Legislature(2019 - 2020)SENATE FINANCE 532

01/30/2020 09:00 AM Senate FINANCE

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09:01:53 AM Start
09:03:40 AM Presentation: Alaska Mental Health Trust Authority
10:13:35 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Alaska Mental Health Trust Authority TELECONFERENCED
- Mike Abbott, CEO
- Mary Jane Michael, Chair of the Board of
Trustees
                 SENATE FINANCE COMMITTEE                                                                                       
                     January 30, 2020                                                                                           
                         9:01 a.m.                                                                                              
                                                                                                                                
9:01:53 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:01 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator David Wilson                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Mike Abbott,  Chief Executive Officer, Alaska  Mental Health                                                                    
Trust  Authority; Mary  Jane  Michael,  Board Chair,  Alaska                                                                    
Mental Health Trust Authority; Senator Cathy Giessel.                                                                           
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
PRESENTATION: ALASKA MENTAL HEALTH TRUST AUTHORITY                                                                              
                                                                                                                                
Co-Chair Stedman  informed that  the committee would  hear a                                                                    
presentation from  the Alaska Mental Health  Trust Authority                                                                    
(AMHTA);  and  would  consider  budget  highlights,  current                                                                    
issues, and where the trust felt it was headed.                                                                                 
                                                                                                                                
^PRESENTATION: ALASKA MENTAL HEALTH TRUST AUTHORITY                                                                           
                                                                                                                                
9:03:40 AM                                                                                                                    
                                                                                                                                
MIKE ABBOTT,  CHIEF EXECUTIVE OFFICER, ALASKA  MENTAL HEALTH                                                                    
TRUST  AUTHORITY, introduced  himself  and  the AMHTA  Board                                                                    
Chair.  He   relayed  the  board   chair  would   start  the                                                                    
presentation;  after which  he would  address finances,  the                                                                    
trust land  office activity,  and the  trust's FY  21 budget                                                                    
proposal.                                                                                                                       
                                                                                                                                
Co-Chair Stedman asked about board members.                                                                                     
                                                                                                                                
9:04:17 AM                                                                                                                    
                                                                                                                                
MARY JANE  MICHAEL, BOARD CHAIR, ALASKA  MENTAL HEALTH TRUST                                                                    
AUTHORITY,   discussed    the   presentation,   "Legislative                                                                    
Presentation - Senate Finance Committee" (copy on file).                                                                        
                                                                                                                                
Ms. Michael looked at slide 2, "Trustees":                                                                                      
                                                                                                                                
     ? Mary Jane Michael, Chair                                                                                                 
     ? Chris Cook, Vice Chair                                                                                                   
     ? Ken McCarty, Secretary                                                                                                   
     ? Vern? Boerner, Program and Planning Committee Chair                                                                      
      Anita Halterman, Audit and Risk Committee Chair                                                                           
     ? Laraine Derr, Finance Committee Chair                                                                                    
     ? John Sturgeon, Resource Management Committee Chair                                                                       
                                                                                                                                
Ms. Michael added that the  governor's most recent appointee                                                                    
was in the audience.                                                                                                            
                                                                                                                                
Ms. Michael spoke to slide 3, "Trust Beneficiaries":                                                                            
                                                                                                                                
     Beneficiaries include Alaskans who experience:                                                                             
                                                                                                                                
       Mental illnesses                                                                                                         
     ? Developmental disabilities                                                                                               
     ? Alzheimer's disease and related dementias                                                                                
     ? Traumatic brain injuries                                                                                                 
     ? Substance use disorders                                                                                                  
                                                                                                                                
     The Trust also works in prevention and early                                                                               
     intervention services for individuals at risk of                                                                           
     becoming beneficiaries.                                                                                                    
                                                                                                                                
Ms. Michael detailed that the  trust had recently celebrated                                                                    
the  25th anniversary  of the  landmark settlement  that had                                                                    
created the  trust. Over  the previous  25 years,  the trust                                                                    
had   increased  its   assets   and   served  thousands   of                                                                    
beneficiaries     that    experienced     mental    illness,                                                                    
developmental   disabilities,   substance   use   disorders,                                                                    
Alzheimer's/dementia,  and  traumatic  brain  injuries.  The                                                                    
trust was  the only organization  of its kind in  the United                                                                    
States and was a state corporation.                                                                                             
                                                                                                                                
Ms.  Michael continued  to discuss  the  trust. The  trust's                                                                    
funds    were   self-generated    and   granted    projects,                                                                    
partnerships,   and   programs   that   promoted   long-term                                                                    
systematic  change.  She  shared that  the  trust's  primary                                                                    
focus was  on improving the psychiatric  crisis continuum of                                                                    
care.  She  thought  the recent  challenges  at  the  Alaska                                                                    
Psychiatric   Institute  (API)   highlighted  the   gaps  in                                                                    
community-based crisis intervention,  which could reduce the                                                                    
need for in-patient treatment  for many trust beneficiaries.                                                                    
The  trust was  working with  the Department  of Health  and                                                                    
Social Services (DHSS) and other  community partners to look                                                                    
at  models that  could replicated  in Alaska  to reduce  the                                                                    
need for long term in-patient psychiatric care.                                                                                 
                                                                                                                                
Ms.  Michael continued  that the  land  office continued  to                                                                    
make significant progress, and  the trust was seeing results                                                                    
from  over ten  years of  work on  the United  States Forest                                                                    
Service  (USFS) federal  land exchange.  She noted  that the                                                                    
Icy  Cape   heavy  mineral  project   continued  exploration                                                                    
activities, finishing  a sixth field session  in the summer.                                                                    
The  recently closed  sale of  the  Juneau Subport  property                                                                    
would  generate $20  million  for the  trust.  Not only  did                                                                    
trust  land  generate  new  revenue  to  add  to  investment                                                                    
earnings but  had been  a stimulus  for local  economies and                                                                    
had created  jobs. The  trust had  invested in  its internal                                                                    
organization,  had  responded   the  previous  year's  audit                                                                    
findings,  had   increased  staff  and   trustee  trainings,                                                                    
established  committee charters  and protocols,  streamlined                                                                    
operations to get more grant  funds to organizations serving                                                                    
beneficiaries. She  asserted that the trust  had a dedicated                                                                    
and resourceful staff, a strong  leader, and a board she was                                                                    
proud to serve with.                                                                                                            
                                                                                                                                
9:07:58 AM                                                                                                                    
                                                                                                                                
Senator  Bishop was  interested when  Ms. Michael  mentioned                                                                    
national  models for  improving  behavioral  health. He  was                                                                    
focused on substance abuse disorders.  He asked if the trust                                                                    
was also  considering what  was being  done internationally,                                                                    
such as in Europe and other places.                                                                                             
                                                                                                                                
Ms.  Michael  stated  that  the  trust  had  looked  at  one                                                                    
particular project,  and there  were subsequent  slides that                                                                    
would delve into the subject.                                                                                                   
                                                                                                                                
Co-Chair   Stedman  wanted   more   information  about   the                                                                    
potential for the trust in Icy Cape.                                                                                            
                                                                                                                                
Mr. Abbott  stated that subsequent slides  would address the                                                                    
topic.                                                                                                                          
                                                                                                                                
9:09:09 AM                                                                                                                    
                                                                                                                                
Mr. Abbott  referenced slide 4, "Financial  Position," which                                                                    
had a bar graph entitled  "Trust Invested Assets." The slide                                                                    
described  the  change  in scale  of  the  trust's  invested                                                                    
assets  since  just  after  it was  formed.  The  trust  was                                                                    
granted $200 million of funds  during the settlement process                                                                    
in 1994; and since that  time the invested assets were close                                                                    
to $700  million, which  did not  include the  proceeds from                                                                    
the  Juneau Subport  sale. He  commented that  the sale  had                                                                    
radically  exceeded  expectations.   He  expected  that  the                                                                    
invested  assets would  continue to  grow over  time through                                                                    
investment  earnings  and   proceeds  from  land  management                                                                    
activities such as  timber, minerals, oil and  gas, and land                                                                    
sales and real estate.                                                                                                          
                                                                                                                                
Mr. Abbott turned  to slide 5, "FY21  Earnings and Available                                                                    
Funding,"  which showed  three data  tables depicting  trust                                                                    
assets,  the  trust's available  FY  21  funding, and  prior                                                                    
years' available  funding. At the end  of FY 19 there  was a                                                                    
total of  $650 million of  investment assets, of  which $450                                                                    
million was  in the corpus  and could not be  deployed while                                                                    
being invested  for the long  term. There were  $125 million                                                                    
in reserves that  were spendable and in a  reserve status to                                                                    
protect  the trust  as active  programmatic  funders in  the                                                                    
event  of  investment declines.  He  noted  that the  equity                                                                    
position of  the trust's commercial real  estate investments                                                                    
had grown  and at  the end of  FY 19 was  a little  over $60                                                                    
million. For  current year funding, the  investment earnings                                                                    
would generate just  under $25 million that  would help fund                                                                    
FY 21  spending. The  investment earnings  made up  the vast                                                                    
majority  of  the  trust's spending,  and  the  income  from                                                                    
investments  was growing  by $1  million to  $2 million  per                                                                    
year.                                                                                                                           
                                                                                                                                
9:12:45 AM                                                                                                                    
                                                                                                                                
Mr.  Abbott discussed  the trust's  spending capability.  In                                                                    
addition to  almost $25 million of  investment earnings, the                                                                    
trust  had a  little over  $3 million  in prior-year  carry-                                                                    
forward. The trust land office  generated a little less than                                                                    
$5 million  of spendable  income the trust  would use  in FY                                                                    
21.  There were  also  interest earnings  on cash  accounts.                                                                    
There was a net of $33  million, which the trust expected to                                                                    
deploy in FY  21. He drew attention to  the lower right-hand                                                                    
corner of  the slide,  where FY 20  showed $33  million that                                                                    
represented continued growth in  spendable income and annual                                                                    
budgets for  the previous five years.  He expected continued                                                                    
growth of  trust spending  of $1 million  to $2  million per                                                                    
year   based  on   reasonable  expectations   of  investment                                                                    
performance and land management activity.                                                                                       
                                                                                                                                
Co-Chair  Stedman asked  about the  real estate  holdings of                                                                    
the trust.  He referenced  past concerns about  dealing with                                                                    
holdings.                                                                                                                       
                                                                                                                                
Mr. Abbott recalled  a 5-year period starting  in 2010, when                                                                    
the   trust  acquired   seven  real-estate   properties  for                                                                    
investment  purposes. The  funds that  were used  to acquire                                                                    
the assets could have been  deployed into the corpus account                                                                    
and invested with the Alaska  Permanent Fund. There had been                                                                    
concerns  reflected in  the legislative  audit completed  in                                                                    
2018.  Since the  concerns had  been identified,  no further                                                                    
real  estate  investments  had  been  made.  The  trust  had                                                                    
committed  to  no  further  use  of  investable  funds  that                                                                    
without explicit statutory  authority. Secondly, the initial                                                                    
investment amount of roughly $40  million that the trust had                                                                    
made  in  the  properties  had  been  transferred  from  the                                                                    
reserves into the  corpus of the fund to make  it whole. The                                                                    
corpus now sat  at the same level as if  the real estate had                                                                    
not been acquired and the  funds had been deposited into the                                                                    
corpus.                                                                                                                         
                                                                                                                                
9:16:18 AM                                                                                                                    
                                                                                                                                
Mr.   Abbott  continued   to   address  Co-Chair   Stedman's                                                                    
question. He  relayed that the  trust continued to  hold the                                                                    
real  estate, which  continued to  perform  well. The  trust                                                                    
expected $4.7  million of spendable income  from land office                                                                    
activities  in FY  21. He  detailed that  $2 million  of the                                                                    
land  office  income  was net  income  from  the  commercial                                                                    
properties.  A significant  percentage  of  the land  office                                                                    
income and significant percentage  of overall trust spending                                                                    
was  sourced in  the  real estate  investments. He  detailed                                                                    
that  one audit  recommendation  was to  update the  trust's                                                                    
asset management  policy statement  (AMPS). The  AMPS guided                                                                    
all   investment   activity   for  the   trust's   different                                                                    
investment classes. Callan and  Associates had evaluated the                                                                    
trust's  AMPS and  made recommendations  for changes,  which                                                                    
were adopted unanimously in 2019.                                                                                               
                                                                                                                                
Mr. Abbott  detailed that one  of the changes in  the policy                                                                    
statement  was  that  if the  trust  owned  commercial  real                                                                    
estate  (and  the AMPS  allowed  for  it) the  trust  should                                                                    
secure the  services of a institutional  real estate advisor                                                                    
that worked  to help evaluate  the merits of  different real                                                                    
estate investment  strategies. There had been  a competitive                                                                    
process  through which  the trust  secured  the services  of                                                                    
Harvest  International, a  reputable  firm  that advised  on                                                                    
several  billion dollars  in  assets.  The organization  had                                                                    
visited most of  the trust's properties and  would visit the                                                                    
Alaska properties  when there was  better weather.  The firm                                                                    
would  begin   to  make  recommendations  to   the  trustees                                                                    
regarding the  overall plans for  the assets as part  of the                                                                    
trust's  overall  invested  portfolio. He  stated  that  the                                                                    
first series  of recommendations  would be available  at the                                                                    
trust's  finance  committee  meeting in  April  2020,  after                                                                    
which  the trust  would  report back  to  the committee  and                                                                    
share with stakeholders.                                                                                                        
                                                                                                                                
9:19:44 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman asked  if  there was  a  real estate  sale                                                                    
pending.                                                                                                                        
                                                                                                                                
Mr. Abbott  informed that one  of the trust's tenants  at an                                                                    
out of state  property had sought an option  to purchase the                                                                    
property  at the  end of  the  lease period.  The trust  was                                                                    
willing to  sell the properties  for appropriate  terms. The                                                                    
property might sell in a few years at the tenant's option.                                                                      
                                                                                                                                
Co-Chair Stedman  stated he would  contact the  trust office                                                                    
if he  had any question  regarding the newer audit  work. He                                                                    
was glad to have an update on the issue.                                                                                        
                                                                                                                                
Mr.  Abbott  considered slide  6,  "FY  21 Spending,"  which                                                                    
showed a  pie chart  depicting the  trustee's recommendation                                                                    
of how  funds would  be deployed  in FY  21. The  orange and                                                                    
yellow  wedges were  administrative  budgets  for the  trust                                                                    
authority and  the trust  land office.  He pointed  out that                                                                    
the  total administrative  budget for  FY 21  was less  than                                                                    
that  of FY  20. The  trust was  working to  drive down  its                                                                    
administrative  spending  and   drive  up  its  programmatic                                                                    
spending. He  thought over time  total spending  would grow,                                                                    
and administrative spending would grow less quickly.                                                                            
                                                                                                                                
Mr.  Abbott  noted  that  the trust  was  working  with  the                                                                    
finance subcommittees for the  Department of Revenue and the                                                                    
Department  of  Natural   Resources  on  the  administrative                                                                    
budgets,   which  did   require   appropriations  from   the                                                                    
legislature. He pointed out that  the green wedge was Mental                                                                    
Health Trust  Authority Authorized Receipts  (MHTAAR), which                                                                    
were  the  funds which  trustees  deployed  to spend  inside                                                                    
state  agencies. The  funds appeared  inside  of budgets  as                                                                    
authorized receipts. He explained  that the trust needed the                                                                    
legislature to grant receipt authority to use the funds.                                                                        
                                                                                                                                
Mr. Abbot identified that  the authority grants, represented                                                                    
in the blue  wedge, were made to  non-profits, tribes, local                                                                    
governments  and  other  non-state  agencies  and  were  not                                                                    
required to  go through the legislature  and were authorized                                                                    
by trustees.  He informed that  all of the  authority grants                                                                    
were  done  through  public processes  and  there  was  more                                                                    
detail if the committee had specific questions.                                                                                 
                                                                                                                                
9:24:17 AM                                                                                                                    
                                                                                                                                
Mr.    Abbott   displayed    slide   7,    "FY   21    GF/MH                                                                    
Recommendations,"   which  showed   a   table  of   spending                                                                    
recommendations.   He  noted   that  one   of  the   trust's                                                                    
responsibilities as  directed by the settlement  was to make                                                                    
recommendations for  the deployment  of general  funds. Some                                                                    
of the  funds were  capital items, some  were in  the mental                                                                    
health budget,  and some were  in the operating  budget. The                                                                    
blue  columns  indicated  the trustee's  recommendation  for                                                                    
general funds  (shown as GFMH).  The list had  several items                                                                    
that the  trust recommended  that had  not been  included in                                                                    
the governor's budget.  The trust would be  working with the                                                                    
committee  and  subcommittees  to   discuss  the  items  and                                                                    
encourage  the  members  to  consider some  or  all  of  the                                                                    
General Fund portion of the budget lines.                                                                                       
                                                                                                                                
Senator Bishop  asked about the total  liability on deferred                                                                    
maintenance as listed on the slide.                                                                                             
                                                                                                                                
Mr. Abbott  noted that the deferred  maintenance program was                                                                    
run by a state agency.  The trust contributed and the agency                                                                    
did a competitive  process to identify grantees,  and it was                                                                    
not  the state's  deferred  maintenance  list. He  qualified                                                                    
that  the  trust had  not  captured  the full  potential  of                                                                    
deferred  maintenance obligation.  The  funds  would not  be                                                                    
used on trust facilities or  operations, and the funds would                                                                    
be  granted.  The  50/50  arrangement  that  the  trust  had                                                                    
recommended had been in place for more than a decade.                                                                           
                                                                                                                                
Co-Chair  Stedman  asked  if the  trust  dealt  with  Public                                                                    
Facilities at  the Department  of Transportation  and Public                                                                    
Facilities.                                                                                                                     
                                                                                                                                
Mr.  Abbott  stated  that  the   grants  were  commonly  for                                                                    
facilities   for  non-profits   or  agencies   had  deferred                                                                    
maintenance   requirements.  Typically,   the  grants   were                                                                    
relatively small and in the $10,000 to $30,000 range.                                                                           
                                                                                                                                
Senator Bishop thought it would be  kind of nice to see what                                                                    
the target might be.                                                                                                            
                                                                                                                                
9:27:46 AM                                                                                                                    
                                                                                                                                
Mr. Abbott highlighted slide 8, "Trust Land Office":                                                                            
                                                                                                                                
     ? Subport Property Sale                                                                                                    
     ? USFS Land Exchange                                                                                                       
     ? Icy Cape Development                                                                                                     
                                                                                                                                
Mr. Abbott drew attention to the  table on the right hand of                                                                    
the slide  and highlighted  that the  trust land  office had                                                                    
generated about  $10.5 million. The funds  were comprised of                                                                    
investable  and  spendable  funds.   In  the  current  year,                                                                    
roughly half  of the  $10 million in  revenue earned  by the                                                                    
trust land office was required  to be invested. Earned funds                                                                    
by the sale of property, oil  and gas royalties, or a timber                                                                    
sale  were dedicated  to being  invested as  the funds  were                                                                    
likely  to  be one-time  earnings  from  a land  asset.  The                                                                    
investment earnings  would be  spent from  the contribution,                                                                    
but not the contribution itself.                                                                                                
                                                                                                                                
Mr. Abbott continued  to address slide 8.  The other portion                                                                    
of revenue  from the land  office was  "spendable" recurring                                                                    
revenues  from lands  such  as  leases, permitting  revenue,                                                                    
funds   for   short-term   easements,  and   interest   from                                                                    
financing. The  trust land office had  two different revenue                                                                    
streams that  added up to  $10.6 million  in FY 19.  Some of                                                                    
the  amount was  spendable,  and some  was  invested in  the                                                                    
corpus.                                                                                                                         
                                                                                                                                
9:30:13 AM                                                                                                                    
                                                                                                                                
Mr.  Abbott discussed  the recent  land sale  of the  Juneau                                                                    
Subport. He  detailed that Norwegian  Cruise Lines  had paid                                                                    
the  sale amount  in $5  million increments  on a  quarterly                                                                    
basis  and the  trust  expected to  receive  the balance  in                                                                    
September  2020.  The  funds would  be  deposited  into  the                                                                    
corpus  of the  trust  fund.  The trust  used  a percent  of                                                                    
market value  (POMV) to generate investment  earnings with a                                                                    
payout  rate  of 4.25  percent.  When  the $20  million  was                                                                    
deposited,  it would  ultimately earn  $850,000 per  year in                                                                    
perpetuity. In  most years, the trust  deposited $10 million                                                                    
to $20 million from land office activity into the corpus.                                                                       
                                                                                                                                
Mr. Abbott  mentioned the USFS  land exchange, which  was in                                                                    
the final stages. He stated  that there had been significant                                                                    
progress,  and  the  trust had  already  received  lands  on                                                                    
Prince  of  Wales Island  (originally  part  of the  Tongass                                                                    
National Forest) in exchange for  trust lands above the City                                                                    
of Ketchikan.  The lands the  trust acquired in  the portion                                                                    
of  Prince of  Wales  known as  Naukati  were already  under                                                                    
contract for  timber harvest and being  harvested. The trust                                                                    
had  contracted for  timber sale  before  it controlled  the                                                                    
acreage. There  would be continued  timber revenues  for the                                                                    
trust, and  he thought timber  revenues would be one  of the                                                                    
trust's largest revenue categories  in the coming years. The                                                                    
second phase  of the  land exchange  was underway  and would                                                                    
allow the  trust to transfer  additional trust lands  to the                                                                    
Tongass  National  Forest.  In   exchange  the  trust  would                                                                    
receive additional  lands, most of  which were on  Prince of                                                                    
Wales  Island. Most  of the  land would  be used  for timber                                                                    
harvest in  the coming  years. He hoped  that that  the sale                                                                    
was near completion the following year.                                                                                         
                                                                                                                                
9:34:18 AM                                                                                                                    
                                                                                                                                
Mr. Abbott mentioned the trusts  development at Icy Cape, in                                                                    
the northern  part of the  Gulf of Alaska near  Yakutat. The                                                                    
trust owned a  lot of land in the area.  There was a current                                                                    
timber harvest,  and there was a  challenging timber market.                                                                    
He was not  sure that the trust would  harvest all available                                                                    
timber  due  to  market  conditions.   He  stated  that  the                                                                    
Sealaska Corporation  had been an excellent  partner and had                                                                    
been logging  on the site for  two years. There was  also an                                                                    
active  mineral   exploration  underway  at  Icy   Cape.  He                                                                    
detailed that  on the beach and  in the uplands there  was a                                                                    
significant   gold   deposit   as   well   as   an   unusual                                                                    
concentration  of  industrial  abrasive  materials  such  as                                                                    
garnets  and  hard  sands.  There   was  a  market  for  the                                                                    
materials for industrial uses.                                                                                                  
                                                                                                                                
Mr. Abbott  relayed that  the trust  had completed  a fourth                                                                    
year of field  work on the site. He stated  that the samples                                                                    
were being evaluated  and the trust was looking at  a way to                                                                    
develop  the  materials.  He  thought  the  development  was                                                                    
likely to be a significant  revenue generator for the trust,                                                                    
but it could be five years from fruition.                                                                                       
                                                                                                                                
Co-Chair  Stedman  had mentioned  Icy  Cape  because of  the                                                                    
potential for revenue generation.                                                                                               
                                                                                                                                
Mr. Abbott agreed with Co-Chair  Stedman. He stated that the                                                                    
trust had  a few  mining exploration projects  underway, and                                                                    
Icy Cape was among the most promising.                                                                                          
                                                                                                                                
Senator Hoffman asked  how many employees were  in the trust                                                                    
land office and where they were located.                                                                                        
                                                                                                                                
Mr.  Abbott  stated  that  the  trust  land  office  had  17                                                                    
employees, all  located in Anchorage  save for  one employee                                                                    
in  Ketchikan that  ran the  timber program.  There was  one                                                                    
vacancy being actively recruited.                                                                                               
                                                                                                                                
Mr.  Abbott  looked at  slide  9,  "25 Years  of  Supporting                                                                    
Beneficiaries":                                                                                                                 
                                                                                                                                
     ? Harborview closure                                                                                                       
     ? Mental Health Court                                                                                                      
     ? Bring the Kids Home                                                                                                      
     ? Medicaid Reform/Expansion                                                                                                
                                                                                                                                
Mr.  Abbott  commented that  the  slide  showed examples  of                                                                    
things  the trust  had helped  the state  accomplish in  the                                                                    
previous 25 years.                                                                                                              
                                                                                                                                
9:38:39 AM                                                                                                                    
                                                                                                                                
Mr. Abbott addressed slide 10, "Medicaid Reform/Expansion":                                                                     
                                                                                                                                
     ? $10M investment (SB 74)                                                                                                  
     ? Capacity support to the department                                                                                       
     ? Administrative Services Organization                                                                                     
       1115 Waiver development (Behavioral Health and                                                                           
     Substance Use Treatment)                                                                                                   
                                                                                                                                
Mr. Abbott  recalled that the  trust had made a  $10 million                                                                    
multi-year   commitment  to   fund  costs   associated  with                                                                    
Medicaid  reform  and  expansion.  The  trust  had  met  its                                                                    
obligation  and the  $10 million  would  be fully  expended.                                                                    
Most of the  key elements of Medicaid reform,  as it related                                                                    
to  trust   beneficiaries,  was   online.  He   thought  the                                                                    
administrative services organization,  which was essentially                                                                    
was  a  managed care  operation  for  behavioral health  and                                                                    
Medicaid was a big and important change.                                                                                        
                                                                                                                                
Mr.  Abbott discussed  the 1115  Waiver, which  would expand                                                                    
the  number  and  quality   of  behavioral  health  services                                                                    
available  in  Alaska,   specifically  for  substance  abuse                                                                    
treatment. In the  past, Medicaid had been  a limited funder                                                                    
for behavioral  health and substance abuse  treatment, which                                                                    
would be dramatically expanded. He  DHSS for its work on the                                                                    
waiver,  which was  a  difficult  bureaucratic process.  The                                                                    
trust  was  grateful to  have  been  a funding  partner  and                                                                    
advocate in the expansion.                                                                                                      
                                                                                                                                
9:40:51 AM                                                                                                                    
                                                                                                                                
Mr. Abbott advanced to slide 11, "Medicaid Reform Success":                                                                     
                                                                                                                                
    ? Estimated $166M in GF savings and cost avoidance                                                                          
     ? Flat state GF spending despite significant                                                                               
     enrollment growth                                                                                                          
     ? An increased use of Home and Community Based Service                                                                     
     (HCBS) waivers                                                                                                             
     ? 1115 Waiver will lead to continued savings                                                                               
                                                                                                                                
Mr. Abbott thought Medicaid reform  and expansion had been a                                                                    
great success. The  information on the slide  came from DHSS                                                                    
and  the most  recent  Medicaid reform  update produced  two                                                                    
months  previously. He  directed attention  to the  graph on                                                                    
the  slide which  showed a  green bar  that represented  the                                                                    
number of Alaskans  that had been served  by Medicaid, which                                                                    
was  up  by  100,000  individuals from  five  or  six  years                                                                    
previously. Medicaid  total spending had gone  up, but state                                                                    
General  Fund  spending  had stayed  flat.  He  thought  the                                                                    
expansion was  a success story.  The trust was  grateful for                                                                    
the legislature pursing expansion and reform activity.                                                                          
                                                                                                                                
Mr.  Abbott  expected  ongoing  Medicaid  reform  activities                                                                    
would  continue  to  improve service  and  hopefully  reduce                                                                    
spending. The trust recognized that  Medicaid reform had not                                                                    
made every  provider happy. He thought  some providers would                                                                    
prefer to  work with  state grants, specifically  related to                                                                    
substance abuse  and behavioral  health. He  understood that                                                                    
with the  increase in Medicaid  spending for  like services,                                                                    
grant funding  would decrease. He thought  that the increase                                                                    
in Medicaid expenditures would be  good for the state budget                                                                    
because Medicaid  expenditures would be  primarily federally                                                                    
funded, whereas the grant system  was entirely state General                                                                    
Funds.  He expressed  concern about  the timing  of Medicaid                                                                    
funding not matching  the timing in the  reductions in grant                                                                    
funding. He wanted  people to understand that  the trust was                                                                    
capable of  being part  of the process  and working  to help                                                                    
the  state  reduce the  general  fund  contributions to  the                                                                    
services.                                                                                                                       
                                                                                                                                
9:44:11 AM                                                                                                                    
                                                                                                                                
Co-Chair  von  Imhof had  seen  the  graph  on slide  11  in                                                                    
several iterations. She thought  it was important to analyze                                                                    
the many  ways the graph could  look in the future.  She was                                                                    
very  interested  in  the   1115  waiver,  particularly  for                                                                    
behavioral health. She thought  the waiver was a complicated                                                                    
mixed  bag, with  many categories  with different  levels of                                                                    
reimbursement.  She  discussed  the  balance  of  state  and                                                                    
federal funding  for services  in different  categories. She                                                                    
thought  it was  not  certain that  further Medicaid  reform                                                                    
would  lead to  continued savings.  She questioned  what was                                                                    
being done to  manage the different levers so  there was not                                                                    
a bigger spike in expenses.                                                                                                     
                                                                                                                                
Mr. Abbott  thought the  green line  representing enrollment                                                                    
would go down  as more people had access to  health care. He                                                                    
agreed entirely that Medicaid was  a difficult enterprise to                                                                    
manage.  He acknowledged  that different  levels of  federal                                                                    
contribution came into play for  different service types. He                                                                    
explained  that through  the 1115  waiver was  based on  the                                                                    
expectation  that the  new service  types and  reimbursement                                                                    
types that  would be  allowable would  be less  expensive to                                                                    
the Medicaid program generally than  the previous system. He                                                                    
discussed  the concept  of substance  abuse treatment  being                                                                    
timely  and  preventing acute  future  care.  He noted  that                                                                    
other states  had demonstrated that  the system  could work.                                                                    
He thought that  Alaska's healthcare system did  not have as                                                                    
much  in  common  with  other  states  than  was  hoped  for                                                                    
purposes of comparison. The trust  was committed to the 1115                                                                    
wavier trial in working DHSS  to increase access to services                                                                    
and gaining  expected savings. He  acknowledged that  it was                                                                    
not a guarantee.                                                                                                                
                                                                                                                                
9:48:26 AM                                                                                                                    
                                                                                                                                
Senator   Olson  congratulated   the  trust   for  providing                                                                    
expanded  care  to  individuals.  He looked  at  flat  state                                                                    
general fund  spending as  shown on the  graph and  asked if                                                                    
all the funding was undesignated.                                                                                               
                                                                                                                                
Mr. Abbott did not know  and reiterated that the information                                                                    
on the slide was from DHSS.                                                                                                     
                                                                                                                                
Co-Chair  Stedman  commented  on the  increase  in  Medicaid                                                                    
population.  The  legislature had  tried  to  reduce it  the                                                                    
previous   year.  He   expected  that   there  would   be  a                                                                    
supplemental  budget  proposed  in the  following  days.  He                                                                    
acknowledged  that there  were  challenges  in the  Medicaid                                                                    
component  of the  budget. He  hoped  that the  work of  the                                                                    
committee would not be evaporated  in six months. He thought                                                                    
it was alarming that 35  percent of the state population was                                                                    
on public  assistance. He thought  it was one of  the larger                                                                    
percentages of all the states.                                                                                                  
                                                                                                                                
Senator Hoffman thought  the way to control  the DHSS budget                                                                    
was  to  consider the  services  that  were being  provided,                                                                    
which had  been increasing over  the previous ten  to twenty                                                                    
years. He  opined that there had  been no look at  trying to                                                                    
reduce services.                                                                                                                
                                                                                                                                
Co-Chair  Stedman agreed  with  Senator Hoffman's  comments,                                                                    
and stated that  he would be on the issue  to change some of                                                                    
the requirements if it was politically possible.                                                                                
                                                                                                                                
9:52:35 AM                                                                                                                    
                                                                                                                                
Mr.  Abbott   looked  at   slide  12,   "Psychiatric  Crisis                                                                    
Continuum of Care":                                                                                                             
                                                                                                                                
     ? Absence of full continuum including community based                                                                      
     services                                                                                                                   
     ? Reduction in API capacity                                                                                                
     ? Psychiatric boarding - Emergency                                                                                         
     Departments/Department of Corrections                                                                                      
     ? Police/Fire resources misused                                                                                            
                                                                                                                                
Mr. Abbott thought another opportunity  for the trust was to                                                                    
mitigate the crisis  of the failure of the  ability to serve                                                                    
Alaskans with psychiatric crisis.  There were many types and                                                                    
causes of  the problem, and it  was known that the  need was                                                                    
not being  properly addressed. First  responders, hospitals,                                                                    
correctional  facilities,  API  and others  were  all  being                                                                    
over-burdened  because there  were no  systems in  place for                                                                    
dealing with the problem productively.  He gave kudos to the                                                                    
state  and the  department for  sharing in  the recognition.                                                                    
The trust had  identified a model it believed  would be able                                                                    
to help the state with the situation.                                                                                           
                                                                                                                                
9:54:44 AM                                                                                                                    
                                                                                                                                
Mr. Abbott spoke to slide 13, "Crisis Now Model":                                                                               
                                                                                                                                
     Model includes four elements:                                                                                              
                                                                                                                                
         Regional   or   statewide   crisis   call   centers                                                                    
     coordinating in real time                                                                                                  
     ? Centrally deployed, 24/7 mobile crisis teams                                                                             
     ? Short-term, "sub-acute" residential stabilization                                                                        
     programs                                                                                                                   
     ? Essential crisis care principles and practices                                                                           
                                                                                                                                
Mr.  Abbott  shared that  Senator  Wilson  had travelled  to                                                                    
Maricopa  County   and  learned   about  the   model.  Other                                                                    
stakeholders  such as  legislators, trust  staff, department                                                                    
staff,  and police  leadership. Subsequently  the trust  had                                                                    
funded  a  field  trip  of   25  department  staff  and  key                                                                    
stakeholders. The  model was able  to radically  improve the                                                                    
success  of the  folks  experiencing crisis  and reduce  the                                                                    
impact on  the rest of  the community; within a  system that                                                                    
paid for itself  with Medicaid and other  funding. The model                                                                    
had been successful  by standing up a system  of crisis care                                                                    
that included call centers with  available support. He noted                                                                    
that  the vast  majority  of calls  resulted  in the  crisis                                                                    
being alleviated without further support.                                                                                       
                                                                                                                                
Mr.  Abbott  discussed  mobile   crisis  teams,  which  were                                                                    
comprised of  a master clinician and  a peer-support staffer                                                                    
who typically  had lived experience  that was  relevant. The                                                                    
two-person  teams went  to the  location of  a crisis  in 20                                                                    
minutes or less and typically  a first responder was already                                                                    
present. The  first action  of the team  was to  release the                                                                    
first  responder,  which  often helped  to  de-escalate  the                                                                    
situation.                                                                                                                      
                                                                                                                                
9:59:09 AM                                                                                                                    
                                                                                                                                
Mr. Abbott discussed  the third level of  response as listed                                                                    
on the slide. The  facilities were sometimes walk-in centers                                                                    
that  provided 23-hour  non-residential  services or  short-                                                                    
term  residential services.  The  facilities were  typically                                                                    
operated by  non-profit entities  and provided  services for                                                                    
individuals  that needed  to  be in  a  different place.  He                                                                    
described  the  environment  of  a  sub-acute  stabilization                                                                    
facility, which was staffed by  clinicians and helped people                                                                    
to stabilize.  He noted that the  state did not have  any of                                                                    
the three systems  in place. He thought the  City of Phoenix                                                                    
had  learned that  it needed  all three  pieces in  place to                                                                    
complement each other.                                                                                                          
                                                                                                                                
Mr. Abbott discussed the differences  in Phoenix and Alaska.                                                                    
He  thought  the  state  could  apply some  or  all  of  the                                                                    
services  listed  on  slide  13  throughout  the  state.  He                                                                    
acknowledged  that  each  service  could  not  be  in  every                                                                    
community,  but a  portion could.  The trust  had hired  the                                                                    
entity that had  built the system in  Maricopa County, which                                                                    
had visited the state and  generated a report. The trust was                                                                    
committed to testing  the viability of the  model in Alaska.                                                                    
He  emphasized that  the trust  was not  asking for  general                                                                    
funds.  He noted  that  later  in the  day  the trust  would                                                                    
consider    a   multi-million-dollar    multi-year   funding                                                                    
commitment for the  planning for and startup of  some or all                                                                    
of the  service types on  the slide.  He hoped that  some of                                                                    
the model could begin within a year.                                                                                            
                                                                                                                                
10:03:37 AM                                                                                                                   
                                                                                                                                
Mr.  Abbott noted  that Medicaid  would  ultimately pay  for                                                                    
many of  the services that were  part of the model  on slide                                                                    
13. He was optimistic that  the trust would commit itself to                                                                    
working on the  change. He noted that  other legislators had                                                                    
expressed interest in the model.                                                                                                
                                                                                                                                
Co-Chair Stedman asked to receive an update in a year.                                                                          
                                                                                                                                
Mr. Abbott hoped  to be sharing information  sooner than one                                                                    
year.                                                                                                                           
                                                                                                                                
Senator Bishop  asked about  results from  the model  and if                                                                    
there  was demonstrated  savings  for  first responders  and                                                                    
emergency room visits.                                                                                                          
                                                                                                                                
Mr.  Abbott  relayed  that  there  was  tremendous  data  to                                                                    
support the  success of the  model. He discussed  the amount                                                                    
of  police  officer  savings in  time  associated  with  the                                                                    
model.                                                                                                                          
                                                                                                                                
Co-Chair Stedman suggested  that Mr. Abbott get  back to the                                                                    
committee with more information.                                                                                                
                                                                                                                                
Mr. Abbott noted that the  system in Phoenix paid for itself                                                                    
and had no supplemental state funding.                                                                                          
                                                                                                                                
Co-Chair  Stedman  asked  Mr.  Abbott to  get  back  to  the                                                                    
committee   on  more   detail  regarding   Senator  Bishop's                                                                    
question.                                                                                                                       
                                                                                                                                
10:07:36 AM                                                                                                                   
                                                                                                                                
Senator Olson considered the  growing homeless population in                                                                    
the  state  and asked  if  the  trust  saw  the model  as  a                                                                    
mitigating solution for the homeless problem in Alaska.                                                                         
                                                                                                                                
Mr.  Abbott  expected  the  model   to  make  a  significant                                                                    
improvement  to the  quality of  care of  those experiencing                                                                    
homelessness in Alaska. He pointed  out that a large part of                                                                    
those experiencing  homelessness were  challenged by  a lack                                                                    
of substance  abuse treatment,  behavioral health  care, and                                                                    
other services.  He noted that  a significant  percentage of                                                                    
first responder  calls and emergency room  visits associated                                                                    
with psychiatric  crisis were  experienced by  Alaskans with                                                                    
homelessness. He  emphasized that the model  would radically                                                                    
improve   the   quality   of  care   available   to   people                                                                    
experiencing homelessness.  He pointed out that  one barrier                                                                    
to housing was the ability  to address mental health issues.                                                                    
He  thought   people  would  seek  housing   when  they  had                                                                    
addressed substance abuse or mental health challenges.                                                                          
                                                                                                                                
Senator  Olson  asked  about  the  possibility  of  Medicaid                                                                    
paying for the services being described in the model.                                                                           
                                                                                                                                
Mr. Abbott  did not know  about reimbursement rates  for the                                                                    
services.   He  stated   that   the   1115  waiver   process                                                                    
contemplated several  of the service  types. He  thought the                                                                    
department could speak to reimbursement  rates. He knew that                                                                    
Medicaid was a key payer  in Arizona and other jurisdictions                                                                    
that were  using some or  all of  the service types  and was                                                                    
ultimately   reducing  overall   Medicaid  expense   through                                                                    
reduction in hospital visits.                                                                                                   
                                                                                                                                
10:10:55 AM                                                                                                                   
                                                                                                                                
Mr. Abbott referenced slide 14, "Crisis Now in Alaska":                                                                         
                                                                                                                                
     Crisis Now Consultation Report                                                                                             
                                                                                                                                
     ? System accountability and performance metrics                                                                            
     ? Policy considerations                                                                                                    
     ? Funding options including Medicaid                                                                                       
     ? Implementation of key Crisis Now model elements                                                                          
     ? Workforce needs                                                                                                          
                                                                                                                                
Mr. Abbott turned to slide 15, "Improving Alaska's Crisis                                                                       
Continuum of Care":                                                                                                             
                                                                                                                                
     Next Steps for the Trust                                                                                                   
     ? Support alignment statewide                                                                                              
       Statute and policy needs                                                                                                 
     ?   Facilitation/support   of    local   planning   and                                                                    
     implementation                                                                                                             
       Capital, equipment, and start-up needs                                                                                   
     ? Urban and rural Alaska                                                                                                   
                                                                                                                                
Mr. Abbott stated that the trustees would be looking at                                                                         
additions to the FY 21 trust budget that would fund areas                                                                       
necessary to advance the planning for the new model.                                                                            
                                                                                                                                
Mr. Abbott showed slide 16, "THANK YOU - Questions?":                                                                           
                                                                                                                                
     In the past 25 years, Trustees have approved more than                                                                     
     $355,000,000 to fund more than 3,200 beneficiary                                                                           
     serving  projects and  more than  8,600 mini  grants to                                                                    
     beneficiaries across Alaska                                                                                                
                                                                                                                                
Co-Chair Stedman discussed the agenda for the following                                                                         
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:13:35 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:13 a.m.                                                                                         

Document Name Date/Time Subjects
013020 Trust 2020 S FIN Final.pdf SFIN 1/30/2020 9:00:00 AM
SB 153
Senate FIN Follow Up_Alaska Mental Health Trust Authority_2.5.20.pdf SFIN 1/30/2020 9:00:00 AM
SB 153