HSTA - 01/31/95 Number 535 HB 70 - PERMANENT FUND DIVIDEND HOLD HARMLESS ROD MOURANT, Administrative Assistant to Representative Kott, sponsor of the bill, said there would be new items in their bill packet, including a revised fiscal note from the Permanent Fund Division, and a series of fiscal notes from the Department of Health and Social Services, demonstrating the financial savings and expenses to the various programs that are affected by this legislation. There is also a letter from Hope Cottages expressing concern about HB 70 and its effects on their program. Number 562 REPRESENTATIVE PETE KOTT stated that he did not have anything more to add. However, he would answer questions. REPRESENTATIVE GREEN wanted assurance that if the bill passed, it would not cause people to lose their benefits. He said the Department of Health and Social Services had said that individuals would not lose their benefits, because they were the administrators of the program, but that some people questioned if that was true. Number 600 ELMER LINDSTROM, Special Assistant to Commissioner Perdue, Department of Health and Social Services, testified that the department is opposed to the bill. He asserted that although there is a net saving if thinking in terms of total funds, there is a net cost to the state, in terms of general funds. Number 605 CHAIR JAMES asserted that we have a tax on everyone in the state for this hold harmless amount. It is never appropriated in the budget, because it is part of the statute, yet Alaska residents are paying close to $23 million to $24 million in additional benefits that would not have to be paid if we did not have the hold harmless provision. This should be included in the budget appropriations' process. Number 622 MR. LINDSTROM said that all the funds, PFD, the various public assistance programs, and the hold harmless, are included in the operating budget on an annual basis. The confusion is the funding source. He said that they dont often talk about that during the budget deliberation because, again, the hold harmless funds are not general funds, they are earnings of the permanent fund. They are real dollars, and they are appropriated through the regular operating process. The information about the reductions from the PFD check is included on the PFD check stub. Number 656 CHAIR JAMES said people are distressed that money comes out of their PFD checks. The issue is that this is a tax, any time the state takes money from income, it is a tax. She suggested that we take the funds from the general fund. Number 661 REPRESENTATIVE ROBINSON asked what the savings would be to the individual, and what the increased amount would be to the general fund. CHAIR JAMES asked if the expense would be the same or less if these funds were taken from the general fund instead of from the PFD fund since it would only be a different funding source. MR. LINDSTROM said the expense would be the same. There would be an increase of $20 million in the general fund costs, however, if the legislature were to take that approach. He said that if the decision were made to fund the hold harmless out of the general fund it would not require a piece of legislation. It would be a budget decision made by the finance committees. Legislation would not be required to accomplish a funding source switch. TAPE 95-5, SIDE B Number 001 MR. CURTIS LOMAS, Welfare Reform Coordinator, Department of Public Assistance, Department of Health and Social Services gave information on the expenditures on the various relief programs. About $1,050,000 would be the increased expenditures of the general relief program; $330,000 would be part of the increased expenditures in the Medicaid Program; and $472,000 would be the increased expenditures in Public Assistance administration. Number 016 REPRESENTATIVE ROBINSON brought up the debate and the letter from Hope Cottage that disputes what the Mr. Lomas had said the other day that people would not lose their medical benefits. They believe that in cases of nursing homes, and others, that they would lose their benefits. Number 025 JON SHERWOOD, Program Coordinator, Division of Medical Assistance, Department of Health and Social Services, reported that the receipt of the Permanent Fund Dividend (PFD) would not disqualify someone for Medicaid in the month of receipt. If they retained the dividend, they would become ineligible because they would be what they call "over resource" in future months. Some people were placed on the Hold Harmless Program, and about 75 percent of the spending in the Medicaid Hold Harmless Program is for facilities, hospitals and nursing homes. They don't know the reasons why people chose to retain that money, but Mr. Sherwood said they are pretty sick people, so spending their PFD may not be their first priority. There are situations where Medicaid allows up to three months of coverage retroactively. If they are looking at retroactive cases some people will be disqualified, because of the receipt of a permanent fund dividend check in a prior month. REPRESENTATIVE ROBINSON asked what would happen to someone in a nursing home if they were dying and received the dividend and were suddenly ineligible. She asked if they would be kicked out. If they did not have money to continue to be in the facility, she asked what would happen to them. MR. SHERWOOD said he wasn't aware of a case where anyone was kicked out in a situation like that. Generally, the social workers at the nursing home would work with the family to try to get the money spent as soon as possible. If there was a period of ineligibility that would become a debt that the client had to pay the nursing home. If the client couldn't pay the debt, it would be a "bad debt" to the facility. Medicaid also allows provisions for people to use their income, when they are in a nursing home, to pay uncovered medical expenses such as expenses they haven't covered. If someone had some income coming in later months, they could pay off the debt using that income. REPRESENTATIVE ROBINSON asked who is responsible for the bad debt if the client or family doesn't have money to pay it. MR. SHERWOOD said that he thought the bad debt does not go into the rate they pay nursing homes, but he wasn't certain. Number 100 REPRESENTATIVE PORTER commented that it is not a problem of accepting the permanent fund dividend, but retaining it. MR. SHERWOOD said that is the case; there are a few exceptions but that is the rule. REPRESENTATIVE PORTER said it puts a person in the unusual situation of having to spend their money to get more. MR. SHERWOOD said he is in situations where he encourages people to plan spending their PFD to pay some uncovered medical expenses. CHAIR JAMES asked if there were any other questions of the people from the Division of Public Assistance. Number 120 REPRESENTATIVE SCOTT OGAN asked if people on public assistance spend their money on medical expenses, they would lose their PFD. MR. SHERWOOD said if they spend it in the month they receive it, in most cases it won't effect their Medicaid eligibility. Number 150 REPRESENTATIVE IVAN said he is not familiar with the welfare program and he asked what the average length of time is that a family is on public assistance if they got on AFDC or Medicaid or some sort of Public Assistance. Number 173 MR. CURTIS LOMIS said it is hard to say. The data they have indicates that most families remain on public assistance for less than two years. He did not have detailed length of participation data to provide specific information on that. REPRESENTATIVE IVAN brought up how different Alaska is from other states. It is equivalent to five states. It is very diverse and different circumstances occur if you compare one family in an urban setting versus a rural setting. He said he would need more information on the impact of this bill on the different constituencies before he could consider supporting such legislation as this. Number 195 MR. LOMIS presented a legislative research report, prepared last year, for purposes of analysis for a different piece of legislation. It is research request 94-94.172, and what it has is a breakdown of public assistance benefits by community for the month of October, 1993. This report is being updated by Legislative Research with October, 1994, information. He referred the committee to this document for analysis. The numbers are very representative. REPRESENTATIVE JOE GREEN asked if they must spend the PFD in the same month or same year to avoid the problem. Number 227 MR. LOMAS said they have to spend the PFD check in the same month it is received. The PFD money is considered as income for that month. If it is retained in the next month it is a resource, so then it might put the recipient over the resource line. Number 214 REPRESENTATIVE ROBINSON spoke about the lengths of time people are on public assistance, and about the people who come to Alaska from the Lower 48 states. There is a strong impact of other people coming in to get our benefits. She wondered if this would be part of the research they are doing. CURTIS LOMAS said the question has come up repeatedly over the last several years and the department did some research about three years ago. They questioned applicants who had been in the state less than a year about their reasons for coming to Alaska. They come for reasons like anyone else, they are looking for jobs. There is also a prevailing perception that Alaska is wealthy and it brings people here. CHAIR JAMES recalled hearing about people moving into the state specifically because they had a disabled person in the family and medical benefits and treatments for disabled people are better here than in other states. She asked Mr. Lomas to respond to that issue. Number 276 CURTIS LOMAS confirmed that the benefit levels in Alaska are higher than other states, although we are not higher in disability programs. The department's research does not bear out that benefits are a major factor when people from other states decide to come to Alaska. Number 290 REPRESENTATIVE CAREN ROBINSON wanted to know how much higher our payments are, and if that is because our cost of doing business here is higher. She wondered if the reason is that medical costs are higher and housing is higher; we are not so much higher compared to the kind of service they can get in the Lower 48. MR. LOMAS said that when the department has compared the AFDC rates in our state to that of other states, speaking in terms of the cost of living in Alaska, Alaska comes close to the top six states as a percentage of the poverty guide line. As generous as Alaska is, it is not considered remarkable compared to other states. Number 308 MR. SHERWOOD said people with disabilities may be intrigued by the levels of benefit payments in Alaska compared to other states, yet they lose interest in coming to Alaska when he explains the cost of rent in Alaska, or the lack of availability of some kinds of services that disabled people need in many communities. REPRESENTATIVE KOTT returned to give a closing statement on HB 70. There was concern about how it would effect Child Support and Enforcement Division (CSED) individuals. Since the last meeting, he spoke with them and determined that there would not be any pragmatic impact. Also, he had a preliminary zero fiscal note, so there is absolutely no impact on CSED. REPRESENTATIVE KOTT said there may not be statutory requirements to change the funding source; however, there would be statutory requirements to eliminate or delete from statute the hold harmless provisions, as well as the notification to the public, which is currently required. There will be some kind of statutory requirement. Also, there may be some start up costs in the program. The bill has a Judiciary and Finance referral. There is a mechanism to transfer people on and off of programs, namely, automation, and he believes some kind of program can be constructed to offer ease of transfer and to reduce bureaucratic costs. Number 385 REPRESENTATIVE KOTT said he spoke to Jan Hansen who said many people have come here because of Alaska's public assistant programs. Ten percent of Alaskan people are receiving some type of public assistance, one out of ten people. As stated before, the majority of people on public assistance stay on the program less than two years. Judging from the information Representative Kott has, this is a slim majority, Over 40 percent stay on the program longer than two years. The fiscal note is based on the theory that everyone currently on the Hold Harmless Program will accept the PFD check. Representative Kott thinks that, in the final analysis, people on public assistance will opt to stay on public assistance program and not receive the PFD check. Number 403 REPRESENTATIVE IVAN spoke of his concern to have slow welfare reform and said he respects the efforts and the intent of this legislation. CHAIR JAMES made a comment that many of the problems result from federal regulations. We are in a transition period, where in Washington D.C., they are currently working on what to do and how they will address welfare. Some federal changes might give us more control over how we handle public assistance. Number 442 REPRESENTATIVE BRIAN PORTER does not see this legislation as a step that would frustrate the attempt at welfare reform. He doesn't think it will adversely affect anyone, since there are mechanisms in place for those who have a dire need. Number 460 REPRESENTATIVE KOTT stated they are trying to work toward a mind set of being more self-sufficient. Number 485 REPRESENTATIVE ROBINSON voiced her objections. She totally disagreed with the testimony. She said that passing this bill would hurt the most needy people in our state, seniors, disabled, the poor and sickest. She believe they are spending the PFD frivolously. The permanent fund is part of their wealth that they deserve to receive. She said she will be voting against this bill. Number 526 CHAIR JAMES commented that there are the working poor also who are not on public assistance. Each one of them is paying about $41 of their permanent fund dividend check to keep these other people going. Number 539 REPRESENTATIVE BRIAN PORTER moved that the committee pass HB 70 from the House State Affairs Committee, with attached fiscal notes and individual recommendations. Number 540 REPRESENTATIVE ROBINSON objected. REPRESENTATIVE ED WILLIS testified that he will not support the bill. The intent of this bill was that money be put away for all generations of Alaskans. All Alaskans deserve its bounty. He believes that those of us who can work must help the people who cannot help themselves, and he will not support this bill until he knows precisely what impact this bill would have. As it is, everyone is only guessing, so for that reason he will have to vote "No." CHAIR JAMES said that the motion before the committee was whether or not to move this bill out of committee with individual recommendations. She asked the secretary to call the roll. Number 590 Representatives Ivan, Robinson and Willis voted against moving HB 70. Representatives Porter, Ogan, Green and James voted in favor of moving the bill with individual recommendations. The motion passed and HB 70 was moved out of committee. The committee took a brief break. CHAIR JAMES called the meeting back to order at 9:35 a.m.