SB 104-PERSON W/DISABILITY SAVINGS ACCOUNTS  2:18:17 PM CHAIR COSTELLO reconvened the meeting and announced the consideration of SB 104. She relayed that this is the second hearing and public testimony was closed on 2/4/16. The intent is to take members' questions, adopt a committee substitute, and look to the will of the committee. 2:19:00 PM SENATOR GIESSEL moved to adopt the CS for SB 104, labeled 29- LS0702\L, as the working document. CHAIR COSTELLO objected for an explanation of changes and requested Mr. Jessee first provide testimony. 2:19:24 PM JEFF JESSEE, Chief Executive Officer, Alaska Mental Health Authority, stated that he and the board consider SB 104 to be a very important piece of legislation. He related that he previously was the senior attorney for the Disability Law Center and had to advise people with disabilities not to accumulate any resources. The reason is that it would make them ineligible for Medicaid. He described SB 104 as a huge step forward in allowing people with disabilities to do things for themselves and become more self-sufficient. It allows these individuals to set aside assets for legitimate purposes related to their disability. He noted that there is a claw-back provision so that the state can recover some of the Medicaid payments it made, once the individual has passed away. MR. JESSEE reported that the Alaska Mental Health Authority trustees last week unanimously voted to fund the Department of Revenue fiscal note for SB 104 with $60,000 in FY2017 and $40,000 in FY2018. CHAIR COSTELLO expressed surprise for the generous offer and appreciation for the work the Mental Health Trust Authority does on behalf of Alaskans. 2:21:50 PM SENATOR STEVENS asked if the contributions are tax deductible. MR. JESSEE deferred the question. 2:22:38 PM CHAIR COSTELLO asked Mr. Eiler to explain the changes made in the CS. 2:22:57 PM WESTON EILER, Staff, Senate Labor and Commerce Standing Committee and Senator Mia Costello, explained that the committee substitute (CS), version L, for SB 104 houses the ABLE Savings Program in the Department of Revenue rather than the Department of Commerce, Community and Economic Development. The reason for the shift is that the Division of Banking and Securities would have been in charge of auditing and regulating the same accounts it was administering. The CS also changes the plan from a 529 (A) approach, and looks towards having the State of Alaska join a consortium of states to achieve greater economies of scale for the programs. Section 8 on pages 15-16, amends AS 47.10.115(b) relating to permanent fund dividends held in foster care trusts. The CS provides that the proceeds of the trust will be distributed when the youth has reached 21 years of age, is no longer in state care and has reached 18 years of age or is emancipated. The idea is that this provides bridge funding for these youths as they prepare for adult life. 2:26:17 PM JANE CONWAY, Staff, Senator Cathy Giessel, Alaska State Legislature spoke to the following prepared overview of changes to from the original version I to the current version L of SB 104: When Senate Bill 104 was introduced, it was written to reflect the intention of Alaska setting up its own ABLE Savings Program to be housed and administered in the Department of Commerce and Economic Development. Early on we heard from DCCED concerns that they would have a conflict of interest in housing the program since banking and securities would be in charge of auditing the very same accounts that they would be administering. Following that, we then approached Dept. of Revenue to run the program (which is where most states house their ABLE programs) and they agreed to work with us on the legislation. In looking for expertise in the area of 529 plans, like Alaska's college savings plan, we called the folks there who run that program out of University of Alaska, Fairbanks. In that conversation we learned that T.Rowe Price, one of the financial institutions who offer the college savings plan portfolios, had told UAA that they had no interest in offering 529(A) plans in Alaska, as there is not a healthy economy of scale for them to make it worth their investment to do so. After that conversation, we learned that is the same obstacle that other states were experiencing: not large enough numbers of possible account holders to make it economically viable for investment companies to offer ABLE accounts in most states. Then we learned about a consortium of states who are now working together in an effort to offer ABLE accounts by joining together and pooling their numbers to attract and incentivize financial institutions to respond to an RFP with ABLE Account investment offerings. If SB 104 passes, Alaska plans to join that consortium of 8 states (and more states poised to join), be part of the RFP process to select a financial contractor to handle the accounts and benefit from the economies of scale, resulting in lower account fees for Alaska ABLE account holders. The consortium would also provide a call center and assist in marketing assistance for its members. Currently our office and our Dept. of Revenue folks are part of a weekly teleconference with the other states to share concerns, ask questions and learn as much as they can about the ABLE Act, as it is a brand new federal authorizing law and many states are in some stage of implementation at this time. This change of course for the program has resulted in restructured legislation language to reflect that: federal authorizing law the "consortium" to achieve a better economy of scale and share administrative tasks that selects a financial contractor institution if it chooses to do so and it deems it an economically viable choice These items remain the same:    contractor, maintain oversight, terminate or not renew a contract if they want to choose a different contractor account for an ABLE account accounts allowed, that a fee may be required to open an account, guidelines and caps for the accounts themselves, that the accounts can be changed only 2 times a year, that a designated beneficiary can be changed, guidelines for use of the account, rollover options, statement requirements, accounting requirements, annual fees. "security" for a loan claims during the life of the beneficiary ABLE account confidential, and not open to public record search, but allows the Dept. and DHSS to exchange information re: eligibility assets under means test programs fund to run the program back funds if a beneficiary dies law for the program beginning in 2018 2:33:19 PM SENATOR GIESSEL advised Senator Stevens that income from the accounts and contributions to the accounts are not taxed. SENATOR STEVENS asked if property rights attach to ABLE accounts that can be passed on to the heirs of the account holder. MS. CONWAY deferred to Mr. Spielman. 2:34:25 PM STEWART SPIELMAN, Senior Policy Advisor and Counsel, Autism Speaks, Maryland, explained that the account passes though the individual's estate like other property and is subject to a Medicaid claw back. Any assets that remain in the account after the Medicaid claim is paid pass through to the estate of the deceased individual. 2:35:43 PM CHAIR COSTELLO removed her objection and finding no further objection, the committee substitute, version L, for SB 104 was adopted. SENATOR GIESSEL asked if the committee would like to hear from the head of the consortium that Alaska would join, should the bill pass. 2:36:10 PM CHASE REHNWEINKEL, Director of Policy, Illinois State Treasurer, related that the idea of the consortium developed because states were concerned that the economy of scale would not be sufficient to sustain a program. To address the concern, a number of states decided to work together to share services while maintaining control over the individual accounts in their state. SENATOR GIESSEL asked which states have joined the consortium, how many he anticipates joining, and the current state of the request for proposals (RFP) process. MR. RHNWEINKEL said Illinois, Wisconsin, Minnesota, Iowa, Kansas, Missouri, Pennsylvania, and Nevada have signed interstate agreements to participate in the consortium and a number of other states have indicated interest. The consortium is in the process of drafting RFPs for services in order to provide investment and recordkeeping for the program. CHAIR COSTELLO noted the individuals online to answer questions. SENATOR STEVENS asked for information about the individual tax benefits. 2:39:52 PM PAM LEARY, State Investment Officer, Treasury Division, Department of Revenue (DOR), said the contributions to the fund are after tax, but the income earned on the contributions is not taxed. CHAIR COSTELLO found no further questions and solicited a motion. 2:40:41 PM SENATOR GIESSEL moved to report the CS for SB 104, labeled 29- LS0702\L, from committee with individual recommendations and attached fiscal note(s). CHAIR COSTELLO announced that without objection CSSB 104(L&C) is reported from the Senate Labor and Commerce Standing Committee.