Legislature(2003 - 2004)
02/12/2003 01:33 PM Senate HES
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ALASKA STATE LEGISLATURE
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE
February 12, 2003
1:33 p.m.
MEMBERS PRESENT
Senator Fred Dyson, Chair
Senator Lyda Green
Senator Gary Wilken
Senator Bettye Davis
Senator Gretchen Guess
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
Confirmation Hearing:
Commissioner, Department of Health and Social Services - Joel
Gilbertson
CONFIRMATION ADVANCED
SENATE BILL NO. 25
"An Act relating to the teachers' housing loan program in the
Alaska Housing Finance Corporation; and providing for an
effective date."
HEARD AND HELD
PREVIOUS ACTION
SB 25 - No previous action to record.
WITNESS REGISTER
Commissioner-designee Joel Gilbertson
Department of Health &
Social Services
PO Box 110601
Juneau, AK 99801-0601
POSITION STATEMENT: Gave a short overview of his department.
Ms. Sheila Peterson
Staff to Senator Wilken
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Staff to sponsor of SB 25.
Mr. Dan Fauske, Executive Director
Alaska Housing Finance Corporation (AHFC)
Department of Revenue
PO Box 101020
Anchorage, AK 99510-1020
POSITION STATEMENT: Commented on SB 25.
Mr. Paul Kapansky, Mortgage Operations Director
Alaska Housing Finance Corporation (AHFC)
Department of Revenue
PO Box 101020
Anchorage, AK 99510-1020
POSITION STATEMENT: Commented on SB 25.
ACTION NARRATIVE
TAPE 03-1, SIDE A
CHAIR FRED DYSON called the Senate Health, Education and Social
Services Standing Committee meeting to order at 1:33 p.m. All
members were present. As the first order of business, he asked
Commissioner-DISIGNEE Joel Gilbertson to join the committee.
COMMISSIONER-DISIGNEE JOEL GILBERTSON, Department of Health and
Social Services (DHSS), said his department is very diverse and
has to work within a budget. His primary goal is to meet the
mission of the department, which is to protect and promote the
well-being and health of all Alaskans within the budget.
He said the department would focus on important issues such as
the Division of Family and Youth Services moving through a
program improvement plan. He is working with the Region 10
office and the Health and Social Service Agency in Washington
D.C. to develop that program. This will entail substantive
changes to improve child protection services in the state to
guarantee that all reports of harm are investigated while
working toward permanency and protecting the rights of families.
COMMISSIONER-DISIGNEE GILBERTSON said that child services are a
top priority for the Governor and that he is in the final stages
of interviewing for a new director for DFYS and plans to work
with the federal government to implement the improved plan
quickly.
During an audit done last year, the State of Alaska was found to
be out of compliance with a number of federal standards.
Therefore, the department will be working with the Medicaid
Program to address the financial concerns to make sure that care
is being delivered in an efficient manner throughout the state.
Fraud and abuse standards are in place to make sure there is
program integrity.
Welfare reform is continuing with the caseload down 40 percent.
Cash payments and cash assistance is down by 50 percent since
welfare reform was initiated. He will make sure that childcare
assistance, work training and diversion programs are in place to
help people learn to help themselves. He will be working with
the federal government this year on reauthorization of the
welfare package and reviewing the new work standards that will
be in place.
COMMISSIONER-DESIGNEE GILBERTSON said there are some great
challenges and he is looking forward to working on them with the
Legislature.
SENATOR LYDA GREEN said the Governor made a comment about the
lack of in-house auditors and asked him to address that since he
said he wanted to move toward permanency in his department.
COMMISSIONER GILBERTSON replied one of the first activities the
Governor directed all departments to do was a department wide
audit of all operations. He was able to assemble a team of nine
auditors for the department's 2,600 employees. They were not all
trained as auditors, but he had to work with them and is
grateful for their service. Good auditing systems are needed in
all departments to insure that the resources are going out to
deliver the services.
SENATOR GRETCHEN GUESS agreed with him on audit mechanisms and
encouraged the administration to have program auditors as well
as financial auditors, because they have different skills. She
asked if it is more efficient for every department to have
auditors or to have a group of auditors that goes out to the
departments.
COMMISSIONER GILBERTSON replied he didn't have the answer right
now. Audit funds are being reassigned between departments, but
there are three individuals in the Division of Administrative
Services and one or two others throughout the department.
There is a need for additional auditors statewide.
There are benefits from having individuals who are
trained within each of the departments for that
department's book of business, but there are also
advantages to having centralized auditors. It's more
efficient and independent. The administration wants to
work towards having the most effective audit teams.
SENATOR GUESS followed up saying that as an auditor, she found
audit skills and experiences picked up in one area could be
taken to another project.
SENATOR WILKEN said for the last four years the Legislature has
worked on missions and measures and asked if he had any
assessments of the quality of the definition of his mission and
the standards against which his department will be measured.
COMMISSIONER-DESIGNEE GILBERTSON replied he is at the early
stage of reviewing missions and measures and the department is
focusing on not having misalignment of program activities.
1:50 p.m.
SENATOR GUESS asked what he thinks the state's role is in the
increase in health care rates in both the state and private
sectors. She also asked him to comment on the problem of the
uninsured and how the Legislature can grapple with both issues.
COMMISSIONER-DESIGNEE GILBERTSON responded that Alaska is not
alone in the national trend towards rising health care costs.
There are tremendous increases in health care costs all across
the sector. Our society has expectations on what health care
services people should receive, the quality of health care that
should be available in this country and the technology that
should be available. The associated costs are tied into risk
pools and having ways to community-rate health care insurance
products. This has hurt Alaska because the relatively small
population has not allowed some of the insurance models to come
in. The bottom line is that health care costs are higher in the
State of Alaska.
The state is a purchaser in the health care marketplace and its
costs are increasing annually. There has to be work on cost
containment. There have been discussions on risk pooling, which
would be difficult, but he thinks it could be accomplished.
He said there is a national debate about how to address the
problem of the uninsured. The administration is focusing on
whether care is being delivered, not if someone is insured or
not. Billions of dollars have been invested in community health
centers to try to make sure health service networks are out
there for individuals who lack community based insurance options
and to make sure federal funding is a revenue stream that will
support the states. There are over 44 million uninsured
Americans right now and to address the solution, Alaska will
have to become involved on a national level.
SENATOR GUESS asked whether the administration plans to continue
to fund Denali Kid Care at current levels.
COMMISSIONER-DESIGNEE GILBERTSON answered that the
administration is engaged in budget discussions right now and he
is looking at ways programs will be impacted the least. First,
he will make sure that levels of service are maintained, which
means eligibility levels for the Medicaid Program in Denali Kid
Care. Once those options are exhausted, the department will have
to review the services at the state level.
SENATOR GUESS asked if he could discuss how he would prioritize
alcohol treatment.
COMMISSIONER-DESIGNEE GILBERTSON responded there is a tremendous
problem with substance abuse in Alaska and the Governor is aware
of it. While in Washington D.C., he focused on inhalant and
alcohol abuse for juveniles in rural Alaska. Currently the
department is discussing what to do with the revenues from the
alcohol tax. It is a priority to have alcohol treatment options
available for individuals that are court ordered to undergo
alcohol and substance abuse treatment and who are in the DFYS
system where the state is incurring additional expense in trying
to stabilize families. Another priority is to have alcohol
treatment programs in rural areas where they are totally lacking
now.
He said that child protection is one of the department's
objectives along with making sure alcohol funds are invested in
ways that support other program activities within the
department.
SENATOR GUESS requested that the administration make those funds
a priority for pregnant women and related an instance she knew
of in Anchorage where a pregnant woman had to wait six weeks for
alcohol treatment. She agreed with his priorities and noted that
Fetal Alcohol Syndrome/Fetal Alcohol Effects (FASFAE) has been
federally funded for most of the five-year term. She asked him
to comment on that funding.
COMMISSIONER-DESIGNEE GILBERTSON replied FASFAE is a nationwide
problem, but Alaska and South Dakota have the highest incidence.
Senator Stevens arranged funding for a five year FASFAE program
and it is now in the fourth year. The department is entering
into the application stage of that work and he informed them
that a lot of the funding in the early years was used for
research - finding out some of the social conditions,
demographics and health indicators that should be targeted to
prevent the next generation of individuals from fetal alcohol
exposure. As they gather the data and continue to go through
program design and operations, there needs to be a transition to
using a greater number of resources for prevention efforts and
interventions. He said it has been a good and well directed
effort so far. Research has shown a tremendous link between
females who are sexually assaulted when underage and those who
have children born with fetal alcohol syndrome. "We're at the
stage right now where there can be true implementation of trying
to look at some of the behavioral risks."
CHAIR DYSON said he appreciated Commissioner-designee Gilbertson
taking on the job and that he brought some amazing credentials
to it. He asked if he had seen the audits from DFYS and
Legislative Budget and Audit (LB&A) that show areas of concern.
Last year the Legislature passed legislation requiring that each
department's budget be prioritized and asked if that is going to
be a problem for him.
COMMISSIONER-DESIGNEE GILBERTSON said if the department is asked
to do that it will, but it already is doing that in the process
of submitting a budget the Governor supports and will defend.
CHAIR DYSON stated that at some point he would ask if juvenile
justice should continue as a part of the Department of Health
and Social Services as opposed to the Department of Corrections.
He then asked if it is his or this administration's view that
everyone should have health insurance.
COMMISSIONER-DESIGNEE GILBERTSON replied the Governor is focused
on what is realistic and achievable and that isn't achievable in
the next 2 - 4 years. The administration is committed to working
with the private sector, insurance companies and risk pools in
the state to make sure they maximize opportunities for
individuals to purchase an insurance product. They want to work
with welfare roles to get people transitioned into employment
where there is an opportunity to have health insurance. There
are a lot of things they can do, but they can't start with an
unrealistic goal.
CHAIR DYSON asked if the ultimate goal is for everyone to have
health insurance.
COMMISSIONER-DESIGNEE GILBERTSON replied, "I think a good goal
is to establish a marketplace where everyone has an opportunity
to purchase into an insurance product...if they want."
CHAIR DYSON asked if it's okay for people to actually pay their
own bills.
COMMISSIONER-DESIGNEE GILBERTSON replied, "I believe individuals
who have access to insurance product and have the ability to
purchase an insurance product should not be reverting to a
public insurance product."
CHAIR DYSON restated his question, "What about people who just
choose to pay their bills and not have insurance?"
COMMISSIONER-DESIGNEE GILBERTSON replied, "If they are capable,
cash payers are allowed in the system. I don't think this
Governor will say you are not allowed to be a cash payer in the
health insurance marketplace."
CHAIR DYSON asked about the current policy of most health
service providers to discriminate on a price basis against those
who do pay their own bills as opposed to a third party payer.
COMMISSIONER-DESIGNEE GILBERTSON replied that is a true
statement and that has been occurring in the health system for
40 - 50 years of cost shifting. Health insurance companies
negotiate below usual and customary charges and the provider
diverts charges. The Medicaid Program does that on a national
level by doing fee schedules that are below the usual and
customary charges. "That cost shifting does occur and it does
impact individuals who pay cash."
CHAIR DYSON said, "I think it's profoundly un-American, but very
pervasive."
SENATOR GREEN asked if Medicaid does the same thing.
COMMISSIONER-DESIGNEE GILBERTSON replied that they do, but their
schedule is above the Medicare fee schedule.
CHAIR DYSON noted that he works for the National Association of
Social Workers.
COMMISSIONER-DESIGNEE GILBERTSON said that he too worked for
them and when he was in law school he worked in the general
counsel's office on legal issues for social workers.
CHAIR DYSON stated:
We have gone in the last five years from almost no
programs related to fetal alcohol syndrome to some
experts think that we are doing better than any other
state in terms of responding to the problem, not
preventing it. I would encourage you - some of the
people - and Diane DeSanto [and Diane Casto] - have
done an extraordinary job there and do all we can to
continue that momentum.
SENATOR GUESS said she would like to know his and the
administration's opinion on moving domestic violence and sexual
assault out of the Department if Public Safety into HESS.
Under full disclosure, I sit on the board of Standing
Together Against Rape (STAR) and the sexual assault
community is very concerned about moving and hope that
you discuss it with the community before the
administration moves forward.
CHAIR DYSON noted that under full disclosure he has a foster
child that has fetal alcohol issues, but his concerns are
broader than that.
SENATOR BETTYE DAVIS said she appreciates the fact that he took
the time to speak to her in her office and she is looking
forward to working with him. She is pleased to find that he
knows a little more about the state than she anticipated. She
counseled him to let people know that he has visited rural
Alaska and some of the hubs and let people know of his
accomplishments and things he wants to accomplish. She asked if
he had an opportunity to look at the Children's Cabinet that was
instituted by the last Governor and if he has any plans on how
he would work with other departments.
COMMISSIONER-DESIGNEE GILBERTSON responded that he is familiar
with the Children's Cabinet and he is now working with the
Governor on structuring children's services in the State of
Alaska as part of their conversations on missions and measures
and looking at alignment of programs. Three working groups are
already formed and there will be more. "Children's services will
be seen as a top priority of this administration."
SENATOR GREEN made a motion to forward Mr. Gilbertson's name to
the full body for consideration. There were no objections and it
was so ordered.
SB 25-AHFC LOANS TO EDUCATORS
CHAIR FRED DYSON announced SB 25 to be up for consideration.
SENATOR GARY WILKEN, sponsor of SB 25, introduced Sheila
Peterson, his staff who was working on this issue. He said it's
a simple bill and puts a loan program in place that allows
Alaska Housing Finance Corporation (AHFC) to loan 100 percent of
value.
It requires no down payment and can only be used for
owner-occupied housing. This will supply Alaska school
districts a tool to attract and keep qualified public
school teachers. Recruitment and retention of a
qualified workforce is paramount to the operation of a
successful K-12 educational program.
In addition, SB 25 addresses one of the concerns highlighted in
the October 2001 Committee Report on the Statewide Teacher
Shortage by the House Special Committee on Education. It states
that education professionals testified that the number one
reason for the statewide teacher shortage is because housing is
too expensive or non-existent. There is a $0 fiscal note. For
backup he referred the committee to their copy of "Teacher
Housing - Current Issues and Challenges" issued last year by
AHFC and the statements of support from different areas of the
state.
He said it is helpful to see what other states are doing.
California gives $15,000 to $30,000 grants to attract and retain
teachers and Santa Fe, New Mexico, has a loan program like this
one. The Alaska Bankers Association also supports SB 25.
SENATOR GRETCHEN GUESS asked if speech therapists are included.
SENATOR GARY WILKEN said he would find out, but he doesn't want
this bill to turn into a Christmas tree bill. Other occupations
are worthy, but it would "sink under its own weight" if they are
all added. He wants to stick with the realm of education.
SENATOR GUESS said she is talking about other occupations that
fall in the counseling realm, which isn't defined in the bill.
SENATOR LYDA GREEN asked if the bill the Legislature passed a
couple of years ago that reduced the interest rate by 1 percent
for teachers in small communities had any effect.
TAPE 03-01, SIDE B
SENATOR WILKEN said he remembers that to be negotiated for rural
Alaska where you could have up to a 4-plex, one of which had to
be owner occupied. He doesn't remember if it had a teacher
qualification.
MR. DAN FAUSKE, Executive Director, Alaska Housing Finance
Corporation, said there is a provision under SB 181 that covers
that.
MR. PAUL KAPANSKY, Mortgage Operations Director, explained that
SB 181 became effective October 3 and it isn't limited to 1 - 4
units, but one of the provisions is that every unit has to be
occupied by a teacher year-round. The units could not be
subleased. There has been no activity under that program to
date.
CHAIR DYSON asked if lending institutions want to take the risk
for a 100 percent loan-to-value ratio.
MR. FAUSKE said there are similar provisions under federal law
as well and the risk exposure is increased, but is somewhat
offset by the fact that mortgage insurance is required for
anything over an 80 to 85 percent loan-to-value ratio. He said
they are attempting to increase their exposure in rural areas
and thinks there would be some movement.
CHAIR DYSON asked if the mortgage industry put a high rate for
mortgage insurance on 100 percent loan-to-value loans.
MR. KAPANSKY responded it's common practice in the mortgage
insurance industry to insure loans up to 100 percent, so it's
not unique to Alaska. His department requires mortgage insurance
on all loans that are 80 to 85 percent loan-to-value. Now the
maximum loan they can make is 95 percent loan-to-value. "If you
go to 100 percent, the incremental cost of the mortgage
insurance from covering a loan at 95 percent loan-to-value to
100 percent loan-to-value would not be very significant."
CHAIR DYSON said this legislation does not require the teacher
who is getting the loan to actually occupy the house. He asked
whether the loans are for single family only.
MR. KAPANSKY replied yes.
CHAIR DYSON asked Senator Wilken if he intends this for single-
family units.
SENATOR WILKEN answered yes, with owner occupied housing. "If it
was a duplex, when I read that sentence, the owner would have to
live in both."
SENATOR GUESS suggested having the legal department look at the
language to make sure it couldn't be interpreted any other way.
She asked if he intends this to apply to first time homeowners
or could they upgrade and could a teacher buy a home and then
quit.
SENATOR WILKEN answered that if you're a teacher and buy a home,
you're somewhat stable. He doubts that one would quit being a
teacher just to have this kind of loan. He doesn't know how to
get away from people manipulating the system. He said he would
ask professionals to help with that language.
SENATOR GUESS asked whether this is limited to first time
homebuyers and would it apply to people who currently own a
home, but need a larger one.
SENATOR WILKEN replied that he doesn't intend it to be a first
time teacher home loan program.
MR. FAUSKE pointed out that line 7 of the bill says for purchase
only, not refinance.
CHAIR DYSON asked what happens if a person quits mid-term and
moves out of town or moves because of health reasons.
MR. FAUSKE answered, under the rural program, if someone
violates the covenants that the unit must be occupied by a
teacher and is financed with tax-exempt financing, the loan
would revert back to taxable status. They wouldn't necessarily
be found in default.
2:45 p.m.
SENATOR GREEN asked if the same would apply if the person
doesn't move, but just quits teaching.
SENATOR WILKEN responded that the interest would stay the same
and the loan would continue at 100 percent.
MR. FAUSKE said that was correct.
SENATOR GREEN asked if the difference between her and Senator
Dyson's question is that they move out.
SENATOR WILKEN said yes.
MR. FAUSKE said it would be hard to police the issue.
SENATOR GREEN said she doesn't see any geographic limitation.
SENATOR WILKEN said it is statewide.
SENATOR GREEN asked what the harm is to provide 100 percent
loans for any profession in the state.
SENATOR WILKEN responded the harm is that there is a bill at the
end of the process that has 30 different professions and he
doesn't think the Bankers Association would want that or that it
would be good public policy. He said Alaska needs all the help
it can get to hire and keep good teachers and that is the
purpose for this. If there is a crying need for another
profession, that discussion should take place at a different
time.
CHAIR DYSON said he thinks this bill is justifiable because
teachers very obviously serve the public good. "The entire
population and community benefits from having well educated and
thoughtful people..."
He thinks that idea might extend to nurses, as well.
SENATOR GREEN asked who is picking up the down payment
differential and is it all covered by mortgage insurance.
MR. FAUSKE answered that the 10 percent is reflected in the size
of the payment and he envisions this bill helping the young
folks who are just out of college and just don't have the down
payment.
CHAIR DYSON said he thought about inserting "single-family"
after "owner-occupied", but decided not to. Allowing a teacher-
family to build a duplex and perhaps make affordable housing
available to someone else deepens their involvement in the
community and their propensity to stay and adds to their ability
to make the payments. He asked Senator Wilken to comment.
SENATOR WILKEN responded that if it's a duplex, it would cost
approximately twice as much and he wonders if the exposure would
bother Mr. Fauske. Also, if a duplex is good, would a 4-plex be
better? He simply envisions a teacher family buying a house.
MR. FAUSKE said that discussion takes them from a single-family
owner occupied to an investment grade, especially beyond a
duplex. Their underwriting criteria views investments entirely
differently. He believes the single-family approach is safe,
although he deals with a lot of multifamily loans. Affordability
would be a consideration.
SENATOR WILKEN commented that nothing would prevent the
Legislature from expanding the coverage to a duplex or bigger.
MR. FAUSKE agreed that could be done.
SENATOR GREEN said she thinks that this bill could pertain to a
4-plex, since it doesn't preclude it so the drafters should
check that out.
CHAIR DYSON said they would work on a committee substitute that
would include wording making this program available to other
schools that are doing state school testing. He said there is
significant interest in reviving Covenant High School and other
private schools and they may not fit into the present definition
of public school.
SENATOR WILKEN added that the balance in his mind is does it
expand the exposure for abuse versus the good it's doing. He
noted that this was originally Representative Rokeberg's idea
last year.
CHAIR DYSON held SB 25 for further discussion and adjourned the
meeting at 2:53 p.m.
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