat in statute. Number 1335 CO-CHAIR IVAN asked if state agencies were authorized to apply for loans. MR. KELTON replied that federal language authorized state agencies to be eligible for loans. He noted that was an item that the Senate CRA committee had also questioned. As a result of that committee's work, he said, there was an amendment that would be prepared and heard the next day which redefined that to eliminate state agencies. Number 1368 CO-CHAIR IVAN referred to the term "liberally construed" and asked for a definition. MARIE SANSONE, Assistant Attorney General, Natural Resources Section, Civil Division (Juneau), Department of Law, explained that in terms of statutory construction, the term "liberal construction" meant that this statute should be broadly construed to give effect to its beneficial purposes of providing money for the public wastewater projects and other pollution projects. The term was fairly standard in statutes, Ms. Sansone said. In contrast, "strict construction" or "narrow construction" would indicate a much more restrictive view of the words of the statute. Number 1477 REPRESENTATIVE KOTT asked if underground storage tanks would fall within the scope of HB 401. MR. KELTON indicated that would have happened only if they were going to make loans to state agencies. Some states had dedicated this program to that purpose, he added. He emphasized the fund primarily would be for new construction. Number 1534 REPRESENTATIVE KOTT asked for an explanation of "state aid intercept." MR. KELTON responded that the packet contained a more complete discussion of that issue. In a nutshell, the bond counsel had informed them that having the "state aid intercept" language in there meant the difference between selling the bonds at a "AA" rating versus an "A" rating. "It's assurance to the buyers of the bonds that there's less chance of default," he said. If there was a default by a borrower, the state agency or agencies with control of the funds could intercept undesignated funds to repay the defaulted loan. It would apply to specifically appropriated funds, Mr. Kelton said. He referred to an example in the packet and added that in the nationwide history of the loan program over the past seven years, there had been no defaults. In Alaska's history, there had not been a single late payment. They did not view this as a significant problem, he emphasized. Any community that defaulted would ruin its own credit rating. Number 1651 BERDA WILLSON, Assistant Manager, Nome Joint Utilities, City of Nome, testified via teleconference in favor of HB 401. She asked that the funds be provided only to communities in need and not to state agencies. Number 1738 DIANA BENNETT, Finance Manager, Anchorage Water and Wastewater Utility (AWWU), Municipality of Anchorage, testified via teleconference in favor of HB 401 and SB 207, its companion bill. She read from a prepared statement: "Although AWWU shares a common work force and management team, it is actually two separate utilities for regulatory purposes, establishing separate rates for service and incurring separate debt for capital projects. The wastewater utility relies substantially, in fact, almost entirely, on the Alaska Clean Water loan fund to finance its comprehensive capital improvement plan. We anticipate borrowing $4-6 million annually from the loan program. I hope the funds will be available to do so. "The low-interest loan program has been extremely popular and well received throughout the country. The Anchorage Wastewater Utility has borrowed $8.8 million from this low-interest loan program, at rates substantially lower than would be possible in the regular bond market. We estimate this has saved the ratepayers at least $400,000 over the past four years, in addition to the flexibility the program affords us. In the years this Alaskan program has been in existence, ADEC has made loans totaling $53 million. There is still a tremendous need for low-cost funding throughout the state. ADEC received requests for $13 million in loans for the current fiscal year. "The bill now under discussion will allow what many other states have done and leverage this initial capitalization money from the federal government. Increasing the amount of funds available allows projects to be completed sooner than if we have to wait for our projects to move above the `cut line.' This is a good way to increase the pool of money available for necessary water quality projects, without putting any other programs at risk. The burden for repayment remains with the communities requiring the funds and there is a strong incentive for them, or for us, to continue to make our repayments. "Without increasing the availability of funds, at the current request level of $13 million a year, the state is going to run out of money to loan in only two years. The loans are being repaid, but the repayment stream has not reached equilibrium yet, and when it does, it will still only be, I believe, $4-5 million, which is well below the projected need. The communities around the state need this source of low-interest money to help finance sorely needed water quality improvements. "The revenue bonds will be backed, not by the full faith and credit of the state, but by the revenue coming from repayment of the loans. As you've heard, in the history of the low-interest loan program, there has never been a default -- not in the entire United States. In fact, in Alaska, there has never even been a late payment. These bonds will be extremely safe. The state will not be required to `bail out' any agency over this. "You may have seen a Municipality of Anchorage memo listing some recommended changes in this bill. The Utility is substantially in favor of the bill as was originally written; however, we were asked to comment on the bill, with an eye to any proposed changes. This Utility works closely with ADEC and we have agreed among our two groups that this bill, with or without any or all of the suggested revisions, is extremely workable and will benefit the whole state of Alaska. I urge you to pass this bill. Thank you for your time." Number 1930 LEE SHARP, Attorney at Law, Preston, Gates & Ellis, testified via teleconference that his firm had been acting as bond counsel to the state, assisting ADEC with some of the language in HB 401. He expressed that he was available for questions with respect to the peculiarities of bonding. Number 1954 CO-CHAIR AUSTERMAN asked Mr. Kelton how long ago the loan program had begun. MR. KELTON replied the program had been in place about six years. CO-CHAIR AUSTERMAN referred to the $15 million per year of maximum bonding, with $50 million being repaid over 20 years. He suggested there was a time frame for looking at getting that $15 million stream coming back, so that bonding would no longer be needed. Number 1969 MR. KELTON said it depended on the lengths of the loans. Although most were 20-year loans, some were less. To come up with a firm figure was difficult. For example, if all $80 million were already loaned for 20-years, the maximum principal repaid per year would be $5 million. There may be interest, as well. That was a long ways from the demand of $15 million, even if all the money were out there and repayments coming back. CO-CHAIR IVAN asked if others wished to testify; there were none. Number 2062 REPRESENTATIVE ELTON noted that HB 401 had several other committee referrals. In light of that, he moved that HB 401 move from the committee with individual recommendations and attached zero fiscal notes. There being no objection, it was so ordered. HB 400 - WELFARE REFORM Number 2093 CO-CHAIR IVAN noted that committee packets for HB 400 contained a copy of the bill, the Governor's transmittal letter and numerous fiscal notes from affected agencies. Number 2133 JAY LIVEY, Deputy Commissioner, Department of Health and Social Services (DHSS), expressed his intent to provide an overview of both HB 400 and the progress of welfare reform in Washington, D.C., as those issues seemed to be linked. Number 2148 MR. LIVEY explained there seemed to be two major issues with regard to what was happening in D.C. The major change was replacing the entitlements with block grants. Historically, Aid to Families with Dependent Children (AFDC) had been a joint federal-state partnership in which the federal government matched state expenditures. If populations increased or the economy turned downward, adding welfare recipients, the federal government would participate with the state in funding those additional costs. With block grants, however, that was not necessarily the case. The block grant amount coming to the state would be based on a prior expenditure year, which in Alaska's case would probably be 1994. If the cost of AFDC rose in the future, it would leave the state with the choice of adding funds or making changes to the program. Number 2218 MR. LIVEY said the second major theme in D.C. was that welfare was more than AFDC. In the U.S. Congress, welfare reform included changes to child support, food stamp, child care, Medicaid and other programs. In addition, there were bills in Congress combining and placing into block grants all the employment and training money currently coming to the states. On the federal level, welfare reform meant comprehensive changes to a lot of programs that were interactive and which affected each other. Number 2260 MR. LIVEY explained that a stand-alone welfare reform bill had passed both the House and the Senate in the U.S. Congress; that bill had been vetoed by the President. In addition, there were welfare reform proposals currently under negotiation in the Budget Reconciliation Act. Recently, the National Governors Association had met in D.C. and come up with a proposal about welfare reform. Congressional hearings were scheduled on those provisions over the next couple of weeks. Mr. Livey thought there was a good chance something would happen in welfare reform in the next year. Number 2296 MR. LIVEY said the ambiguity of not having federal welfare reform had made everyone's jobs a little more difficult. However, regardless of what happened in D.C., he felt reform should go forward. If the U.S. Congress and the President went forward with welfare reform, then HB 400 would provide a framework. If that did not happen, HB 400 offered a way of applying for waivers that would implement as many provisions of the bill as possible. Number 2336 REPRESENTATIVE ELTON expressed concern that there was no protection from future congresses. If the block grant level was "x" one year, it did not necessarily mean it would not be "y" the next year. States would also have to pick up costs if federal funding was reduced by a future congress. Number 2362 MR. LIVEY affirmed that was correct. The bill, he said, was written so that the block grant amount received in 1996 would essentially be appropriated to the state every year for five years. However, of course, Congress could come back and change that action at any time. REPRESENTATIVE ELTON noted that was exactly what the state had done to municipalities under revenue sharing municipal assistance. Number 2383 JIM NORDLUND, Director, Central Office, Division of Public Assistance, Department of Health and Social Services (DHSS), indicated that the process leading to the legislation had been quite thorough. The bill was the product of several state agencies besides DHSS, including the Departments of Labor, Law, Community and Regional Affairs, Education, Administration, Revenue, and Commerce and Economic Development, as well as the Alaska Housing Finance Corporation (AHFC) and the new Alaska Human Resources Investment Council (AHRIC). An interagency task force had met over the summer and in the fall; input from that task force was included in the bill. In addition, HB 400 was the product of the Governor's blueprint for welfare reform which was released May 1, 1995. There had also been community meetings held in late summer and fall, funded by the legislature, in 14 areas of the state. Finally, HB 400 had been based on legislation introduced the previous year. TAPE 96-14, SIDE B Number 0006 MR. NORDLUND emphasized that HB 400 was one element of a plan that also included changes in the budget, as well as administrative changes in DHSS that depended on neither the budget nor HB 400. Number 0023 MR. NORDLUND set out the primary principles behind their approach to welfare reform: 1) welfare would no longer be a permanent solution but would provide a temporary safety net; 2) work would be emphasized; 3) benefits would be limited; and 4) recipients would assume a measure of responsibility towards moving off public assistance and into the work force. Number 0074 MR. NORDLUND touched briefly on changes in the operating budget. In the current budget, they were requesting a "reinvestment of saved benefit dollars." This past year, he explained, there had been a drop in the case load, which he suggested was, in part, due to the state's welfare reform efforts. They wanted to see those dollars reinvested into job training and child care, which were both essential for successful welfare reform. Number 0104 MR. NORDLUND said his agency was trying to change the culture of the welfare office. In the past, they had simply determined eligibility and issued benefits. Now, they wished to work with clients to develop self-sufficiency plans and help them through the necessary steps. They were co-locating their agency with the Department of Labor's Division of Employment Security at various locations around the state, both for programmatic and symbolic reasons. Number 0141 MR. NORDLUND explained that the bill itself, HB 400, was a comprehensive redesign of what was currently the AFDC program. It focused on work and self-sufficiency, as well as providing the necessary tools. It completely repealed the AFDC and JOBS programs. Instead, it started over with a new program, the Alaska Family Independence Program (AFIP). The implementation of AFIP was based on what DHSS anticipated to be changes in federal law. As Mr. Livey had mentioned, if the federal law did not change and allow the state to implement the new program through the sweeping changes envisioned in HB 400, there were provisions in the bill that would allow DHSS to go forward and apply for waivers to implement as many changes as possible. Number 0192 MR. NORDLUND noted that HB 400 was broadly constructed. Many things the department planned to do would be done by regulation. He suggested the fiscal note might provide a better idea of how the program would operate than would the bill itself. Mr. Nordlund cited examples of ways the department would limit assistance. Number 0218 MR. NORDLUND referred to limits on benefits and said they were carrying forward "what looks to be a requirement from the federal government that there'll be a 60-month lifetime limit on benefits." Secondly, they anticipated basing payment levels on household expenses, reducing benefits, for example, to families receiving free or subsidized housing. That would result in a savings of approximately $2 million; in the fiscal note, DHSS was asking for a realignment of those savings into increasing the earned income disregard, which would provide further incentive for recipients to take jobs. There were a number of work incentives in the legislation, Mr. Nordlund added. Number 0295 MR. NORDLUND said teens would be required to live at home and finish their high school education or obtain their GEDs in order to receive benefits. One-parent families would receive higher priority than two-parent families. Sanctions or disqualifications would also be established for recipients who refused to take appropriate jobs, assuming adequate child care was available and that they were adequately trained for that employment. Mr. Nordlund pointed out the heavy emphasis in HB 400 on work and job development. The Governor and DHSS intended for all recipients to be in work-related activities within two years of first receiving benefits. A family would also be required to adhere to a self- sufficiency plan developed between case workers and the family. Mr. Nordlund said HB 400 also eliminated "what are currently federal regulations that are disincentives to work," one of which was the 100-hour rule that disqualified any individual who worked more than 100 hours per month. He explained that most states were doing away with that, either under waiver programs or state law. Number 0394 MR. NORDLUND noted that current recipients were allowed a car valued at up to $1,500, which in many cases precluded adequate transportation to work. Under HB 400, that provision was eliminated for one car. In addition, HB 400 provided incentives for development of self-employment, if a recipient was so suited. Opportunities for community service were also expanded through nonprofit organizations. Number 0428 MR. NORDLUND emphasized that the primary reason AFDC existed, and the reason DHSS wanted a cash assistance program to continue, was that there were still poor people in Alaska with families. The bill continued to maintain a safety net for low-income individuals with children. What had been painstakingly avoided under HB 400 was making across-the-board benefit cuts. Instead, cuts were being made to provide incentives to work and to provide equity to families currently receiving AFDC. Number 0481 MR. NORDLUND said the bill provided services to teen parents to ensure they had safe homes. He said they were working to establish better cooperation and communication between food banks and food kitchens in the state, as well. He mentioned a food coalition established by Commissioner Perdue. More community involvement was envisioned in the administration of what was currently the AFDC program, Mr. Nordlund said. Currently, the public assistance program was based on a state-to-client relationship, with 450 employees in 12 offices located around the state. In the future, under welfare reform and the flexibility it would provide, he envisioned that local communities, including Native organizations, local nonprofits or municipalities, could take over part of what the Division of Public Assistance was currently administering. Mr. Nordlund added that HB 400 gave grant authority to DHSS to do that. Number 0555 MR. NORDLUND explained that if a federal welfare bill were signed into law, there was little doubt it would contain a Native set- aside provision allowing Native organizations to contract directly with the federal government to provide what is currently the AFDC program. The Administration was in support of that, Mr. Nordlund said. Furthermore, there was language in HB 400 that asked DHSS to coordinate and cooperate with Native organizations as they worked with the federal government to establish their own programs. Number 0608 MR. NORDLUND mentioned that child support was a big part of the bill, which increased the tools available to the Department of Revenue's Child Support Enforcement Division to collect payments from child support obligors. With regards to this, the language in HB 400 was identical to that in the previous year's legislation. He said language relating to possible withholding of individuals' occupational or driver's licenses in lieu of child support payments would probably be required by the federal government under welfare reform proposals currently being considered by the Congress. Number 0663 MR. NORDLUND concluded by saying there was a section-by-section analysis which had been provided with the legislation. CO-CHAIR IVAN referred to the possibility of block grants going to the state, with some diverting to the Native community. He asked if that would decrease the number of personnel in the Division of Public Assistance. Number 0695 MR. NORDLUND replied that the correct way of portraying that relationship would be that the monies coming from the federal government would not go to the state, but would go directly to the Native organizations. It would be a direct federal-Native relationship for the federal share of that money. To answer Co- Chair Ivan's question, he said there would probably be some affect on the number of employees. However, that was hard to determine right now because currently the division also administered the food stamp program, as well as the adult public assistance programs. Their staff would still need to do eligibility for those programs, while the Native organizations would do eligibility for the AFDC programs. He anticipated a reduction of staff if they gave up to Native organizations not only the benefit dollars, currently administered by the state, but also some of the administrative dollars. However, it was too difficult to quantify right now, he reiterated. Number 0750 CO-CHAIR IVAN mentioned that he had voted for a measure that passed the House last session. He asked what the differences were between HB 400 and the bill that passed the House the previous year. Number 0772 MR. NORDLUND explained that last year's legislation was based on current law. "The way we wanted to achieve welfare reform was through waivers in the federal law," he said, adding that was a much more piecemeal approach. On the other hand, this year's legislation was a sweeping, comprehensive change, wiping clean the current AFDC and child support statutes and starting all over. "We are doing this in anticipation of federal welfare reform," he said. "Last year's legislation was based upon existing federal and state law." Number 0830 CO-CHAIR IVAN asked about the difference between last year's five- year time line and the current one. MR. NORDLUND explained that the previous year's legislation would have been signed by the Governor except for the five-year provision. Whether intentional or not, the way the Attorney General's Office read that legislation was that the five-year limit would have kicked in for individuals starting at birth. Any child who was a beneficiary of the AFDC program for five years would never be eligible for AFDC again, even if he or she needed assistance later as an adult with children. The Governor had felt that was exceptionally harmful to children and with some regret had to veto an otherwise good piece of legislation because of that provision, Mr. Nordlund noted. Number 0885 CO-CHAIR IVAN referred to the Alaska Family Independence Program (AFIP). He asked about differences between AFIP and the AFDC and JOBS programs that would be replaced. Number 0906 MR. NORDLUND said the reason the JOBS program was no longer identified was not because that program was considered unimportant. In fact, he said, they envisioned the whole public assistance agency essentially becoming like the JOBS program. To make sure that the AFDC program, as they knew it in the past, no longer existed, they had thought it appropriate to rename it. It was also renamed on the federal level, he noted. Number 0971 REPRESENTATIVE ELTON said he was "half-way comforted" about the five-year limit. He asked if the five-year limit did not kick in until the age of majority. MR. NORDLUND nodded yes. REPRESENTATIVE ELTON asked, "if a person, a parent, has been in the program from the age of 21 to 26, what happens to the kids in that family once the parent is kicked out?" He further asked what percentage of the client base would probably be kicked out by a five-year limit. Number 1014 MR. NORDLUND clarified that what was envisioned under the federal law, which was being carried through in this legislation, was that after 60 months of receiving benefits, the entire family would be ineligible to receive benefits again. Once a child in that family grew up and had offspring, establishing a new case, he or she would be eligible. Number 1039 REPRESENTATIVE ELTON expressed concern over having a program that kicked a child out for the failure of a parent to "matriculate from the program, whatever the structure of that might be." He said he assumed that the structure of HB 400 anticipated the federal requirement of a 60-month limit and that there was nothing the state could do about that. Number 1076 MR. NORDLUND replied, "We don't know exactly what the state could do about that. We don't know where we're going to be, necessarily, in five years, once this provision kicks in." He added that it was of great concern to the Administration what happened to families going over the 60-month limit. It was their goal to not allow that to happen. "We need to bring as many forces to bear as we can to make sure that those individuals are given every opportunity to move into the work force as possible," he said. He noted that there was currently either a 15 or 20 percent exemption, depending on which version of the federal welfare reform was looked at; the National Governor's Association had suggested it be 20 percent. That exemption would mean 20 percent of the case load would be exempt from the 60-month limit. Presumably, that exemption would apply to people who were disabled and unable to work, or else individuals living in areas with chronically high unemployment areas. "This continues to be a source of concern to us," he said. He voiced the need for child care and job training to get people back into the work force. Number 1163 MR. LIVEY agreed the bill put much more responsibility on the family, as well as on the department. He referred to the fiscal note and the bill and said that in conjunction with the budget, what was proposed was taking some savings from case load reductions and continually reinvesting those savings into job training, child care, adult basic education and so forth, so that people could work their way off the program. Number 1222 CAROL YAKISH, Social Worker, Kodiak Area Native Association (KANA), testified via teleconference, saying she had some concerns, mainly because of her work with the Bureau of Indian Affairs (BIA) general assistance program for the Native villages on Kodiak Island. One concern was not knowing whether BIA general assistance programs would continue or how they would fit into the state block grant areas, as well as whether KANA, as one of the 12 listed organizations, would or would not take on responsibility for what was now known as the AFDC program. Ms. Yakish thought the impact on the villages would be great. She was concerned about incorporating the requirements of the programs within the isolated villages that had chronic high unemployment. Number 1356 LOUISE CHARLES, Administrator, Job Opportunities and Basic Skills Program, Tanana Chiefs Conference, testified via teleconference from Fairbanks in favor of HB 400, which she thought was fair to urban and rural welfare recipients alike. She discussed the obstacles faced by people in welfare-to-work programs and provided an overview of the tribal JOBS program. It was impossible to serve all eligible clients with their current funding, Ms. Charles said, although they were trying their best. She cited examples of agreements with other local agencies. She noted that many clients needed developmental or adult education courses prior to gaining skills to get jobs that paid well enough to make workers self- supporting. Ms. Charles provided examples of clients who had moved from the AFDC rolls because of job training programs and indicated more funds were needed for that. She emphasized the necessity of looking at local solutions for rural areas. Number 1944 ANGELA SALERNO, Executive Director, Alaska Chapter, National Association of Social Workers, testified via teleconference from Anchorage, saying her association represented 450 social workers statewide. She spoke in favor of HB 400, which offered a well developed and workable plan for removing recipients of AFDC into work. Considering the five-year limit, she said, recipients would need work that would support their families. She expressed strong approval of the job training and child care provisions of HB 400, both for people at school and at work, as well as provisions to increase child support collections. She commended the department for their work on the bill. Number 2115 GENE OTTENSTOER, Victims of the State and Guardians of Family Rights, testified via teleconference from Delta Junction, asking how much federal funding the state received by passing this bill and others like it, such as bills on domestic violence. Number 2177 MR. NORDLUND replied that this bill did not directly affect the amount of federal funding to be received. Instead, it anticipated a federal block grant, which would likely be the amount of money received for the AFDC and JOBS programs, as well as for AFDC administration, in FY 1994. That amount was less than amounts currently received. This bill was written envisioning fewer federal dollars available to the state for the administration of these programs, Mr. Nordlund added. Number 2236 MR. OTTENSTOER voiced that this bill and others like it were geared to strip families of wealth and freedom and put them under the whips of slavery. It not only attacked the Constitution, Bill of Rights and Magna Carta, it was an attack on the back-bone of our country, which was the family. Anyone who would vote for this bill or any like it was committing treason. A better plan of attack for welfare reform would be to put recipients to work doing jobs that were not very nice. This would not only save money, but would inspire recipients to get off welfare. Number 2333 SINEAD (ph) PHIPPS, Board of Directors, Guardians of Family Rights, testified via teleconference from Delta Junction, saying the bill went against the Declaration of Independence and was another form of unconstitutional attack on families, making it a crime to be poor, because most poor families were not politically correct. This bill was a back door for Communist take-over. It would not help anyone to become more self-sufficient but promoted more dependency on the government. It advocated the promotion of Healthy Start and similar programs by way of back door taxing. It tried to control every aspect of a person's life, taking away the rights and freedoms guaranteed by the Constitution of the United States and the Holy Bible. The state appeared to be wanting to receive more federal bounty. It appeared to be a means of robbing from people to separate them from any possible means of wealth that they may obtain to get ahead. More government control was not what was needed. This was not a way of freedom, but a way of bondage. Ms. Phipps disapproved renaming AFDC and disagreed with Section 36, page 35. TAPE 96-15, SIDE A Number 0001 MS. PHIPPS concluded her comments by saying, "You are committing treason and sedition, and do you know ... what could happen to you for doing that?" Number 0073 SHARON OLSEN, Chairperson, Alaska Native Coalition on Employment and Training (ANCET), noted that Ed Thomas had given testimony and provided copies the previous day to "the Senate committee." She mentioned some personal background and then read from a three-page document entitled, "Testimony on Welfare Reform Legislation, February 20, 1996," which she provided to the current committee as part of a packet prepared by ANCET. MS. OLSEN furnished background on the Tribal Job Opportunities and Basic Skills (JOBS) Program; discussed consolidation of programs under PL 102-477 and the joint partnership between Alaska Natives and the federal government to provide services; and made recommendations. Briefly, the recommendations addressed the following: 1) strengthening government-to-government relationship between Alaska tribes and the state government; 2) supporting the Governor's inclusion of a tribal match for FY 1997; 3) stimulating economic development, with special emphasis on creating job opportunities for those dependent on public assistance; 4) consulting with tribal governments in development of state waiver requests; 5) inviting tribes who were willing and able to contract with the state for a block grant as a demonstration project until the federal government passed welfare reform legislation; and 6) developing Tribal JOBS Plans for the next two years. Number 0804 CO-CHAIR IVAN shared his opinions about the state of Alaska not recognizing "so-called village tribal governments." He acknowledged there was a debate over the sovereignty issue that he wished could be set aside. The tribal government IRAs had been in place for centuries, he said, and were part of a community that could help in the welfare reform process, if the arguments could be set aside. Number 0869 DARLENE DEWEY, Child Care Coordinator, Child Care and Development Block Grants, Kawarek, Incorporated, testified via teleconference from Nome. Referring to AS 47.27.025 (a), regarding family assistance, she suggested that if the system intended to help families on AFDC become self-sufficient, assets should not be considered in determining benefits. She did not favor a time limit. She said most of the clients in the program lacked job skills. She thought clients in rural villages who were taking college classes should be considered. It cost money to leave the village, she said, and having time limits would only put children in jeopardy. Number 1054 MS. DEWEY referred to definitions under AS 47.27.090 and said since so many programs were involved, she recommended that the legislature come up with one flat income guideline. The clients using those services were AFDC clients and should not have to report every penny that went past their front door, she said. "Please define income, whether it is going to be earned or unearned, and delete assets as part of the applicant's requirements," she concluded. Number 1112 BRENDA AKELKOK, Bristol Bay Native Association, testified via teleconference from Dillingham. She explained that as a tribal entity, the association was interested in developing community service and work experience positions under contract with the state. However, they wondered what provisions there would be to indemnify "these Native entities from liability if something should happen to a work experience participant while they were on the job." She assumed such people would not be covered by Workers Compensation. She asked Mr. Nordlund to respond. Number 1171 MR. NORDLUND deferred to Kristen Bomengen to reply. KRISTEN BOMENGEN, Assistant Attorney General, Human Services Section, Civil Division (Juneau), Department of Law, said there might be a couple of different circumstances that had been described here. She acknowledged that all questions about what coverages would be required had not yet been answered. For subsidized employment, the entity employing the person would need to ensure there was Workers Compensation coverage. "I think that there may be an unlimited number of potential liability issues," she said. She pointed out that she was not really prepared to address all of those issues. "I think that there will be some provisions where someone is hired working on behalf of an outside employer, where we would, under state law, have to recognize the Workers Compensation provisions," she added. Number 1257 MS. AKELKOK responded that had answered some of the questions. However, she was still interested in seeing, for community service positions with nonprofits or state agencies, what protection there would be for the tribal entity, as well as for the state. She added that concluded her testimony for now. Number 1280 CO-CHAIR IVAN asked if there was any further testimony. He noted that the bill would be considered again. He thanked the participants and mentioned that the next meeting would address HB 409 and HB 383. Number 1331 ADJOURNMENT There being no further business to conduct, CO-CHAIR IVAN adjourned the House Community and Regional Affairs Committee meeting at 3:09 p.m.