Legislature(2003 - 2004)
02/04/2003 01:34 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 04, 2003
1:34 P.M.
TAPE HFC 03 - 10, Side A
TAPE HFC 03 - 10, Side B
TAPE HFC 03 - 11, Side A
CALL TO ORDER
Co-Chair Harris called the House Finance Committee meeting
to order at 1:34 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Carl Moses
Representative Gary Stevens
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
Representative Reggie Joule
ALSO PRESENT
Representative Bruce Weyhrauch; Representative Kelly Wolf;
Cheryl Frasca, Director, Division of Management & Budget,
Office of the Governor; Jeff Jesse, Executive Director,
Alaska Mental Health Trust Authority; Phil Younker, Sr.,
Alaska Mental Health Trust Authority Board Member; Nelson
Page, Chair-Budget Committee, Alaska Mental Health Trust
Authority Board Member; Stephen Planchon, Executive
Director, Alaska Mental health Trust Land Office, Department
of Natural Resources; Dan Fauske, Executive Director, Alaska
Housing Finance Corporation, Department of Revenue; Bryan
Butcher, Legislative Liaison, Alaska Housing Finance
Corporation, Department of Revenue; Joseph Dubler, Chief
Financial Officer/Finance Director, Alaska Housing Finance
Corporation, Department of Revenue.
PRESENT VIA TELECONFERENCE
*Listen only
GENERAL SUBJECT(S):
HB 75-APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 76-APPROP:MENTAL HEALTH BUDGET
Agency Overviews:
Alaska Mental Health Trust Authority (AMHTA)
Alaska Housing Finance Corporation (AHFC)
The following overview was taken in log note format. Tapes
and handouts will be on file with the House Finance
Committee through the 23rd Legislative Session, contact 465-
2156. After the 23rd Legislative Session they will be
available through the Legislative Library at 465-3808.
LOG SPEAKER DISCUSSION
TAPE HFC 03 - 10, SIDE A
000 Co-Chair Harris Convened the House Finance Committee
meeting at 1:45 P.M.
114 Representative Requested that Representative Kelly Wolf
Stoltze be seated at the Committee table.
160 Co-Chair Harris
HOUSE BILL NO. 75
"An Act making appropriations for the
operating and loan program expenses of
state government, for certain programs,
and to capitalize funds; making
appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from
the constitutional budget reserve fund;
and providing for an effective date."
Co-Chair Harris noted that HB 75 was
before the Committee for review by the
Office of Management and Budget.
222 CHERYL FRASCA, Explained and highlighted the handout.
DIRECTOR, DIVISION (Copy on File).
OF MANAGEMENT &
· Page 1 - total funds appropriations
BUDGET, OFFICE OF
by funding source since FY1992 in
THE GOVERNOR
the Operating and the Capital
budgets. General fund spending has
remained constant since FY95. The
federal funding has doubled in the
State.
· Page 2 - Outlines the Operating
budget since FY92. The general fund
is approximately 2/3 of the current
budget.
· Page 3 - Indicates the Operating
budget versus the formula Programs
since FY92- the general funds and
the other State funds;
· Page 4 - Formula growth by fund
source since FY99 through FY03. She
noted that federal funds fuel the
operating budget.
· Page 5 - Provides a recap of all the
formula program changes during the
past five years. The biggest
changes are to the Longevity Bonus
Program, which has decreased 25%.
She listed other decreases. Ms.
Frasca pointed out the 99% increase
to the Medicaid program since 1993.
· Page 6 - FY03 total funds operating
budget of $6.5 billion dollars by
program category. The All funds are
listed by program category. The
Department of Health and Social
Services consumes 23% of the entire
operating budget.
· Page 7 - FY03 Operating budget: $5.2
billion all funds (except Permanent
Fund) by an appropriation
categories. She noted the amount
for Personal services category. The
amount that goes to grants consumes
27% of the budget; personal services
amounts to 27% of the budget by
contracts.
· Page 8 - FY03 General Fund operating
budget categories: $2.2 billion
general funds only by program
category. She noted that education
consumes 35% of that budget and that
budget is primarily formula driven.
The Governor's priority is to
minimize the impact on the public of
the reductions to services. Ms.
Frasca noted that was the challenge
being faced by the new
Administration. As a result the
budget is not currently available
and that they are attempting to have
the budget available by February
th
25.
· Page 9 - Provides the FY02
authorized/fiscal year 2003
authorized fiscal summary. She
noted that there are approximately
$40 million dollars of proposed
increases to the formula driven
programs, about $55 million dollars
in increased debt service costs,
approximately $85 million dollars to
replace lost one time monies, $39
million from lost federal funds, $19
million dollars to replace non
general fund sources and an increase
request by the University.
1232 Ms. Frasca Admitted that those needs and costs need
to be balanced.
1321 Co-Chair Harris Asked to have a zero line budget, the
State will need to reduce spending by
$159 million dollars. Ms. Frasca replied
that would be the scenario with a flat
budget.
1342 Representative Asked if there had been statutory
Stoltze recommendations at present time.
1357 Ms. Frasca Replied that the goal was not to present
a budget that depends upon statutory
changes.
1417 Representative Asked if it was foreseeable that the
Stoltze Administration would be making
recommendations for statutory changes.
Ms. Frasca replied it was probable.
1451 Representative Croft Referenced Page 9, noting that Habitat
was still in the Department of Fish and
Game, not Department of Natural
Resources.
1516 Ms. Frasca Responded that was the FY03 management
plan approved by the Legislature last
session. It has not been rewritten to
reflect the current proposal for FY04.
1526 Representative Croft Summarized that what was being overviewed
was the FY03 budget.
1533 Representative Croft Referenced Page 1 & 2 of the handout. He
noted the general fund and operating
funds and asked if they were inflation-
adjusted numbers.
1616 Ms. Frasca Replied that they are 'raw' numbers.
1628 Representative Croft State that those numbers would not keep
up with inflation.
1641 Ms. Frasca Stated that it would not reflect "buying
power".
1650 Representative Croft Noted that the numbers did not reflect
any increase in the State's population.
He thought that numbers was approximately
600.
1704 Ms. Frasca The chart shows the amount appropriated
by the Legislature last year.
1720 Representative Croft The graph indicated that the graph shows
mostly federal funds.
1746 Co-Chair Harris Noted that the bill would be HELD in
Committee for further consideration.
1814
ALASKA MENTAL HEALTH TRUST AUTHORITY
(AMHTA)
1832 PHIL YOUNKER, SR.,
HOUSE BILL NO. 76
ALASKA MENTAL HEALTH "An Act making appropriations for the
TRUST AUTHORITY operating expenses of the state's
BOARD MEMBER integrated comprehensive mental health
program; and providing for an effective
date."
Mr. Younker introduced the members of his
group, Nelson Page, Steve Planchon and
Jeff Jesse.
2001 JEFF JESSE, Distributed the handout. (Copy on File).
EXECUTIVE DIRECTOR, He spoke to the history of the Alaska
ALASKA MENTAL HEALTH Mental Health Trust Authority (AMHTA).
TRUST AUTHORITY In the times of territorial Alaska, if a
person had any type of disability, and
could not make it with the support of
family and or church and came to the
attention of the territorial officials,
that person was tried and convicted of
being an "insane person at large". When
statehood was being discussed, then the
state would then have had to take over
this responsibility. There was no means
of support at that time. Within a few
years, a three-prong strategy was created
to work out the problem. The first was
an initial appropriation of $8 million
dollars that built the first wing of
Alaska Psychiatric Institute (API) and
bought the original Harborview.
Additionally, there was some federal
operating support. The third part was to
allow the State to select acres of land
to hold a trust to generate income to pay
for mental health services. The State
did a good job of choosing the land.
It was well chosen land. As the State
grew, mental health services increased.
Unfortunately, the State then took that
million acres and rolled it into their
100 million acre federal entitlement and
treated it all like general state lands.
Half of that land was removed into
federal trust status. When the local
governments were able to select State
land, they selected mental health trust
lands. He admitted that was a problem.
It took three years and then in 1982, the
original lawsuit was filed. By 1985, it
went to the Alaska Supreme Court who
ruled that the land must be returned.
2428 MR. JESSE Referenced Page 2, which listed the key
terms of that Court settlement.
· Trust authority free to use Trust
resources to act as a catalyst for
change;
· Trust authority funding
recommendations considered in a
single appropriation bill;
· Trust authority to aid in
comprehensive planning for mental
health program;
· Mental Health Trust Lands and
associated state lands released for
development.
2541 Mr. Jesse Claimed that AMHTA is proud of the land
office. He recapped the beneficiaries:
· People with mental illness
· People with developmental
disabilities
· People with Alcoholism/other
addictions;
· People with Alzheimer's disease 7
other dementia.
2613 Mr. Jesse Referenced those people with traumatic
brain injuries that are also
beneficiaries of the Trust. The Board
will work with the Alaska Traumatic Brain
Injury Advisory Board.
2705 Mr. Younker Referenced Page 3, Land and Resources.
When the settlement actually came, the
Trust received 994,000 acres, managed for
the long-term.
He listed the breakdown of the lands:
· Fee estate
· Mineral estate
· Coal, Oil & Gas
2842 Mr. Younker Continued, highlighting the revenue from
the Trust land office and how the
operating and capital expenditures versus
the revenue earned. That budget is broken
into two portions, Capital expenditure
and the Operating.
3001 Mr. Younker Referenced Page 5, 2002 Alaska Business
Monthly TOP 49 by $ per employee
operations. The Trust land office with
just nine employees, ranks #7 on the
chart. He compared that to some Native
Corporations that have some large land
holdings.
3050 Mr. Younker The chart on Page 5 also indicated the
value from 1996 versus 2002.
3110 Mr. Younker The pay out rate changed from 1996 at 3%
to 3.5% in 2002. The Trust is designed to
'self-inflate'. That is why a little
less than 5% is paid out.
3136 Mr. Younker Noted that the system is that there is a
4-year payout. Currently at 2 years.
Added additional policy to insure
3222 Mr. Younker Referenced Page 6, Trust FY04 and the
Trust Major Accomplishments. The general
fund mental health base amounts to
$134.400 million dollars. The alcohol
tax, which was added last year, $3.6
million dollars was committed in last
year's budget.
3350 NELSON PAGE, CHAIR-Referenced the handout. (Copy on File).
BUDGET COMMITTEE, He highlighted the accomplishments of the
ALASKA MENTAL HEALTH first six years.
TRUST AUTHORITY
· Closure of the Harborview
BOARD MEMBER
Developmental Center in Valdez. For
years the State had been trying to
find a way to close that center.
When closing down an institution,
there is a period of time with there
are two sets of bills that need to
be paid. The Trust ended up coming
forward and paying 1/2 of those
bills. The State then spent their
money on new programs.
3635 Mr. Page Continued listing the accomplishments:
· API. For years, everyone knew that
API needed to be replaced. The
Trust helped with the change. API
was on Trust land. The system
involved what a new API building
would look like and that system
currently is in place.
3820 Mr. Page Provided another example:
· The Fort Knox Gold mine. The Trust
was able to collect some revenue and
at the same time, there was an
opportunity to have permits to make
the site a regional mill site. That
created a place for milling.
3942 Mr. Page Referenced Handout 1, Page 7, noting that
the Trust works in conjunction with the
Four Advisory Boards. The four boards
help to create the Mental Health Budget
bill to determine the needs of the
beneficiaries.
· Alaska Mental Health Board
· Governor's Council on Disabilities &
Special Education
· Advisory Board on Alcoholism & Drug
Abuse
· Alaska Commission on Aging
4135 Mr. Page Comprehensive Integrated Mental Health
Plan provides for Department of Health &
Social Services and AMHTA be responsible
for preparation of a plan for an
integrated comprehensive mental health
program that is coordinated with federal,
state, regional, local and private
entities involved in mental health
services.
4220 Mr. Page Listed the result-based planning areas:
Health, safety, economic security and
living with dignity.
4233 Mr. Jesse Stated that the priorities are the result
based planning concerns that are building
infrastructure and creating workforce
development.
4340 Mr. Jesse Listed the prior collaborations.
· API 2000 - Anchorage Emergency
Services
· Assisted Living Rate Increase
· Medicaid Options
· Women's Mental Health Unit in
Department of Corrections
· Closure of Harborview
· Suicide Prevention Council
· Alcohol Evaluation
4500 Mr. Jesse Noted that the Trust had split a $200
thousand dollar study costs to determine
the results of alcohol treatment
programs. He advised that good results
need to happen from those investments.
4548 Mr. Jesse API/Anchorage Emergency System. He noted
that AMHTA was being pushed into the
'corner' to build a larger hospital was
because Anchorage was using API as a
short-term psychiatric facility. In
other parts of the State, they do not do
that. The Trust worked with U.S. Senator
Stevens to develop a hospital for
Anchorage. The first job was to create a
single point of entry. In Anchorage, the
police officers have to access the people
that they pick up.
TAPE HFC 03 - 10, Side B
4659 Mr. Jesse Added that with the help of the federal
monies, a single point of entry was
created for detoxing. A 24-hour nursing
coverage was also provided with the
federal money. He stressed that there
must be an emergency system within
Anchorage to address these concerns and
the federal money is going away. There
is a scheduled cycle to address this and
over the years those federal dollars have
been replaced with general fund dollars.
4501 Mr. Jesse Spoke to the Alcohol Fund Package.
· Alcohol Tax increased in 2002
· Alaska Legislature committed one-
half of the alcohol tax revenue to
be set aside for alcohol prevention
and treatment
· $3.6 million dollars for Alcohol
Fund revenue was utilized in the
FY03 budget for existing services
4314 Mr. Jesse Listed the reforming mandated treatment
consisting of five components of alcohol
fund package:
· Child protection
· Adult Offenders
· Emergency Services
· Youth/Juvenile Justice
· Capital/Infrastructure
Representative Questioned if the Trust had an inventory
Stevens of their properties and the present value
of those.
4141 STEPHEN PLANCHON, Responded that a there was a detailed
EXECUTIVE DIRECTOR, inventory of where the parcels are
ALASKA MENTAL HEALTH located. As a result of the settlement
TRUST LAND OFFICE, process, there was an extensive appraisal
DEPARTMENT OF process done for the bulk of the lands.
NATURAL RESOURCES As of today, there is not a complete
inventory.
4018 Representative Asked how long it would take to prepare
Stevens that information.
4000 Mr. Planchon Noted that it would not be much different
that some of the Alaska Native
Corporations who have concluded that it
would take a lot of time and a lot of
money. The settlement clarified that the
Trust was not to take over the obligation
of the State in respect to funding Mental
Health programs. The Trust does not have
the resources to take over the State's
funding requirements.
3834 Representative Inquired if the Trust has been expanded
Stoltze since the inception of including mental
health.
3811 Mr. Jesse Explained that early on, the Trust went
through the entire State budget and
determined what should be allocated in a
separate appropriation bill. Following
that discussion, the concept of what was
under the Trust has remained consistent.
3747 Representative Referenced the history of the Trust.
Stoltze
3725 Mr. Jesse Advised that the beneficiaries have not
changed, but rather the methods of
service. He noted that home health care,
family supports, community based
services, etc. have been added. He
conceded that the program had changed
dramatically.
3635 Co-Chair Williams Referenced a discussion he had with a
constituent regarding the method of
timber sales involved through the Trust.
3550 Mr. Planchon Confirmed that a bulk of the timber sales
had gone to an export market, however, he
noted that small mills in Alaska have
benefited from the sales.
3433 Mr. Page Noted that the initial suit occurred when
the State forgot that the land was held
in 'trust'. That had been overlooked.
The Trust's Fiduciary responsibility is
to safeguard the beneficiary's interests.
3330 Representative Croft Followed up on previous comments that the
State would receive less money if it were
restricted for shipping out raw.
3310 Mr. Planchon Confirmed that there was a significant
price difference between the foreign and
domestic markets in timber. He noted
that some of that was based upon volume.
The domestic market is not able to
accommodate the large quantities. The
Forest Service sales included an export
ban. The domestic sales would be a
significant reduction in Trust income.
At present time, the timber revenue for
the Trust represents 50 percent of the
gross income. The Trust attempts to
diversify the revenue sources. Timber is
a faster resource to liquidate. The
timber resource will decline in the next
three years.
3122 Representative Croft Asked if Alcoholism was considered a
mental illness in 1955.
3015 Mr. Jesse Responded that the territorial
authorities applied a 'blunt instrument'
that people with any kind of mental
disabilities that fell back on the
territorial government for their care
were considered as such.
3004 Representative Croft Asked if it was expanding the client base
or a more sophisticated way of talking
about the issues.
2940 Mr. Jesse Stressed that the issue of prevention.
In some areas, the Trust has better
strategies than the others.
2928 Representative Croft Asked about HB 76.
2917 Mr. Jesse Commented that HB 76 is the same
situation as the general fund bill and
that the Trust was in consultation with
the Office of Management and Budget
regarding the concern.
2900 Representative Croft Noted that it was the same funding as
last year.
2847 Mr. Jesse Acknowledged that was correct. He
pointed out two more aspects of the
Alcohol package.
· Evaluation - he noted that they were
proposing that a significant amount
of the money would be used for an
ongoing, independent evaluation of
the outcomes of the alcohol programs
· Workforce development - The State is
not good at taking what is known
nationally of what are the best
practices and putting them into
play.
2733 Mr. Jesse Stated that partnering with the
University of Alaska could play a key
role in all areas, which could benefit
the State.
2650 Mr. Younker Addressed the success of the Mental
Health Trust. He admitted that the Trust
looks forward to working with the
Legislature and the Administration. He
concluded that the management of the
State's land continues to serve a wide
variety of needs throughout Alaska.
2453 Representative Asked if the Trust had been subjected to
Hawker an independent audit.
2427 Mr. Jesse Replied that the Trust only participates
in the State audit.
2416 Representative Croft Asked for further information on the
alcohol assessments and which programs
work.
ALASKA HOUSING FINANCE CORPORATION
2320 DAN FAUSKE, Provided the Committee with a handout.
EXECUTIVE DIRECTOR, (Copy on File). He noted that the
ALASKA HOUSING mission of the Alaska Housing Finance
FINANCE CORPORATION, Corporation (AHFC) was to provide
DEPARTMENT OF Alaskans access to safe, quality,
REVENUE affordable housing.
2227 Mr. Fauske Explained that the: (Page 3)
· Housing industry accounts for 24% of
the gross State product
· Expenditures for housing amounts to
28% of the average Alaskan family's
disposable income
2140 Co-Chair Harris Asked if those numbers could be divided
between the rural and the urban.
2123 Mr. Fauske Replied that those percentages were
statewide.
2111 Mr. Fauske Referenced Page 4 - Operations:
· Offers Home Loan programs
emphasizing housing for low and
moderate income and rural residents;
· Administers statewide housing,
energy efficiency and weatherization
programs;
· Operates the State's Public Housing;
· Assists in the statewide financing,
development and sale of dwelling
units.
1958 Mr. Fauske Page 5 - Special programs for low to
moderate income & rural residents:
· Interest rate reduction for low-
income borrowers;
· Energy efficiency interest rate
reduction;
· Rural Housing Assistance loan fund;
· Multi-family loans.
He commented that the low interest rates
are 'fueling' the current robust market.
1855 Representative Inquired if those were residential loans.
Hawker
1826 Mr. Fauske Replied that they were.
Referenced Page 6 - Statewide housing,
energy efficiently and weatherization
programs. He explained that this was a
very successful programs and then listed
the items:
· L.I.H.T.C. Program
· Senior & special needs housing
· Statewide weatherization & energy
programs
· Supplemental housing
1702 Mr. Fauske Page 7 - the Public Housing Division. He
noted that there would be a pilot program
taking place in Barrow and that it would
be administered through the federal
government. Mr. Fauske noted that there
are over 4,000 people on the wait list
for that program.
1600 Mr. Fauske Page 8 - The Financing Programs. Mr.
Fauske noted that the Veterans Mortgage
program was about to sunset. The
programs include:
· Tax-exempt first time homebuyer
program
· Veterans mortgage program
· Taxable first time homebuyer program
· Taxable program
1399 Representative Inquired the rough number of veteran
Stevens loans that are out within the State.
1339 JOSEPH DUBLER, CHIEF Offered to provide that information. He
FINANCIAL estimated that there was roughly $300-
OFFICER/FINANCE $400 million dollars out.
DIRECTOR, ALASKA
HOUSING FINANCE
CORPORATION,
DEPARTMENT OF
REVENUE
1308 Representative Questioned the amount of the AHFC
Stoltze advertising budget.
1255 Mr. Fauske Replied that AHFC works with public
awareness. On the veteran's side, there
are public service announcements and no
voting restrictions have been violated.
He reminded members that AHFC is in a
competitive market and they want
awareness 'out there' particularly
regarding the taxable programs. He
reiterated that it is a competitive
market and that AHFC is 'up against' the
commercial market.
1155 Representative Admitted that he was overly suspicious.
Stoltze
1140 Mr. Fauske Continued highlighting Page 8.
1118 Mr. Fauske Outlined Page 9 - the long-term debt
issuance process that emphasizes the
subjective nature of the rating agencies
review of capital adequacy.
1050 Mr. Fauske Referenced Page 10 - reiterated the
rating criteria and requirements selected
excerpts emphasizing the subjective
nature of the rating agency's' review of
capital adequacy. AHFC is currently
rated as an AA-. He hoped to receive an
AAA rating. That would have an impact on
the cost of capital to the State.
Currently, Alaska has a positive image
and that frees up the operating system
and lowers the capital to investors. The
criteria is important will become more
important in discussions within the
Capitol budget.
906 Mr. Fauske Page 11 - Highlights the transfers to or
on behalf of the State General Fund from
1986-2002 percentages in the amount of
$1,219,040.
830 Mr. Fauske Page 12 - Summary of AHFC equity, net
income, State appropriations and
transfers to the State.
744 Representative Croft Noted the difference between direct cash
transfers and dividends. He asked the
distinction between those two.
715 Mr. Dubler Replied that in 1990, AHFC began a
dividend program, which included a cash
transfer for the dividend program.
638 Representative Croft Asked if it was ½ direct cash and ½
taking over projects. Mr. Dubler replied
that was correct.
630 Mr. Fauske Continued, referencing Page 12, the
summary of AHFC equity, net income, State
appropriations and transfers to the
State.
608 Mr. Fauske The rating agencies focus onto these
amounts. He stated that it is important
to be careful with these plans. The
plans must outline what is foreseeable
with the future transfers within the
State. Mr. Fauske noted that he would
work with the Committee in order to
formulate that plan.
422 Mr. Fauske Page 13 - Summary of financial
information. From a business
perspective, AFHC is satisfied with the
corporation's market share, however, he
pointed out the drop in the investment
income. The original base was based on
6% as an interest rate. Currently, that
rate is at 1.2%. That percentage falls
in line with interest rates throughout
the country. AHFC does not now invest in
equities; all money loaned is short-term.
226 Mr. Fauske Discussed that these are trusted money
and they have no equity.
207 Representative Asked the portion of the portfolio that
Hawker is on a fixed rate basis versus the
variable rate base.
142 Mr. Dubler Replied that everything at this time, is
on the fixed rate loan scheme.
127 Representative Asked the average maturity rate on the
Hawker portfolio.
113 Mr. Fauske Replied that the average loan in Alaska
is seven years.
54 Mr. Fauske Referenced Page 14, the Short-Term
Investment rates.
TAPE HFC 03 - 11, Side A
020 Mr. Fauske Continued, noting that the business of
AHFC is currently doing well.
038 ADJOURNMENT The meeting was adjourned at 3:15 P.M.
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