HOUSE FINANCE COMMITTEE APRIL 11, 1996 1:45 P.M. TAPE HFC 96 - 113, Side 1, #000 - end. TAPE HFC 96 - 113, Side 2, #000 - end. TAPE HFC 96 - 114, Side 1, #000 - end. TAPE HFC 96 - 114, Side 2, #000 - #378. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:45 P.M. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Kohring Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Navarre was not present for the meeting. ALSO PRESENT Representative Ed Willis; Representative Scott Ogan; Bill Parker, Deputy Commissioner, Office of the Commissioner, Department of Corrections; Dennis DeWitt, Staff, Representative Eldon Mulder; Allison Gordon, Staff, Senator Steve Frank; Wendy Redman, Vice President, University of Alaska; Sara Hannan, Executive Director, Alaska Environmental Lobby, Juneau; Dan Ritzman, Northern Alaska Environmental Center, Fairbanks; Mike Miller, Alaska Commission on Aging, Juneau; Jay Livey, Deputy Commissioner, Department of Health and Social Services; Connie Sipe, Director, Division of Senior Services, Department of Administration, Anchorage; Cliff Orme, (Testified via teleconference), Chief Executive Officer, Valley Hospital Association, Mat-Su; Alfreda Ward, (Testified via teleconference), City Manager of Fort Yukon, Fairbanks; Jim Hansen, (Testified via teleconference), Lease Sales Manager, Division of Oil and Gas, Department of Natural Resources, Anchorage; Hans Neidig, Staff, Representative Scott Ogan; Kenneth Rogowski, (Testified via teleconference), Environmental Specialist, Spill Prevention and Response, Department of Environmental Conservation, Anchorage. SUMMARY HB 2 An Act allowing courts to require certain 1 offenders as a special condition of probation to complete a boot camp program provided by the Department of Corrections; making prisoners who complete the boot camp program eligible for discretionary parole; providing for incarceration of certain nonviolent offenders in boot camps operated by the Department of Corrections; allowing the Department of Corrections to contract with a person for an alternative boot camp program; creating the Boot Camp Advisory Board in the Department of Corrections; and providing for an effective date. CS HB 2 (FIN) was reported out of Committee with a "do pass" recommendation and with a new fiscal note by the Department of Corrections. HB 393 An Act relating to managed care for recipients of medical assistance; and providing for an effective date. HB 393 was rescheduled for April 12, 1996, morning meeting. HB 394 An Act authorizing a program of natural gas and coal bed methane development licensing and leasing; relating to regulation of certain natural gas exploration facilities and coal bed methane exploration facilities for purposes of preparation of discharge prevention and contingency plans and compliance with financial responsibility requirements; amending the duties of the Alaska Oil and Gas Conservation Commission as they relate to natural gas exploration activities and coal bed methane exploration activities; and amending the exemption from obtaining a waste disposal permit for disposal of waste produced from coal bed methane drilling. CS HB 394 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Natural Resources dated 2/28/96 and the Department of Environmental Conservation dated 2/28/96. HB 436 An Act relating to purchase and sale of mobile homes by mobile home dealers or agents; to mobile home titles; and providing for an effective date. HB 436 was rescheduled for hearing on April 12, 1996, morning meeting. 2 HB 528 An Act relating to applications for certificates of need and licensing of nursing homes; amending the standard of review for certificates of need for health care facilities in the state; establishing a moratorium with respect to new applications by prohibiting the issuance of a certificate of need or a license for additional nursing home capacity in the state until July 1, 1998; and providing for an effective date. HB 528 was HELD for further consideration. SB 250 An Act relating to the University of Alaska and to assets of the University of Alaska; authorizing the University of Alaska to select additional state public domain land, designating that land as `university trust land,' and describing the principles applicable to the land's management; and defining the net income from the University of Alaska's endowment trust fund as `university receipts' subject to prior legislative appropriation. SB 250 was HELD in Committee for further consideration. HOUSE BILL 2 "An Act allowing courts to require certain offenders as a special condition of probation to complete a boot camp program provided by the Department of Corrections; making prisoners who complete the boot camp program eligible for discretionary parole; providing for incarceration of certain nonviolent offenders in boot camps operated by the Department of Corrections; allowing the Department of Corrections to contract with a person for an alternative boot camp program; creating the Boot Camp Advisory Board in the Department of Corrections; and providing for an effective date." Representative Mulder explained the differences in the work draft #9-LS0016\O, Luckhaupt, 4/11/96. Representative Mulder requested that the fiscal note be revised in order that the Department of Corrections could expend the funds this fiscal year. The fiscal note would be federal funds. Representative Mulder MOVED TO WITHDRAW the pending motion to change the dates from the previous meeting. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED TO RESCIND action of adopting CS HB 2 (FIN) from the previous meeting. There being NO 3 OBJECTION, it was so ordered. Representative Brown MOVED to adopt work draft 9-LS0016\O, Luckhaupt, 4/11/96, as the version before the Committee. There being NO OBJECTION, it was adopted. REPRESENTATIVE ED WILLIS noted that he supported the current version of the legislation. Representative Brown asked if the reference to "maintain", Page 2, Line 1, would make the State responsible for maintaining the building. DENNIS DEWITT, STAFF, REPRESENTATIVE ELDON MULDER, explained that language was used resulting from concern that the boot camp program wants to use the State facilities at Wildwood. Legal counsel advised to include that language. BILL PARKER, DEPUTY COMMISSIONER, DEPARTMENT OF CORRECTIONS, stated that the Department agrees with the changes provided in the bill. Representative Mulder questioned the $2 million dollars in the fiscal note as indicated received in FY96. He stated that the assumption was that the $2 million dollars was related to the boot camp. Mr. Parker stated that was the amount that the federal government needs to distribute, although no federal funds have yet been awarded. That amount was awarded for activity last year. Representative Therriault questioned Page 3, Line 15, speaking to the 150 day term sentencing. Mr. Parker responded that the person would need to have to serve enough time in order to complete the course if sentenced to it. He added that the plan would be to run two five month courses. If a person had not been sentenced for five months, they would not be required to do the course. Representative Martin recommended including a clause which would authorize program receipts to be authorized by Legislative Budget and Audit (LBA) Committee in addition to any federal monies. Co-Chair Hanley stated that specific language would need to be included indicating the dollar amount. Representative Martin suggested including $1 thousand dollars program receipts in the fiscal note. They would then be able to come to LBA if additional funds were needed. Mr. Parker remarked that as a class, these people were normally indigent. Representative Kohring MOVED to report CS HB 2 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Mulder OBJECTED to the fiscal note. Co-Chair Hanley recommended revising the fiscal note to include $2 million dollars federal funds and 4 $1 thousand dollars general fund program receipts to address regulations if adopted. There being NO further OBJECTIONS, it was adopted. CS HB 2 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Corrections. SENATE BILL 250 "An Act relating to the University of Alaska and to assets of the University of Alaska; authorizing the University of Alaska to select additional state public domain land, designating that land as `university trust land,' and describing the principles applicable to the land's management; and defining the net income from the University of Alaska's endowment trust fund as `university receipts' subject to prior legislative appropriation." ALLISON GORDON, STAFF, SENATOR STEVE FRANK, noted that SB 250 would allow the University of Alaska to select 350 thousand acres of unencumbered land from the State of Alaska. In this era of declining State funds, endowing the University with additional lands will allow them to develop those lands to produce income for university programs. Under the Congressional Morrill Act of 1862, each state was entitled to receive a grant for public lands, the income from which would provide the financial base of operation for at least one college or university. The University of Alaska received about 112 thousand acres of land, less than any other western public land state and less than the national average entitlement by over 300 thousand acres. Some universities have received one million acres. She concluded that an additional grant of land would bring Alaska up to the level of other western states and would follow through with the original purpose of land grant colleges. WENDY REDMAN, VICE PRESIDENT, UNIVERSITY RELATIONS, UNIVERSITY OF ALASKA, stated that the University of Alaska is called a "Land Grant University". She pointed out changes made in the bill from last year. The largest change removed the portion of the bill which specified which lands were available, and giving the Department of Natural Resources (DNR) responsibility for making that determination. The University is willing to concede with what DNR determines is in the "best interest" of the State. 5 A section has been added which would provide the same protection for the University that the State has for the proprietary information to the lands issue. Policy that currently applies to the State is included. Another section addresses the administrative foreclosure on the lands. Ms. Redman added that the Board of Regents are trying to determine alternative sources of revenue. Over the last decade, the University has decreased from a 70% to 40% dependency on general fund revenues. The majority of the financial shift has been to the students. She emphasized the need to generate additional money each year for the University and thought that it could be accommodated through the land use grant. Ms. Redman continued, DNR does not have the resources available to adequately manage state land. The University is looking for 1/10th of 1%. Last year, the University received 350 million acres of land. Representative Therriault asked if the bills language was consistent with the language used last year. Ms. Redman responded that the income from the receipts would be classified as program receipts. Ms. Redman addressed the amendment as distributed by Representative Therriault. She stated that the amendment was drafted in response to issues by the mining community. The changes delete the "selection" when used with conveyance of land rights. The intent of the bill is that land not be tied up in any way, until the Legislature takes action to give the lands to the University through the appropriation process. SARA HANNAN, EXECUTIVE DIRECTOR, ALASKA ENVIRONMENTAL LOBBY (AEL), JUNEAU, voiced strong opposition to SB 250. She stated that the University of Alaska's land grant obligation is fulfilled. The State of Alaska has no additional land obligation to the University, and has monetarily supported the University since Statehood. The University has no higher right to State resources than any other agency. Ms. Hannan continued, in a time when we cannot fully fund our public schools, it is inappropriate to give resources worth millions of dollars to the University. All Alaskans currently have access to share the opportunity to the use of State lands. Putting 350 thousand acres of State owned land into the "private" ownership of the University preempts equal access. "Customary and traditional use" of the land, like fishing, hunting, camping, trapping and hiking will only be protected until the University development plans conflict with it. 6 Ms. Hannan concluded that fracturing the ownership platter of Alaska lands would not be in the State's best interest. If the lands should be developed by the State, then the State should lease them. Giving away valuable resource lands, without a plan for future Alaska's land management is short sighted. DAN RITZMAN, NORTHERN ALASKA ENVIRONMENTAL CENTER, FAIRBANKS, stated that the Northern Center is opposed to SB 250 noting that the bill would remove 350 thousand acres of public land from public control. SB 250 exempts the selected lands from public oversight and State land planning requirements. The University claims to be concerned about public input into it's land management although their recent history does not demonstrate this. He added that the University tried to fast-track the bill right past the public. SB 250 had only one hearing in the Senate, which was not tele-conferenced. Mr. Ritzman noted that the Northern Center believes that SB 250 is a "dangerous" bill for public lands. It would negate years of good faith public participation in state land use planning, that resulted in decisions to retain most lands for fish and wildlife habitat, public recreation, and a host of other purposes. The University's draft financial management plan indicates that they would like to dispose of much of their land holdings for cash that can be invested. Mr. Ritzman noted that SB 250 fails to address the issue of contiguity of land ownership. There is no provision in the bill to prevent our land from being fragmented further, which will lead to development conflicts with existing uses on neighboring public and private land. He concluded that the bill would violate the dedicated fund prohibition in the State constitution. In addition, the University does not have any more right to a land entitlement than the public safety providers or the secondary school system. Representative Therriault referenced Page 10, Section 9, which speaks to the management and disposition of University trust lands, with policy to provide for public notice, plans and seeking of public comments. He disagreed that the public was being excluded. (Tape Change, HFC 96-113, Side 2). Representative Therriault MOVED to adopt Amendment #1. Representative Brown OBJECTED in order to read the amendment. Amendment #1 was HELD with the MOTION pending. Representative Mulder requested that staff from Department of Natural Resources DNR) be present for the next hearing of SB 250 was heard. 7 SB 250 was HELD for further discussion. HOUSE BILL NO. 394 "An Act authorizing a program of natural gas and coal bed methane development licensing and leasing; relating to regulation of certain natural gas exploration facilities and coal bed methane exploration facilities for purposes of preparation of discharge prevention and contingency plans and compliance with financial responsibility requirements; amending the duties of the Alaska Oil and Gas Conservation Commission as they relate to natural gas exploration activities and coal bed methane exploration activities; and amending the exemption from obtaining a waste disposal permit for disposal of waste produced from coal bed methane drilling." ALFREDA WARD, (TESTIFIED VIA TELECONFERENCE), CITY MANAGER OF FORT YUKON, FAIRBANKS, spoke in support of HB 394, indicating the importance of the legislation to rural Alaska's ability to deal with the high cost of fuels and utilities. HANS NEIDIG, STAFF, REPRESENTATIVE SCOTT OGAN, explained Amendment #1, 9-LS1463\R.12, Chenoweth, 4/9/96. He stated as the legislation currently reads, it would reduce the bond level $25 thousand dollars on state lands. The amendment would also include Native Corporation Lands being placed at that rate. Representative Mulder MOVED to adopt Amendment #1. There being NO OBJECTION, it was adopted. Representative Brown spoke to Amendment #2, 9-LS146\R.13, Chenoweth, 4/11/96 which would change language on Page 6, Line 15, from "may" to "shall". REPRESENTATIVE SCOTT OGAN noted that he did not oppose Amendment #2. Representative Brown MOVED to adopt Amendment Representative Brown MOVED to adopt Amendment #3, 9- LS1463\R.16, Chenoweth, 4/11/96, which would add standard language addressing the royalty which the State would receive. Representative Ogan noted that he did not object to the amendment. There being NO OBJECTION from the Committee, it was adopted. Representative Brown MOVED to adopt Amendment #4, 9- LS1463\R.17, Chenoweth, 4/11/96, which would provide a 8 clarification of Title 38. Representative Ogan noted that he did not object to the amendment. There being NO OBJECTION from the Committee, it was adopted. Representative Brown MOVED to adopt Amendment #5, 9- LS1463\R.5, Chenoweth, 4/8/96, which would require the applicant to pay a reasonable application fee not to exceed $500 dollars. Representative Ogan noted that he did not object to the amendment. There being NO OBJECTION from the Committee, it was adopted. Representative Brown spoke to Amendment #6, 9-LS1463\R.19, Chenoweth, 4/11/96, which questions the distribution of the public owned resources. She thought that it would only be fair that when resources were to be disposed of, all parts of the State be included. Representative Brown remarked that this was a policy issue and that Southcentral Alaska should be included. Representative Ogan stated that he opposed Amendment #6, commenting that the program had been designed to be for rural Alaskans only, the area in which the energy problems exist. He thought the proposed legislation would also help to mitigate the environmental problem, currently estimated to be $500 million dollars for clean-up of the fuel storage facilities. Representative Brown noted that there exists a "lot of room" for expansion of the gas pipeline transmission system. She referenced Page 6, Line 11, which she thought would create a restriction. Representative Ogan replied that the intent was to cover whatever the "in-place" gas pipeline transmission systems are, and would not apply to future systems. The intent of the legislation is to subsidize a resource left in the ground to help with the Power Cost Equalization problem. He thought it would not be fair to those producing gas without the exclusion in the pipeline system. Representative Brown WITHDREW Amendment #6. She thought that gas producers should be consulted as to how this action would affect them. Representative Brown spoke to Amendment #7, 9-LS146\R.18, Chenoweth, 4/11/96, which would insert language addressing gas found in association with oil. She stressed that this section was the governing portion which determines contents of the leases. Representative Ogan noted that he opposed the amendment. He pointed out that specific language already exists in the bill which states gas can not be produced if it is below three thousand feet. He acknowledged that he did not intend to limit gas production in the rural communities. Gas could 9 be associated with methane resulting from coal when and if the source was not identifiable. He suggested that type of gas should not be excluded and pointed out that Amendment #4 already addressed the statutes in Title 38. Representative Mulder questioned the possibility of a natural gas development occurring in a commercially developed oil deposit. JIM HANSEN, (TESTIFIED VIA TELECONFERENCE), LEASE SALE MANAGER, DIVISION OF OIL & GAS, DEPARTMENT OF NATURAL RESOURCES (DNR), ANCHORAGE, advised that, above three thousand feet, the chances of an oil deposit would be remote. Gas not associated with coal could exist in the region. He noted that the chance of finding gas with oil in that shallow of a surface was remote. He also acknowledged that little is known about that area of Alaska and agreed that anything could happen. Co-Chair Hanley asked if oil had been discovered, what would be the status of the gas associated with that oil. Representative Ogan replied, if the gas is not below three thousand feet, it can continue to produce that gas. Language exists in the bill which stipulates that if oil is encountered, operations would immediately be ceased. Representative Brown noted that the issue of "discovery of gas with heavy oil" had not been addressed in the proposed legislation. KENNETH ROGOWSKI, (TESTIFIED VIA TELECONFERENCE), ENVIRONMENTAL SPECIALIST, SPILL PREVENTION AND RESPONSE (SPAR), DEPARTMENT OF ENVIRONMENTAL CONSERVATION, ANCHORAGE, noted that Page 9 addressed the law and regulations associated with gas and oil. He reiterated that if oil was found in the gas, operations would halt immediately. Representative Brown questioned if it had been the intent to sell the gas rights within a reservoir which also had oil in it. Representative Ogan commented that the Oil and Gas Conservation Commission will protect and conserve oil resources in association with the gas above three thousand feet. That agency controls production practices. Representative Brown MOVED to adopt Amendment #7. Representative Martin OBJECTED. A roll call was taken on the MOTION to adopt Amendment #7. IN FAVOR: Brown, Hanley. OPPOSED: Parnell, Kelly, Kohring, Martin, Mulder, Foster. Representatives Navarre, Therriault and Grussendorf were not 10 present for the vote. The MOTION FAILED (2-6). Representative Brown MOVED to adopt Amendment #8, 9- LS1463\R.18, Chenoweth, 4/11/96, which would delete the language on Page 5, Lines 20-22: "If rent is not paid when due, the director shall mail the lessee written notice of nonpayment at the end of each month, while the rent remains unpaid, for a period of two months". Representative Ogan voiced objection to the amendment. Mr. Hansen agreed with Representative Brown noting that language would create a burden on DNR keeping track of lease payment schedule. He noted that lease payments are currently due annually. If a lease is to be terminated due to none- payment of rent, notification is provided. Following further discussion, between Committee members and Mr. Hansen, Representative Brown recommended that the amendment be HELD until Mr. Hansen could provide specific information. (Tape Change, HFC 96-114, Side 1). Representative Brown spoke to Amendment #9, 9-LS1463\R.6, Chenoweth, 4/8/96, which would address language on Page 4, Line 22, and would insert "that it is in the best interests of the state". She noted that in some villages, there is adamant opposition to the oil and gas operations being conducted near their area. Some of those concerns could be mitigated in a best interest finding by attaching to the lease stipulations, language addressing the pipeline placement. She emphasized that a standard needs to be included. Representative Ogan voiced opposition to the amendment. He noted that the Findings Section of the proposed legislation suggests that it be in the best interest of the State that the resource be developed. He added that surface rights were addressed in Amendment #1 and that existing language on surface rights is in Title 38. That language would apply. Insertion of the proposed language could "open the door" to a requirement for a best interest finding now excluded in statute. He thought that the director of the Oil and Gas Division would act in the "best interest of the State". Mr. Hansen agreed with the language proposed in Amendment interest finding. Representative Ogan stated that best interest findings are an extensive inventory of the area, and calculated that it would be an expensive process. 11 Representative Parnell asked if there was alternative language which could be used. Co-Chair Hanley questioned if the proposed language would be more "helpful" to the Department. Mr. Hansen recommended receiving that opinion from the Attorney General's office. Representative Brown noted that virtually all leases representing the States resources go through a "best interest" finding process. She thought that discovery and eventual production would have a large impact, warranting issues which need to be addressed. She recommended that addition of the language would create a standard. Representative Brown suggested that it was not clear that public comment could reveal what was occurring and recommended that the standard be included. Representative Parnell advised using the language "after review of all available information, the director determines it is in the State's interest". Representative Brown agreed. Representative Parnell suggested that would include public comments, as well as other information. Representative Ogan voiced concern that the added language would allow the Commissioner of DNR to be responsible for more findings and hearings which would ultimately be expensive for the State and the user. Representative Parnell thought that current language in the bill would prove to have a negative reaction and that the director would then not have a basis from which to deliver a lease. The intent of the proposed language would remove this concern from the best interest findings category. He added that he would hope to reach a "middle ground" between the various points of view. Representative Parnell MOVED the amended language to Amendment #9 which would delete "on the basis of public comments received" and insert "after review of all available information, the director determines it is in the State's interest....." Representative Kelly voiced concern that special interest groups would sway the director's decision rather than that decision being based on substantive and factual information. Representative Brown recommended deleting "all". Following discussion, most Committee members agreed to delete "all". Representative Parnell MOVED to amend the amended language, deleting "all". There being NO OBJECTION, it was deleted. Representative Parnell MOVED to adopt the amended Amendment environmentalist would use that change to benefit their interests. A roll call was taken on the MOTION. 12 IN FAVOR: Parnell, Therriault, Brown, Grussendorf, Kohring, Martin, Mulder, Hanley. OPPOSED: Kelly. Representatives Navarre and Foster were not present for the vote. The MOTION PASSED (8-1). Representative Brown MOVED to adopt Amendment #8, 9- LS1463\R.15, Chenoweth, 4/11/96. Representative Mulder OBJECTED. A roll call was taken on the MOTION. IN FAVOR: Brown, Grussendorf, Parnell. OPPOSED: Therriault, Kelly, Kohring, Martin, Mulder, Hanley. Representatives Navarre and Foster were not present for the vote. The MOTION FAILED (3-6). Representative Mulder MOVED to report CS HB 394 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTIONS, it was so ordered. CS HB 394 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Natural Resources dated 2/28/96 and a zero fiscal note by the Department of Environmental Conservation dated 2/28/96. HOUSE BILL 528 "An Act relating to applications for certificates of need and licensing of nursing homes; amending the standard of review for certificates of need for health care facilities in the state; establishing a moratorium with respect to new applications by prohibiting the issuance of a certificate of need or a license for additional nursing home capacity in the state until July 1, 1998; and providing for an effective date." CLIFF ORME, (TESTIFIED VIA TELECONFERENCE), CHIEF EXECUTIVE OFFICER, VALLEY HOSPITAL ASSOCIATION, MAT-SU, voiced support for a one year moratorium on applications for certificates of need and licenses for nursing home capacity. He added his support of a working group being created for studying and issuing a report on long term care. Mr. Orme agreed 13 with the primary substance of the legislation, although, did not agree with Section 1, the Findings, indicating that the State has a problem with the distribution of nursing home beds. He thought that the most cost effective way of addressing the concerns would be to affiliate long term care services with a hospital association. Representative Martin asked why the moratorium should be limited to one year. Mr. Orme noted that a one year moratorium would in effect be a two year moratorium because of building stipulations. MIKE MILLER, ALASKA COMMISSION ON AGING, JUNEAU, stated that the Alaska Commission on Aging is in support of HB 528. That group would prefer the original bill which provided for a two year moratorium. He concurred that the resolution stated "it all". The availability of nursing home beds in many areas does exceed the actual need. CONNIE SIPE, DIRECTOR, DIVISION OF SENIOR SERVICES, DEPARTMENT OF ADMINISTRATION, spoke in support of the legislation and of the two year moratorium as indicated in the original legislation. She requested that a study be provided determining the areas where additional nursing home beds were needed. (Tape Change, HFC 96-114, Side 2). Ms. Sipe continued, "home and community-based services" enable elderly Alaskans to entirely avoid or postpone nursing home placement. These are programs specifically designed to keep seniors out of nursing homes. A two year moratorium on long-term care beds would allow time for the community based service programs to more fully develop. Also, it would allow the Department of Health and Social Services (DHSS), Division of Senior Services, time to create a plan for the orderly development and proper mix of community based services and long-term care beds. Co-Chair Hanley pointed out that once the beds are built, they will need to be paid for. This is a formula-funded concern and the Department will be required to pay at that level. He reminded Committee members that there are competing needs for Medicaid dollars, both nursing homes and hospital bases. The moratorium would provide the nursing home group time to reevaluate their needs. JAY LIVEY, DEPUTY COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, commented that the Department generally supports HB 528, and that it would be essential in controlling Medicaid costs. The average Medicaid cost per 14 person per year is approximately $86 thousand dollars. A patient can be kept in a home-based community setting for approximately $30 thousand dollars per year. About 85% of the private nursing home revenues originate from Medicaid dollars. Mr. Livey pointed out that there are one hundred forty-seven (147) proposed new beds to be built around the State in the next five years. If all those beds were built, the cost to the Medicaid program would be nearly $57 million dollars, with $28 million dollars in general funds. He stated that the Department does not know how the Medicaid budget could absorb that amount of money. There are basic issues within the Medicaid program which need to be addressed. * Nursing care is a mandatory service. * Medicaid patients enjoy freedom of choice. * All costs must be incurred by an efficient and economically operated facility. If a bed is built and receives a certificate of need, the State would end up paying the bill which will create a serious situation for the Medicaid budget over the next five years. Mr. Livey pointed out that there is no facility in the State that currently looses revenue and that no current facilities will be harmed by the proposed legislation. The Department supports the original language of the bill including a two year moratorium. The Department also recognizes that this is only a temporary measure. Medicaid has the responsibility to provide long-term care services to older Alaskans. Representative Martin asked who authorizes the certification. Mr. Livey replied that the certificate of need comes to the Department, where it is reviewed and if the project meets the criteria, the certificate of need is then granted by the commissioner. Representative Martin asked the cost of empty beds. Mr. Livey responded that the total cost of running a nursing home is spread across the total number of Medicaid patients who are in the home. Currently in Alaska, there exists one hundred fifteen (115) vacant beds. Representative Martin inquired if the increased number of seniors currently living in the State has resulted from a migration north or the natural aging of current residents. Ms. Sipe stated that it was difficult to track migration. She added, studies do exist which demonstrate what Alaska is 15 experiencing; this is called "new elders". Alaska finally has elders staying in the State, aging in place and not moving away. More people are staying longer, many elders are living longer and the life expectancy has increased dramatically in the last ten years. Representative Martin suggested that the State of Alaska has too many generous programs for seniors, thus encouraging out-of-state seniors to move to Alaska. HB 528 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:20 P.M. 16