COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 98(HES) am "An Act relating to contracts for the provision of state public assistance to certain recipients in the state; providing for regional public assistance plans and programs in the state; relating to grants for Alaska Native family assistance programs; relating to assignment of child support by Alaska Native family assistance recipients; to paternity determinations and genetic testing involving recipients of This was the first hearing for this bill in the Senate Finance Committee. JIM NORLAND, Director, Division of Public Assistance, Department of Health and Social Services, testified that this bill would help to continue the progress of welfare reform in the State Of Alaska. Mr. Nordland stated the authority to run the federal programs at the state government level is one of the main reasons for welfare reform's success in Alaska and other states. He explained that state governments have been able to use this power to dramatically reduce caseloads, help families return to work and out of poverty. In exchange for the flexibility, he said states are receiving a specific amount of money from the federal government, known as a Cap Block Grant. He attested this arrangement between the federal government and Alaska's government has worked very well to reduce welfare dependency. In addition to granting ownership of welfare programs to the states, Mr. Nordland stated the federal law allows tribes in the Lower 48 and the 13 regional Alaska Native non-profit organizations to run their own welfare programs as well. He shared that funding for the Native-operated programs is taken from the amount allocated to the state. Mr. Nordland noted that while states are required to participate in funding the state-operated welfare programs, there is no requirement in federal law for any entity to contribute to the funding of Native-operated programs. However, he said that the state contributes approximately fifty percent of the funds needed to operate the Native-run programs. Mr. Nordland then explained that this bill allows for the expenditure of state funds for Native-operated welfare programs. He stressed that the only eligible organizations that can receive these funds are the 13 regional non-profit Native organizations. Mr. Nordland added that the intention is to transfer from the state, the amount of money needed to pay for benefits, administration, child care, work services, etc. He said this money is currently being paid by the state to serve the same participants in programs that would now be run by Native organizations. He pointed out this is the reason for the bill's zero fiscal note. Mr. Nordland shared that the Tanana Chiefs Conference (TCC), an Interior Alaska organization operating under the Doyon Native Corporation is currently operating a welfare program. He said that the state could appropriate federal funding to this organization so long as the program it operates is the same as the one operated by the states' Alaska Temporary Assistance Program (ATAP). However, he stated that TCC had planned to run its program differently than the state, and without this legislation, would be unable to receive funding. He deferred to a representative from the TCC to detail the culturally relevant approach of the Native-operated program. Mr. Nordland stressed that the department supports giving flexibility to the Native organizations so that the programs can be run with more local control and with better cultural relevancy. Mr. Nordland qualified there are limits as to how different the Native-operated programs could be from the state- operated program. He stated that Alaska's congressional delegation inserted language into federal law requiring Native programs to be comparable to the state program. He said the department has worked with the Native organizations to design the comparability criterion, which have been approved by the US Secretary of Health and Human Services. Mr. Nordland summarized that if this legislation passes, there would be a Native-operated program comparable to the state program but somewhat different in order to meet local and cultural circumstances. Senator Green then asked if this legislation requires federal "blessing" before the funds could be allocated. Mr. Nordland affirmed the plan does need to get federal approval. Mr. Nordland concluded his presentation saying that the department supports the legislation because it is believed the welfare reform efforts could be more successful if the Native organizations are allowed to operate their own programs. He attested that the organizations know the needs of their region and the people and that the programs could be run more effectively than the state could. Senator Leman asked if federal law allows allocations to other organizations besides Native organizations. He referred to earlier discussion he had with the witness on this matter where he shared his desire to broaden the localization of the welfare reform programs. Mr. Nordland replied there is a specific provision in federal law applying only to tribes in the Lower 48 and Native Alaskan organizations. He advised however, that there is no reason the state cannot contract the programs out to municipalities or other entities. In fact, he said many states have privatized the services to for-profit organizations. Senator Green asked if privatization or shifting the programs to the local level would require federal approval as well. Mr. Nordland answered federal approval would not necessarily be required. Amendment #1: This amendment inserts a new subparagraph on page 11, line 22 to read as follows. (4) establish the same maximum number of months of benefits as is established for the state program under AS 47.27.015 (a)(1); and (5) [This amendment was not offered at this meeting but was discussed.] Senator Adams requested the department comment on the proposed amendment. He described it sets uniform standards for the maximum amount of benefits that could be collected by participants of either the state or Native-operated welfare programs. Mr. Nordland stated that the department supports the amendment, referring to his earlier statement about the comparable criterion between the two programs. He noted that the issue of consistent benefit eligibility was overlooked when the criterion was developed. He told the Committee that federal law allows the Native organizations to negotiate with the federal government on the length of time benefits could be collected by participants. He said the reason for this allowance is to give some Indian reservations an exemption from the 60-month lifetime benefits limit. He stressed that this exemption was outside the bounds of the comparability arrangement between the state and Alaska Native organizations. He said the department supports holding Native-operated programs to the 60-month limit just as the state-operated program is. He commented that this amendment "plugs a loophole in this bill." Mr. Nordland stressed that villages with an unemployment rate of over 50 percent would be exempt from the 60-month limit whether the residents participate in a state-operated or Native-operated program. He expressed that this amendment does not apply to specific communities but rather the operator of the program. This is to prevent participants of a Native-operated program who do not live in a community with more than 50 percent unemployment to receive more than 60 months of benefits, according to Mr. Nordland. In this manner, he said, the exemption would be based on the community itself rather than the operator of the program serving it and possibly other communities as well. Co-Chair Torgerson asked for an explanation of Section 5. Mr. Nordland replied that this section was part of changes made to the bill by the House of Representatives relating to child support payments. He believed the language to be conforming to other child support enforcement statutes. KRISTEN BOMENGEN, Assistant Attorney General, Human Services Section, Civil Division, Department of Law, testified that this section is the result of a comprehensive review of the child support provisions. The purpose, she said is to ensure that child support payments that are collected on behalf of participants who are receiving public assistance under Native-operated programs are distributed to that Native organization. She stated that the intent is to remove any possible barriers to making appropriate distributions. Co-Chair Torgerson asked if the child support payments only included those collected under court order. Ms. Bomengen replied all child support payments are subject to distribution to the program's operator. Co-Chair Torgerson wanted to know if "petitioning the court" in the language relating to enforcement of child support orders could include tribal courts. Ms. Bomengen confidently stated that is not the intent to petition any tribal court. Co-Chair Torgerson wanted assurance. Ms. Bomengen expressed it is not a function of the Division of Child Support Enforcement to operate in tribal court. Instead, she said the agency follows the rulings of state court. She said there is no intention to expand the agency's efforts into tribal courts. Co-Chair Torgerson acquiesced, but asked about the recent Supreme Court ruling in John v. Baker, which authorizes tribal courts to issue child support orders. Ms. Bomengen needed an opportunity to review the court case before giving a specific opinion on the matter. Co-Chair Torgerson stated he wanted an understanding of the impact of the court decision on this legislation. He then referred to Section 21 that allows the department to adopt program standards that vary by region. He wanted to know why standard practices would not be adopted so all Alaskans are treated equally. Mr. Nordland responded that the language in Section 21 conforms to other sections of the bill to allow regional public assistance programs to be established by the department. He shared that the motivation is to prevent the department from having to create a separate program for the few non-Native residents of a Native village, served by a Native-operated welfare program. He stated that this provision allows the non-Natives to be served by Native organizations. Co-Chair Torgerson understood the intent but claimed the language instead allows the department to vary program standards by region. He thought this provision was too broad-based. Mr. Nordland responded that the intent is to adopt the program standards of the Native-operated plan, which would be comparable yet different than the state-operated program. In doing this, he said, all residents of a community could be served by the Native-operated plan. Ms. Bomengen addressed a concern raised in other committees regarding a potential equal protection question. She detailed that the bill contains a requirement that in any area in which a Native corporation is operating a welfare program, eligible Alaska Natives must seek their services from that program and not from a state-operated program. She spoke of funding for the participant as well as the Native program in these cases. She suggested the approved Native-operated programs should be identical to one that the state would operate if it were to do so. Ms. Bomengen then explained how the Alaska court applies a "sliding scale test" to any equal protection challenge. This test, she said is used to determine whether a greater or lesser burden is placed on the state to justify a classification of individuals to be served by one plan or another, depending on the importance of the individual rights involved. She detailed how the court determines what kind of weight should be given to the constitutional interest impaired by the legislation, examines the purpose of the legislation, and evaluates the state's interest in the means employed to further the goals of the state. Ms. Bomengen stressed that an equal protection challenge to this legislation would probably claim there to be an impermissible classification based on the race of the individual. She said the state's response would then be based on other equal protection cases that have addressed the same distinction. She explained this distinction was created by a federal act, which is born out of the federal government's trust relationship and responsibilities to American Indians and Alaskan Natives. Therefore, she surmised the distinction would be a quasi-political issue based on the unique political status of indigenous peoples and not considered a racial classification. Ms. Bomengen continued detailing why an equal protection challenge would not succeed saying that, regardless of whether the state or a Native organization operated the program, the participant's benefits would not be affected, services would not be denied and the subsequent impact on the family would be insignificant. She said this is because of the comparability requirements for both programs under state and federal law. Ms. Bomengen relayed a suggested amendment to the bill made to the House of Representatives that would allow an individual who is directed to the Native-operated program to request service under the state-operated program. A successful request, she said would demonstrate a compelling interest to receive services from the state rather than the Native organization. She added that the Department of Health and Social Services would develop standards for this exception in regulation. Senator Phillips asked if there was a legal opinion on this matter from the Division of Legal and Research Services. Co-Chair Torgerson said there was not but noted a request would be submitted. Co-Chair Torgerson acknowledged the fiscal note was zero but wanted information about the federal grant funds and necessary general fund money to implement the new programs. Mr. Nordland first commented that not all of the 13 regional Native corporations are interested in operating welfare programs. He noted that there is already one Native-operated program established and that the Tlingit- Haida Corporation and the Association of Village Council Presidents have expressed interest in establishing their own program. He then explained that the department would transfer not only the benefits portion of the welfare programs to participating Native corporations, but also a portion of the administrative funds as well. He admitted this was not easy for the department to do because of the impact on its administrative abilities. However, he said in the long run the programs would be run more effectively with higher caseload reductions. Mr. Nordland stressed this bill has no impact on the general fund, either positive or negative. Senator Wilken wanted to understand the flow of the funding from the federal level to the beneficiary. Mr. Nordland detailed that the Native-operated program must first have a plan approved by the federal government, which requires some state funding to make the plan comparable to the state-operated plan. Once the Native-operated plan is approved, he said a portion of the federal funds provided to the state go directly to the Native organization. He expressed that the intent of this legislation is to allow the state funds to be allocated to the Native organizations so those programs can be operated at the same level as the state-operated program. Senator Wilken wanted to know how the distribution of federal funds between the state and the Native organizations was calculated. Mr. Nordland responded that the amount of federal money spent on Native clients during the federal fiscal year 1994, in the specified region, is reported to the federal government as the percentage of the state's block grant to be allocated to the Native organization. He qualified that the amount could change in the future when the Temporary Assistance for Needy Families (TANF) law changes, but would not change before then. Mr. Nordland continued that the general funds provided to the organization are separate from the block grant funds. He explained further how the TANF program is funded with a fixed federal block grant, of which the state must expend at least 80 percent of what was spent in 1994 to participate in the TANF program without severe penalty. He shared that the state is currently meeting the required expenditure amount. Senator Wilken asked how many families this legislation would affect. Mr. Nordland listed the TCC program currently serves approximately 500 families, the Tlingit/Haida organization serves about 500 families and ABCP would serve approximately 900 families if it takes over the welfare program in their area. He said this represents about 20 percent of the entire caseload in the state. Senator Wilken asked why the transfer of these 1900 families would not make the department's operating costs smaller. Mr. Nordland responded that the department still administers Medicare, Food Stamps, Adult Public Assistance and other programs. It was difficult for him to say exactly how the department would manage the reduction in administrative funds and still operate these other programs. He used Bethel as an example where over 95 percent of welfare clients are Native and the department would therefore reduce department staff. Senator Wilken thought the fiscal note should show a reduction in state bureaucracy. Mr. Nordland responded that there is a reduction in the state bureaucracy but not a reduction in the budget. He stated that the general funds would be paid to employees of the Native corporations to operate the program rather than to state workers. He stressed that the amount of spending stays the same. Senator Wilken then asked the purpose of the legislation. Mr. Nordland answered the reason for transferring welfare programs to Native organizations is for many of the same reasons for having local school districts across the state. That, he expressed is to have some local control with the programs "closer to home." Senator Wilken asked if there would ever be an instance of a non-Native family not provided with services that a Native family is provided or visa-versa. Mr. Nordland assured that one entity or another would serve everyone who is eligible for public assistance. BARBARA NICKLOS, Director, Division of Child Support Enforcement, Department of Revenue, testified via teleconference from Anchorage that she was available to answer questions regarding the disbursement of child support payments to the Native organizations who operate a public assistance program. She assured that the language pertaining to this allowance does not relate in any way to tribal court. DON SHIRCEL, Director, Family Services Division, Tanana Chiefs Conference testified via teleconference from Fairbanks listing his education and experience qualifications. As a social service professional, he strongly supported both SB 80 and HB 98. Mr. Shircel spoke in great detail of the early success of the TCC operated public assistance program and the satisfaction it has given Native leaders. Tape: SFC - 00 #89, Side B 7:09 PM Mr. Shircel read a letter to TCC from a former client as follows. [Copy not provided.] Hello, I'm writing this letter to everyone to let you know that I have a new permanent job and I'm going to be O.K. from here on out. I'm also writing to thank each person for all they have done for my family and I. I know that there's a lot of work that's put into each individual case and I really want to thank you for all that you've done to help me become more self sufficient. This letter is not only a letter to thank you for all your hard work, but it's also a letter to request that I have my case closed. I do realize that all my benefits will stop and I feel I'm prepared for this. Once again, thank you and may Lord Jesus bless you for what you do to help others. Mr. Shircel expressed that he could not think of a better way to convey to the Committee what the legislation is trying to accomplish than this letter could. He believed that with the passage of the bill, his organization could have an even greater impact and get more "bang out of each welfare buck." Senator Adams asked what does TCC do for a Caucasian individual living in a rural community in the region, who otherwise qualifies for the TANF-based program. Mr. Shircel responded that currently the individual must apply for services through the state because TCC does not have the authority to serve him or her. Senator Adams asked if that qualified Caucasian has a choice between the Native-operated or the state-operated public assistance program. Mr. Shircel answered that without this legislation, that person does not have a choice but must be served through the state-operated program. Senator Green commented that four years ago during deliberations of SB 98, relating to welfare reform, suggestions were made to address alcohol, drug abuse, parent's involvement with children, and possible domestic violence issues conditional on receiving benefits. She recalled that on every count it was deemed this was a violation of individual freedom. She stressed that if allowances for these issues to be combined in the public assistance for the Native-operated programs, then the same allowances should be made for every public assistance program in the state. Co-Chair Torgerson requested an improved sectional analysis from the department and a legal opinion on the equal protection clause from the Division of Legal and Research Services. Senator Green also requested a side-by-side comparison of the current role of the Division of Child Support Enforcement and the proposed interaction with the Native- operated programs, as it relates to TANF and how the funds circulate. She wanted to know if any funds would be lost if the legislation passed. Co-Chair Torgerson ordered the bill HELD in Committee.