SENATE BILL NO. 4005 "An Act authorizing, as a temporary rebate of state resources to certain state residents, payments to assist in meeting heating costs under the federal and state heating assistance programs; and providing for an effective date." 11:46:25 AM Co-Chair Hoffman pointed out that current oil prices have approached $130 per barrel. At that price the state would receive $3.6 billion. Alaska has benefited greatly by high prices of oil; however, Alaskans are facing extremely high costs of energy. The Governor has suggested that the legislature come up with a temporary solution to this problem. With this in mind, two pieces of legislation have been introduced. One solution would add to the Power Cost Equalization Program (PCE), and the second would subsidize home heating expenses. The problem of energy costs is difficult due to the variety of methods of heating in Alaska. It is the legislature's duty to find a fair and equitable way of addressing this problem. Co-Chair Hoffman stated that the purpose of the meeting was to have an overview of two bills, SB 4005 and SB 4006. 11:50:19 AM JAY LIVEY, STAFF, SENATOR HOFFMAN, explained that SB 4005 deals with the high cost of heating oil in rural Alaska. The first section increases the rates paid by the Low Income Heating and Energy Assistance Program (LIHEAP). The fiscal note is based on the assumption that the current rates being paid will triple. Mr. Livey related that the second section of SB 4005 says that the cutoff for eligibility would be 350 percent of poverty level, instead of the current level of 225 percent. That would move the income level for a family of three to around $90,000. 11:52:30 AM Mr. Livey explained that LIHEAP has been operating in the state for many years through the Department of Health and Social Services. He related how the formula works. It takes into account the community in which the client lives, the type of house, income, disabilities, age, and the type of fuel used. The more money the client pays for fuel, the more the relief is. Another reason LIHEAP works for this program is that it provides assistance statewide. LIHEAP is an efficient delivery system and a way to provide timely relief to Alaskans. Mr. Livey reminded the committee that the money would not go to individuals, but rather to vendors. Co-Chair Hoffman requested an explanation of the intent of the LIHEAP energy rebate program, which is no longer a low income program. 11:56:25 AM Mr. Livey clarified that the new LIHEAP program would provide assistance to a family at 350 percent of poverty level, which is not a poverty program. The formula that LIHEAP uses is pro-rated based on income. Senator Olson requested information about rural vendors that do not take credit cards. Mr. Livey said that once the application is approved and the amount of relief determined, the fuel account would be drawn down. No money would change hands. Senator Olson hoped there would not be an interruption of service due to lack of technology. Mr. Livey deferred to the Department of Health and Social Services to explain that process. 11:59:52 AM Mr. Livey continued to say that approximately an additional 22,000 families would be eligible. Co-Chair Hoffman requested price information. Mr. Livey highlighted the fiscal note of $75 million. Co-Chair Hoffman commented on the price tag of this bill, which is $75 million, as compared to the Governor's bill, which is $700 million. SB 4006, Power Cost Equalization, also has a price tag of $75 million. 12:01:37 PM Senator Thomas questioned the expansion of the LIHEAP program. He gave examples of different sized families and what they would qualify for. He spoke of resource rebate inequity based on family size. 12:04:28 PM Mr. Livey shared two criteria. The first is that 350 percent of poverty is used to determine eligibility based on the number of individuals in a family. Once a family has been determined eligible for the program, the amount of benefit received is determined by a series of criterion used to decide how much the family is entitled to. Senator Thomas requested a copy of that information. 12:06:00 PM Senator Dyson asked if LIHEAP funds are taxable. Mr. Livey said they were not, nor were they subject to hold harmless. Senator Dyson inquired about "degree heating days" as one of the criteria. Mr. Livey deferred the question to the Department of Health and Social Services. Co-Chair Hoffman brought up another area of concern - dependency on the program, similar to the revenue sharing program. He pointed out that as income rose, benefits were eliminated. He suggested considering that aspect if the program continues beyond one year. He thought there were ways to give protection to indicate that this is not an on- going program. 12:10:01 PM Senator Huggins asked how senior centers would be dealt with under this program. Mr. Livey thought that this program would pay for energy so long as no one else does, such as a grant or non-profit agency. Senator Huggins spoke of long-distance commuters and thought that mass transportation could be a solution, but could cause problems in the long run. He voiced concern about the use of money based on resources that all of the people own and "means testing". Co-Chair Hoffman mentioned the resource rebate as another approach toward addressing high energy costs. Senator Huggins agreed, especially in that it is a temporary solution. Co-Chair Hoffman suggested a sunset date on the bill. The intent at this time is to get Alaskan's immediate relief. Other facets of energy costs can be looked into at a later date. 12:14:31 PM RON KREHER, CHIEF OF FIELD OPERATIONS, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, detailed the components of the LIHEAP program. It is one aspect of the heating assistance programs and is 100 percent federally funded. It serves households at 150 percent below poverty level and is intended to offset heating costs for low income families. The program is operated in conjunction with nine tribal organizations. Last year $10,700,000 was received by the federal government for LIHEAP. He listed the number of households served - 15,000. He described the kinds of people served. He listed residency requirements and how payments must be used. Vendor payments are the vehicle for covering the costs. 12:16:50 PM Mr. Kreher identified the community home heating points used to determine eligibility. These points, plus income, plus the dollar amount available determine the payment to each household. The Alaska Heating Assistance Program created through HB 152 serves households between 150 and 225 percent of poverty, outside of the federal program. He estimated about 22,250 households will qualify for this program. 12:19:20 PM Co-Chair Hoffman asked about tax implications of the current and proposed programs. Mr. Kreher reported that the current program payments are not taxable. The Department of Law is researching the implications of the proposed higher levels. Co-Chair Hoffman asked when that information would be available. Mr. Kreher replied that he did not know. Co-Chair Hoffman asked if the program the Governor is proposing is taxable. Mr. Kreher said it was. 12:21:14 PM Senator Huggins asked how to address the profile of a household that lives "off the grid" and generates heat and electricity from fuel oil. Mr. Kreher did not know. The Alaska Heating Assistance Program only addresses heating costs, not utility costs. Senator Huggins spoke of the high cost to be connected to the grid. Co-Chair Hoffman thought it was an excellent example of an item that requires looking at on a long-term basis in order to address energy costs for all Alaskans. 12:23:15 PM Senator Elton asked if a person has to apply on an annual basis for either program. Mr. Kreher said they would. Senator Elton assumed that those at the higher end of income limits may be less inclined to participate than those at 150 percent. Mr. Kreher agreed. The majority of households now served are below the federal poverty level. Many Alaskans have an aversion to public assistance. 12:25:20 PM Senator Elton noted that those who have not participated in LIHEAP in the past are not limited to one vendor. Mr. Kreher said that was correct. Senator Thomas asked if LIHEAP is taxed. Mr. Kreher said currently LIHEAP is not taxed. He reiterated that the Department of Law is looking into whether the new program would be taxed. Senator Thomas asked if both vendors and individuals can receive payments. Mr. Kreher said yes. In some instances direct payments are made to individuals. Senator Thomas asked if the intention is for energy assistance. Mr. Kreher agreed. 12:27:08 PM Senator Thomas requested an explanation of the income guidelines in a handout entitled "2008 Poverty Guidelines for Alaska Income Guidelines as Published" (copy on file.) Mr. Kreher detailed the annual guidelines. He could not be specific about the amount of rebate because of not knowing the other factors. Co-Chair Hoffman added that the information could be found on the web. 12:29:24 PM Senator Thomas summarized that assistance is based on a point system. Mr. Kreher gave an example of a household in Anchorage that qualifies for eight points due to location. If the household had three bedrooms, the 8 points is multiplied by 1.3. For every child under 5, a point is added. If the household had zero income, it would receive 100 percent of the points, or 10 points. Depending on the availability of funding, a dollar amount would apply against the points. Last year that amount was $85. That household would have been eligible for a grant of $850. Senator Hoffman asked for an explanation of expedited cases. Mr. Kreher explained that an expedited case is one that has demonstrated an urgent need for assistance such as facing a cut-off of utilities or heating costs greatly exceeding income. Mr. Livey referred to the numbers for Anchorage in the document and pointed out an error. Senator Hoffman said it was evident that the program is broad based and addresses issues uniformly throughout the state. Mr. Kreher stated that the funds would be distributed fairly throughout the state. He noted that the state shares its tribal block grant with nine tribal organizations. 12:33:51 PM