HOUSE FINANCE COMMITTEE JANUARY 18, 1996 9:10 A.M. TAPE HFC 96 - 10, Side 1, #000 - end. TAPE HFC 96 - 10, Side 2, #000 - #422. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 9:10 A.M. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Therriault Representative Kohring Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representatives Brown and Mulder were not present for the meeting. ALSO PRESENT Representative John Davies; Nelson Page, Chair, Board of Trustees, Alaska Mental Health Trust Authority; Evelyn Tucker, Member, Board of Trustees, Alaska Mental Health Trust Authority; John Pugh, Member, Board of Trustees, Alaska Mental Health Trust Authority; Kay Burrows, Member, Board of Trustees, Alaska Mental Health Trust Authority; Phil Younker Jr., Member, Board of Trustees, Alaska Mental Health Trust Authority; Tom Hawkins, Member, Board of Trustees, Alaska Mental Health Trust Authority; John Malone, Member, Board of Trustees, Alaska Mental Health Trust Authority; Steve Planchon, Director, Lands Unit, Department of Natural Resources. SUMMARY MENTAL HEALTH TRUST AUTHORITY BRIEFING NELSON PAGE, CHAIR, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, introduced Board members and provided the Committee with copies of the "Alaska Mental Health Trust Authority Presentation to the House Finance Committee" and the "Reconstitution of the Mental Health Trust Statewide Index Map". [Attachment #1 & #2]. Mr. Page provided an overview of Attachment #1, offering background information on the extensive litigation process. 1 He pointed out that settlement of the land trust had been passed nearly unanimously by both Legislative Houses. The settlement ended thirteen years of litigation dispute surrounding the Mental Health Trust Lands. The litigation process cost millions of dollars and much revenue lost from development opportunities. He added that the many years in negotiation had paralyzed and fractured the mental health community. Mr. Page explained the key terms of the settlement. * Mental Health Trust Lands and associated state lands released for development. * Trust Authority free to use Trust resources to act as a catalyst for change. * Trust Authority funding recommendations considered in a single appropriation bill. * Trust Authority to aid in comprehensive planning for mental health. All members of the Trust Authority Board have been appointed by the Governor since the 1995 Legislative session. Mr. Page itemized the significant accomplishments of the Authority to date. * The Trust Authority now is in running order. * The planning functions of that Agency have begun. * An active management of the Trust's natural resources is in order. * Budget proposals have been submitted. * Management principles for the Trust Fund have been adopted. Mr. Page emphasized the accomplishments of the settlement, noting that at this time, the settlement is on appeal. The final decision of approval lies with the Supreme Court. Mr. Page outlined the present challenges for the Authority. * To assure beneficiaries that they will get the benefit of their bargain. 2 * Work with Legislature to make the process succeed. * Encourage innovation and improvements for Alaska's mental health system. * Avoid reinstating the litigation. TOM HAWKINS, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY introduced members of the Board. STEVE PLANCHON, DIRECTOR, MENTAL HEALTH TRUST LAND UNIT, DEPARTMENT OF NATURAL RESOURCES, explained that the Trust Land Unit has existed for one year. He spoke to the small and dedicated staff, noting that temporary and contract employees are also hired as needed. Mr. Planchon pointed out the focus of the mission was to generate revenue for mental health services, maintain and improve land and resource assets of the Trust, and to maintain beneficiary support of land management actions. Management has been established in consultation with the Trust Authority with an emphasis on proactive and cost effective action. He said currently, there are a million acres of land being managed by the Authority. The Trust Authority and the Department of Natural Resources (DNR) have established an excellent working relationship based on accountability and a shared commitment to making the settlement work. A smooth transition has been made from the entire DNR Department management to a management system by one unit within that Department. Mr. Planchon continued by highlighting the accomplishments: Land sales, oil and gas leasing, timber sale, sand and gravel sales, coal development facilitation, management of 2,400 valid mining claims, management of over 160 commercial and real estate leases, land donation, and a special effort to meet with local government representatives, interest groups and individual members of the public who are interested in Trust Land activities. The final start-up tasks of the Board will include creating regulations to guide future management and development, creating a long term strategic plan to ensure long-term productivity of the trust, and development and management with the key focus for effective management of existing claims, leases and contracts. Mr. Planchon concluded testimony by summarizing the revenue 3 and cost projections associated with the project. 1995 (six months) Costs at $270,000/Revenue $380,000 1996 Costs at $700,000/Revenue at $1 million 1997 Costs at $700,000/Revenue at $1.5 million REPRESENTATIVE JOHN DAVIES asked for an overview of the principle costs and sources of revenue. Mr. Planchon advised that the principle costs include a minimum staff cost, start-up costs of establishing an office in working order, and reports combining organizational information. Currently, the chief sources of revenue exists from contracts and leases, adding that in the future, timber resources will provide great revenues. Representative Kelly questioned the extent of royalty growth resulting from Fort Knox. Mr. Planchon advised that the standard three percent (3%) royalty was being received. PHIL YOUNKER JR., MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, focused his testimony on the Trust Corpus Account. He noted that the initial transfer to the Department of Revenue for the Alaska Mental Health Trust Authority (AMHTA) had been $200 million dollars. In the first six months of management, the Alaska Permanent Fund provided consultation for management of those funds. Inflation costs incurred required an additional transfer of $3.5 million dollars. Mr. Younker provided an explanation of the AMHTA Income Account. That fund is comprised of transfers from the Alaska Permanent Fund income transaction account, transfers from the DNR land income and interest earned from the Income Account. The funds are used for income spending on beneficiaries operating and capital, based on recommendations from the four beneficiary boards and operating expenses for the Trust and DNR Lands Unit. Mr. Younker elaborated, during the past ten months, the Board has focused on establishing a policy in providing funds to the beneficiary groups. The Trust Fund assumptions are: * Estimated payout over 10 years for Trust beneficiaries $71,487,403 * Value of principal in 10 years $313,454,996 4 * Inflation adjusted principal $222,214,144 * Assumptions: - Inflation 3.5% - Rate of return 8.0% - Payout rate 3.0% JOHN PUGH, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, addressed AMHTA's funding priorities: * Close Harborview Developmental Center. * Increasing service capacity. * Outcome-oriented programs. * Integrated data collection. Mr. Pugh explained the differences between the requested AMHTA budget and that of the Governor. The Governor failed to fully fund the $4.9 million dollar AMHTA recommendation. The Governor's budget would provide for a salary maintenance of effort for state employees, but not for providers. The Governor's budget also includes a reduction of $585,000 dollars from Harborview which would not be transferred to beneficiary services. Mr. Pugh responded to Representative Martin's questions regarding the short term plan for released Harborview patients. He explained that some of the "Sourdough" unit patients would be placed on a waiting list for the Alaska Pioneer Homes. The Board continues to work on a discharge plan for this coming year. The second consideration and increment would be for the developmentally disabled population, placing them into less restrictive settings and closer to their family's homes. He emphasized that the costs for these services will not necessarily be less. (Tape Change, HFC 96-10, Side 2). Co-Chair Hanley recommended that the Trust Authority consult the Legislature as well as the Governor when planning next year's budget. Mr. Pugh agreed and added that a primary goal of the Board would be to attempt to accumulate a State matching fund and private matching funds. KAY BURROWS, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, noted that the Board had been working 5 closely with Commissioner Perdue from the Department of Health and Social Services (DHSS) to produce a comprehensive integrated mental health program. The program would help the four boards to work together to coordinate services and fund parity. Ms. Burrows stated that AMHTA has attempted to integrate the funding process. There are separate visions for each existing Board and unique priorities for each of them. Specific attention has been placed on the service delivery system and coordination for each of the beneficiary groups. EVELYN TUCKER, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, spoke about initiatives prepared by the Department. She stressed that the Authority has adopted an outcome oriented program. The main responsibility of AMHTA is to find outcomes which are functional and that will benefit the client. Co-Chair Hanley voiced concern with the continuation and proposed budget for the Alaska Psychiatric Institute (API). Mr. Pugh reported that there has been significant downsizing at API; in the Fall, 1995, only sixty-seven beds were full, a significant shift from the previous two hundred. He emphasized that some patients can not be served in private hospitals. Ms. Burrows added that $750 thousand dollars had been set aside to provide an evaluation of treatment in rural areas to those hospitals which would be willing to take on the care of psychiatric patients. Mr. Pugh added that the concern of closing API would require review not only by the Department of Health and Social Services, but also the Department of Public Safety and the Department of Corrections as psychiatric patients can be violent and a threat to public safety. Representative Therriault questioned the differences between the alcoholic and psychological treatments for patients. Ms. Burrows explained that the funding streams for treatments have in the past been separated. Current funding encourages agencies to co-locate thus creating a more comprehensive funding plan. She stressed that efficiencies will be built as the four beneficiary groups begin to work cooperatively. Mr. Pugh concurred suggesting the use of trust income money to develop regulations for integrated funding service. Thus concluded the presentation of the Alaska Mental Health Trust Authority. ADJOURNMENT 6 The meeting adjourned at 10:20 A.M. HOUSE FINANCE COMMITTEE JANUARY 18, 1996 9:10 A.M. TAPE HFC 96 - 10, Side 1, #000 - end. TAPE HFC 96 - 10, Side 2, #000 - #422. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 9:10 A.M. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Therriault Representative Kohring Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representatives Brown and Mulder were not present for the meeting. ALSO PRESENT Representative John Davies; Nelson Page, Chair, Board of Trustees, Alaska Mental Health Trust Authority; Evelyn Tucker, Member, Board of Trustees, Alaska Mental Health Trust Authority; John Pugh, Member, Board of Trustees, Alaska Mental Health Trust Authority; Kay Burrows, Member, Board of Trustees, Alaska Mental Health Trust Authority; Phil Younker Jr., Member, Board of Trustees, Alaska Mental Health Trust Authority; Tom Hawkins, Member, Board of Trustees, Alaska Mental Health Trust Authority; John Malone, Member, Board of Trustees, Alaska Mental Health Trust Authority; Steve Planchon, Director, Lands Unit, Department of Natural Resources. SUMMARY MENTAL HEALTH TRUST AUTHORITY BRIEFING NELSON PAGE, CHAIR, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, introduced Board members and provided the Committee with copies of the "Alaska Mental Health Trust Authority Presentation to the House Finance Committee" and the "Reconstitution of the Mental Health Trust Statewide Index Map". [Attachment #1 & #2]. 7 Mr. Page provided an overview of Attachment #1, offering background information on the extensive litigation process. He pointed out that settlement of the land trust had been passed nearly unanimously by both Legislative Houses. The settlement ended thirteen years of litigation dispute surrounding the Mental Health Trust Lands. The litigation process cost millions of dollars and much revenue lost from development opportunities. He added that the many years in negotiation had paralyzed and fractured the mental health community. Mr. Page explained the key terms of the settlement. * Mental Health Trust Lands and associated state lands released for development. * Trust Authority free to use Trust resources to act as a catalyst for change. * Trust Authority funding recommendations considered in a single appropriation bill. * Trust Authority to aid in comprehensive planning for mental health. All members of the Trust Authority Board have been appointed by the Governor since the 1995 Legislative session. Mr. Page itemized the significant accomplishments of the Authority to date. * The Trust Authority now is in running order. * The planning functions of that Agency have begun. * An active management of the Trust's natural resources is in order. * Budget proposals have been submitted. * Management principles for the Trust Fund have been adopted. Mr. Page emphasized the accomplishments of the settlement, noting that at this time, the settlement is on appeal. The final decision of approval lies with the Supreme Court. Mr. Page outlined the present challenges for the Authority. 8 * To assure beneficiaries that they will get the benefit of their bargain. * Work with Legislature to make the process succeed. * Encourage innovation and improvements for Alaska's mental health system. * Avoid reinstating the litigation. TOM HAWKINS, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY introduced members of the Board. STEVE PLANCHON, DIRECTOR, MENTAL HEALTH TRUST LAND UNIT, DEPARTMENT OF NATURAL RESOURCES, explained that the Trust Land Unit has existed for one year. He spoke to the small and dedicated staff, noting that temporary and contract employees are also hired as needed. Mr. Planchon pointed out the focus of the mission was to generate revenue for mental health services, maintain and improve land and resource assets of the Trust, and to maintain beneficiary support of land management actions. Management has been established in consultation with the Trust Authority with an emphasis on proactive and cost effective action. He said currently, there are a million acres of land being managed by the Authority. The Trust Authority and the Department of Natural Resources (DNR) have established an excellent working relationship based on accountability and a shared commitment to making the settlement work. A smooth transition has been made from the entire DNR Department management to a management system by one unit within that Department. Mr. Planchon continued by highlighting the accomplishments: Land sales, oil and gas leasing, timber sale, sand and gravel sales, coal development facilitation, management of 2,400 valid mining claims, management of over 160 commercial and real estate leases, land donation, and a special effort to meet with local government representatives, interest groups and individual members of the public who are interested in Trust Land activities. The final start-up tasks of the Board will include creating regulations to guide future management and development, creating a long term strategic plan to ensure long-term productivity of the trust, and development and management with the key focus for effective management of existing claims, leases and contracts. 9 Mr. Planchon concluded testimony by summarizing the revenue and cost projections associated with the project. 1995 (six months) Costs at $270,000/Revenue $380,000 1996 Costs at $700,000/Revenue at $1 million 1997 Costs at $700,000/Revenue at $1.5 million REPRESENTATIVE JOHN DAVIES asked for an overview of the principle costs and sources of revenue. Mr. Planchon advised that the principle costs include a minimum staff cost, start-up costs of establishing an office in working order, and reports combining organizational information. Currently, the chief sources of revenue exists from contracts and leases, adding that in the future, timber resources will provide great revenues. Representative Kelly questioned the extent of royalty growth resulting from Fort Knox. Mr. Planchon advised that the standard three percent (3%) royalty was being received. PHIL YOUNKER JR., MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, focused his testimony on the Trust Corpus Account. He noted that the initial transfer to the Department of Revenue for the Alaska Mental Health Trust Authority (AMHTA) had been $200 million dollars. In the first six months of management, the Alaska Permanent Fund provided consultation for management of those funds. Inflation costs incurred required an additional transfer of $3.5 million dollars. Mr. Younker provided an explanation of the AMHTA Income Account. That fund is comprised of transfers from the Alaska Permanent Fund income transaction account, transfers from the DNR land income and interest earned from the Income Account. The funds are used for income spending on beneficiaries operating and capital, based on recommendations from the four beneficiary boards and operating expenses for the Trust and DNR Lands Unit. Mr. Younker elaborated, during the past ten months, the Board has focused on establishing a policy in providing funds to the beneficiary groups. The Trust Fund assumptions are: * Estimated payout over 10 years for Trust beneficiaries $71,487,403 10 * Value of principal in 10 years $313,454,996 * Inflation adjusted principal $222,214,144 * Assumptions: - Inflation 3.5% - Rate of return 8.0% - Payout rate 3.0% JOHN PUGH, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, addressed AMHTA's funding priorities: * Close Harborview Developmental Center. * Increasing service capacity. * Outcome-oriented programs. * Integrated data collection. Mr. Pugh explained the differences between the requested AMHTA budget and that of the Governor. The Governor failed to fully fund the $4.9 million dollar AMHTA recommendation. The Governor's budget would provide for a salary maintenance of effort for state employees, but not for providers. The Governor's budget also includes a reduction of $585,000 dollars from Harborview which would not be transferred to beneficiary services. Mr. Pugh responded to Representative Martin's questions regarding the short term plan for released Harborview patients. He explained that some of the "Sourdough" unit patients would be placed on a waiting list for the Alaska Pioneer Homes. The Board continues to work on a discharge plan for this coming year. The second consideration and increment would be for the developmentally disabled population, placing them into less restrictive settings and closer to their family's homes. He emphasized that the costs for these services will not necessarily be less. (Tape Change, HFC 96-10, Side 2). Co-Chair Hanley recommended that the Trust Authority consult the Legislature as well as the Governor when planning next year's budget. Mr. Pugh agreed and added that a primary goal of the Board would be to attempt to accumulate a State matching fund and private matching funds. 11 KAY BURROWS, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, noted that the Board had been working closely with Commissioner Perdue from the Department of Health and Social Services (DHSS) to produce a comprehensive integrated mental health program. The program would help the four boards to work together to coordinate services and fund parity. Ms. Burrows stated that AMHTA has attempted to integrate the funding process. There are separate visions for each existing Board and unique priorities for each of them. Specific attention has been placed on the service delivery system and coordination for each of the beneficiary groups. EVELYN TUCKER, MEMBER, BOARD OF TRUSTEES, ALASKA MENTAL HEALTH TRUST AUTHORITY, spoke about initiatives prepared by the Department. She stressed that the Authority has adopted an outcome oriented program. The main responsibility of AMHTA is to find outcomes which are functional and that will benefit the client. Co-Chair Hanley voiced concern with the continuation and proposed budget for the Alaska Psychiatric Institute (API). Mr. Pugh reported that there has been significant downsizing at API; in the Fall, 1995, only sixty-seven beds were full, a significant shift from the previous two hundred. He emphasized that some patients can not be served in private hospitals. Ms. Burrows added that $750 thousand dollars had been set aside to provide an evaluation of treatment in rural areas to those hospitals which would be willing to take on the care of psychiatric patients. Mr. Pugh added that the concern of closing API would require review not only by the Department of Health and Social Services, but also the Department of Public Safety and the Department of Corrections as psychiatric patients can be violent and a threat to public safety. Representative Therriault questioned the differences between the alcoholic and psychological treatments for patients. Ms. Burrows explained that the funding streams for treatments have in the past been separated. Current funding encourages agencies to co-locate thus creating a more comprehensive funding plan. She stressed that efficiencies will be built as the four beneficiary groups begin to work cooperatively. Mr. Pugh concurred suggesting the use of trust income money to develop regulations for integrated funding service. Thus concluded the presentation of the Alaska Mental Health Trust Authority. 12 ADJOURNMENT The meeting adjourned at 10:20 A.M. 13