HOUSE FINANCE COMMITTEE January 31, 2003 1:25 PM TAPE HFC 03 - 6, Side A TAPE HFC 03 - 6, Side B TAPE HFC 03 - 7, Side A CALL TO ORDER Co-Chair Harris called the House Finance Committee meeting to order at 1:25 PM. MEMBERS PRESENT Representative John Harris, Co-Chair Representative Bill Williams, Co-Chair Representative Eric Croft Representative Richard Foster Representative Mike Hawker Representative Reggie Joule Representative Carl Moses Representative Gary Stevens Representative Bill Stoltze Representative Jim Whitaker MEMBERS ABSENT Representative Kevin Meyer, Vice-Chair ALSO PRESENT Representative Cheryl Heinz; Representative Ralph Samuels; Representative Harry Crawford; Joel Gilbertson, Commissioner, Department of Health & Social Services; Bob Labbe, Deputy Director, Department of Health and Social Services; Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services; Marc Antrim, Commissioner, Department of Corrections; PRESENT VIA TELECONFERENCE There were no teleconference testifiers. GENERAL SUBJECT(S): Agency Overviews: Department of Health and Social Services Department of Corrections The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 23rd Legislative Session, contact 465- 2156. After the 23rd Legislative Session they will be available through the Legislative Library at 465-3808.   LOG SPEAKER DISCUSSION  TAPE HFC 03 - 6 DEPARTMENT OF HEALTH AND SOCIAL SERVICES  SIDE A  000 JOEL GILBERTSON, Introduced his staff. He reviewed the COMMISSIONER, Department's current structure. The DEPARTMENT OF HEALTH department is undergoing audits regarding & SOCIAL SERVICES restructuring recommendations. The department's goals are to streamline the administrative process and reduced costs, hold service declines to minimize affect on clients, maximize federal revenues, and improve costumer service.  2210 Mr. Gilbertson The department is facing budget reductions. The current budget authority is 1.4 billion dollars: $487 thousand general fund dollars, and $832 federal receipts. He noted that there are 2,512 full time positions. Observed that formula programs represent the majority of the department's budget.  2249 Mr. Gilbertson Reviewed costs for facilities: $41 million. Most of these costs are for large facilities, such as the Alaska Psychiatric Institute.  2302 Mr. Gilbertson Administrative costs are approximately $11.5 million, which includes the Office of the Commissioner and the Division of Administrative Services.  2340 Mr. Gilbertson Reviewed increases in costs for formula programs. In 1993, formula programs accounted for 61 percent of over all costs. They are currently 70 percent, which is a 142 percent increase. He noted that grant programs have increased by 53 percent and program services by 96 percent. Facility and administrative costs have also increased.  2359 Mr. Gilbertson Discussed general goals: Establish fiscal stability for Division of Family and Youth Services programs and reduce dependence on general fund dollars. The department is undergoing review of business processes to eliminate inefficiency and redundancies and maximize federal revenues.  2511 Mr. Gilbertson Discussed federal funding. The Governor, while serving as a Senator, worked to adjust the federal medical assistance percentages that determine the relative  match rate for Medicare funding (FMAP). In 1997, this was raised from 50 to 59.8 percent, which brought in $30 million additional federal dollars every year.  2543 Mr. Gilbertson Observed that the goal is to continue to work for adjustments at the federal level. The Governor has taken the position that the federal formula is flawed.  2645 Co-Chair Harris Questioned if the FMAP percentage was recently included in an appropriation bill.  2655 Mr. Gilbertson Explained that the most recent adjustment was the in the Benefit Improvement and Protection Act, of the year 2000. It would sunset on October 2005.  2736 BOB LABBE, DEPUTY Clarified that the current FMAP rate is DIRECTOR, DEPARTMENT 57 percent.  OF HEALTH AND SOCIAL SERVICES 2745 Mr. Gilbertson Explained that a determination was made at the federal level that the measurement to calculate per capita income contributions was not accurate. Employer contributions to federal employee retirement plans, which aren't realized, were included. This caused the per capita income of the state to rise. Alaska received the greatest increase in their per capita rate, which resulted in a 3 percent reduction.  2846 Mr. Gilbertson Spoke to the Fair Share Program. There was denial of the state of Alaska's Fair Share program's financing operation between the state and native private hospitals to maximize federal funds. The state of Alaska's projected amount was $55 million. These funds were not realized.  3018 Mr. Gilbertson Emphasized that the department feels that Alaska's plan is compliant with federal regulations and stressed that the department is aggressively pursuing the funding through the appeals process.  3112 Mr. Labbe Clarified that the hearing is in March and the decision would be in June. The state's position has not changed. He explained that the issue seems to be that the [federal] Administration does not like the decision. They are confident that the state plan is compliant and will th be upheld at the court level by the 9 circuit court of appeals.  3322 Mr. Gilbertson The fair share language was designed to stop practices of intergovernmental transfers from public facilities.  3348 Co-Chair Harris Summarized that the state would need $50 plus million dollars to maintain the program at the FY03 level.  3422 Mr. Labbe Explained that the state discontinued payments under the program when the disapproval was issued. Part of the payment remains with the Tribal government and would not be recoverable. The assumption is that the funds would be received and could be used to reduce a supplemental request by 20 - 15 percent.  3657 Co-Chair Harris Questioned if the department supports the FY03 budget intent language, which deals with the reduction of services if Medicaid funding is not sufficient.  3704 Mr. Labbe Noted that the legislature inserted language that did not hold the department accountable for the fair share funding. The intent was to hold to the appropriation. There has been some growth. He anticipates some level of a supplemental would be needed.  3828 Co-Chair Harris Observed that the House Finance Committee Chair would watch the supplemental to see that the department manages for the reduction.  3850 Mr. Gilbertson The Governor has directed departments to look at service delivery. There is a lack of access to primary care services in rural communities. The department will work to develop an integrated health service program with tribal health systems, the Denali Commission, Alaska Mental Health Trust Authority and state holder groups to assure that primary services are being delivered throughout the state.  3942 Mr. Gilbertson Noted that the third goal of the department is to protect children and the public from the negative affects of alcohol, substance abuse, violence, injury, and illness.  4041 Mr. Gilbertson The state will also work with the federal government to improve Alaska's responsiveness to bio-terrorism attacks. The state is in phase one of a small pox vaccination schedule.  4051 Mr. Gilbertson Acknowledged budget concerns and the need to bring financial stability to the department. He observed that there is not  financial stability in the Medicaid program, but stressed that the core mandate of the department would be protected.  4231 Mr. Gilbertson Provided a general department overview of divisions and operations.  4257 Mr. Gilbertson Addressed the Division of Public Assistance and noted that the Division provides assistance to children and families. He noted that the Division provides assistance to needy families so that they can care for children in their own homes.  4421 Mr. Gilbertson Reviewed Chart 3: Adult Public Assistance (APA) Caseload Projections. The mission of the Division of Public Assistance is to encourage and promote self- sufficiency. The Division handles eligibility determinations for public assistance and the Medicaid program. Benefits have grown three-fold since 1990. Aid for disabled individuals has been the driving force behind the increase.  4527 Mr. Gilbertson Discussed the Temporary Assistance to Needy Families (TANF) program.  4559 Representative Croft Questioned the doubling of the disabled line appropriation in the APA assistance.  4612 JANET CLARKE, Explained that aid to disabled children DIRECTOR, DIVISION is switched over when they reach the age OF ADMINISTRATIVE of majority. Individuals may be living SERVICES, DEPARTMENT longer.  OF HEALTH AND SOCIAL SERVICES 4742 Mr. Labbe Agreed that there is a rapidly growing senior population that would not meet the financial requirements for APA, but the disability population is tied to the demographics of aging. There has been substantial growth in individuals with mental illness.  4855 Mr. Gilbertson Observed that the TANF reauthorization is before Congress. All sides are pushing for a higher work standard. He referred to Chart 4: TANF Monthly Caseload. There is currently a plateau in applications for food stamps, which is traditionally associated with TANF increases.  5142 Representative Croft Noted that the low is not in the summer months, but in October and November.   5148 Mr. Gilbertson Pointed out that the reductions are a result of permanent fund dividend  payments.  5221 Mr. Gilbertson Reviewed welfare reform caseload and spending, which has declined by 40 percent since 1996. He noted that cash assistance has dropped in half. Additional investments have been made to help facilitate the program.  5316 Co-Chair Harris Observed that money saved in the welfare to work program has been shifted to childcare assistance and other programs and questioned if there had been an overall savings.  5347 Mr. Gilbertson Noted that the TANF block grant ($60 million per year) contains funding for childcare and work services. Some of the TANF block grant has been used to replace increases of costs associated with the program and cash assistance payments. He explained that actual general fund dollars in the program have been reduced.  5427 Ms. Clark Noted that there was a $50 million dollar reduction.  5429 Mr. Gilbertson Added that some of the TANF dollars can be diverted to other federal block grants that help pay for frontline social workers.  5525 Representative Joule Noted that individuals living in Anchorage are providing services to rural areas. He pointed out that the intent is to provide employment for rural residents and questioned if anything can be done to encourage local employment. He stressed the opportunity for departments to network.  5726 Mr. Gilbertson Observed that the Governor has made a commitment to improving economic development and opportunities in rural Alaska. He observed that tribal corporations are handling some TANF benefits.  5815 Mr. Gilbertson There is no 60-month limitation for those living in Native villages with greater than 50 percent unemployment. He stressed that this should not be a signal to the state to abandon attempts to find good jobs in those communities. There needs to be a commitment to job skills. Healthcare is one of the fastest growing professions. Retention is a key issue. The Division of Public Assistance works closely with the Department of Labor and Workforce Development to find jobs.  6044 Representative Croft Observed that $56 million dollars were  saved and questioned how much was reinvested.    TAPE HFC 03 - 6,  Side B  6103 Mr. Gilbertson Explained that a number of the block grant funds were reinvested: $5 million in general fund dollars have been supplanted by TANF [including some Head Start funds], $7 million for childcare is administered by the Division of Public Assistance and $22 million dollars of the TANF block grant is diverted for childcare [development program].  6100 Ms. Clark Clarified that the above $34 million has been reinvested.  6009 Representative Croft Asked what has happened to those that have come off of benefits. He questioned if they had found employment.  5931 Mr. Gilbertson Stated that it is too early to know the results.  5916 Ms. Clark Noted that a "Leaver" study was done, which contains some data regarding those that have gone off of [TANF] benefits.  5827 Representative Referred to private sector creation of Stoltze jobs and questioned if the administration supports [private sector stimulation of jobs] programs such as the one in Oregon.  5820 Mr. Gilbertson Explained that the Division of Public Assistance has worked with individuals who have come out of the Oregon system to develop a workforce first agenda. He stressed that the intent is to help clients stay off of cash assistance.  5700 Mr. Gilbertson Pointed out that having a job is very important to self-esteem and providing a role model. It is very important to get persons to work.  5556 Representative Noted that the state is beginning to feel Whitaker the affects of the 60-month [benefit] limit. He questioned if data is available.  5512 Mr. Gilbertson Clarified that data is available and that it would be provided at a later date.  5438 Representative Referred to the cycles of poverty.  Whitaker 5428 Mr. Gilbertson Noted that there are links between parents that are dependent on welfare and the likelihood that their children would require future assistance. He stressed the importance of job training programs. The state would receive the benefit if the next generation does not need  assistance if their parents can be transitions into the workforce.  5253 Representative Questioned how the state of Alaska Hawker compares to other states in regards to programs services and benefits that the Department of Health and Social Services provides.  5146 Mr. Gilbertson Pointed out that there are a wide variety of ways that states administer federal block grants and programs. Medicare and Welfare reform are the two largest. Tennessee delivers services through a HMO. Some states administer all grants through the Medicaid program. Some states have been slow to implement their Welfare to Work programs. Denali Kid Care has been a tremendous success in Alaska in terms of enrollment. Some of the money that has allowed Alaska's program to grow so quickly came from what other states left on the table. That is being changed and Alaska may not receive this redistribution money in the future.  4728 Representative Summarized that Alaska has done a good Hawker job of availing itself of federal resources programs.  4632 Mr. Gilbertson Maintained that, while the state of Alaska has availed itself to the majority of programs offered at the federal level, the state has not maximized the potential for federal revenues. Alaska has the highest amount allowable in terms of its income levels for children health insurance program (200 percent of poverty, which is the maximum allowed at the federal level). The Medicaid program in the state of Alaska has implemented cost sharing, but there is flexibility to implement containment measures within the Medicaid program for additional savings. The state still controls its ability to structure federal programs.  4529 Representative Asked the Commission to address the Hawker department's vision for shifting the cost of various programs to dollars leveraged from the federal system.  4506 Mr. Gilbertson Explained that Medicare is an insurance program and financing system to provide services where the costs are shared between the state and federal government. The state of Alaska has looked at ways to draw down of additional federal money.  4334 Mr. Gilbertson Concluded that the federal government is  not paying its fair share for care delivered in the state of Alaska and other rural states where the cost of delivery is greater. The formula is based on per capita income, which does not have a correlation with the cost of delivering care. There are ways to find commonality to assure that services are delivered in the most efficient manner and that federal revenues are maximized.  4114 Mr. Gilbertson Stressed the need for financial stability to the Medicaid Program. This means financial stability in grants and program services. General fund dollars support and supplemental requests needs to be reduced.  4106 Mr. Gilbertson Continued by referring to charts illustrating growth in eligibility and costs among all populations. These growths are associated with demographic changes, regional and economic and some are the result of efforts by providers to maximize payment rates by signing up individuals that are dual eligible. He discussed cost and payment issues with the Medicaid program. The State has flexibility in program design, but federal law establishes some things. A new contract will address some issues, to deliver the right care to beneficiaries. Issues that will be reviewed in the coming year include: the preferred drug list, (determining the most cost effective ones and making sure all are accessible), transportation costs, abuse activities, and third party liability.  3654 Mr. Gilbertson Discussed Youth Services; DFYS did not meet some federal standards last year and will bring on a new director to bring about improvements. He explained that this would require investment of time and management. Once the plan is approved, federal standards will have to be met within two years.  3523 Mr. Gilbertson Referred to Chart 10 regarding Child Reports of Harm and Chart 12, illustrating juvenile justice activities. He noted that there are facilities throughout the state, including detention and treatment facilities, with 490 employees. Pointed out that there is a new facility in Kenai, which would be completed in March. The Ketchikan  facility now fully operating. He discussed the Bethel, Nome and McLaughlin Youth Center facilities. Overcrowding issues were discussed as being handled internally.  3248 Mr. Gilbertson Reviewed the Division of Public Health. He observed that the Division has a wide purview, including epidemics, studies, birth defect prevention, etc. There are 686 full time positions. The most high profile positions involve the issue of bio terrorism, and the small pox vaccination program. A confidential state plan would be shared with the federal government. He added that the department would begin the initial vaccinations of the response team within the next month, which would be ready to conduct vaccinations if there is an detected case of small pox any where in the world.  3106 Mr. Gilbertson Discussed the Division of Alcohol and Drug Abuse. Alaska leads the nation in alcohol abuse; 79 percent of incarcerations resulted from alcohol abuse; this also relates to child abuse. The Governor is looking at treatment programs in rural Alaska.  2951 Co-Chair Harris Asked about the planned use of revenues from an increase in the alcohol tax.  2933 Mr. Gilbertson Explained that the Administration is still in the process of developing the FY04 budget. No decision had been made at the time.  2904 Representative Joule Referred to tribal entities, which are attacking social ills through wellness programs.  2821 Mr. Gilbertson Referred to an appropriation of $15 million to the Alaska Federation of Natives, which Senator Stevens appropriation for alcohol treatment programs in the state of Alaska. He acknowledged that substance abuse and the impacts of substance abuse are pervasive throughout many areas of state government. The Governor is aware of the need of native corporations for resources and is committed to local communities. He expressed a desire to have community ownership in success of programs.  2641 Ms. Clark Provided an update on the Alaska Psychiatric Institute facility in Anchorage. She noted that the facility would be located on property near the  McLaughlin Youth Center. The property was part of the Alaska Mental Health Trust Land Settlement. The crisis treatment center must be vacated in two years. A solution must be found for that facility.  2332 DEPARTMENT OF CORRECTIONS  2308 MARC ANTRIM, Introduced department staff and discussed COMMISSIONER, their duties.  DEPARTMENT OF CORRECTIONS, 2002 Co-Chair Harris Questioned the difference between a deputy commissioner and an assistant.  1943 Commissioner Antrim Explained that a deputy takes over for the commissioner in his absence.  1848 Commissioner Antrim Discussed the Deputy Commissioner's Office, which oversees training, prisoner transport and prisoner classification.  1652 Co-Chair Harris Questioned if the Administration's priority would be to house prisoners close to home or if cost would be a factor in long-term incarcerations.  1558 Commissioner Antrim Noted that the Department attempts to house prisoners as close to home as possible while meeting security and financial needs.  1509 Commissioner Antrim Reviewed the Division of Administrative Services, which oversees budget and finance, data processing, human rights, procurement, facilities management and inmate health care.    TAPE HFC 03 - 7,  Side A  28 Commissioner Antrim Discussed the Division of Institutions. He observed that costs vary. Larger facilities are cheaper to house inmates. New prisoner costs are higher due to assessment mandates. Location determines some of the cost.  157 Co-Chair Harris Questioned why the Palmer facility has the lowest cost.  219 Commissioner Antrim Explained that it is a large facility with low security needs. Capital costs were not included.  339 Co-Chair Harris Questioned the cost of housing inmates in Arizona.  354 Commissioner Antrim The cost to house inmates in Arizona is approximately $54 a day or $65 with program costs included. This does not include travel.  415 Jerry Burnett, Observed that the Department is looking Special Assistant, at including travel in their final  Department of figures.  Corrections 425 Commissioner Antrim Continued discussions of inmate programs: adult basic education, general education, youth offender program (spring Creek Correctional Center), substance abuse, sex offender treatment, anger management and vocational and technical training.  556 Commissioner Antrim Reviewed the Community Jail Initiative, which operates 15 local jails under contract to police departments and costs $2,844,900 dollars.  703 Representative Ralph Asked the timeline on audits and Samuels determinations of recidivism rates.  734 Commissioner Antrim Clarified that the sex offender program at Highland Mountain is the first scheduled for audit. He was not able to provide information on recidivism rates. He observed that "recidivism" needs further definition.  920 Representative Questioned how the decline in dividends Stoltze has impacted the Department.  1002 Mr. Burnett Observed that it would have an affect, but was not able to quantify it.  1028 Commissioner Antrim In response to a question by Representative Stoltze, Commissioner Antrim noted that there is a victims' rights advocate in the Department. An automative notification system allows people to call in and receive information regarding prisoners.  1109 Representative Joule Asked which inmate programs are court ordered.  1128 Commissioner Antrim Explained that substance abuse and sex related cases general have court ordered treatment.  1198 Representative Joule Questioned if there was a correlation to recidivism.  1224 Commissioner Antrim Affirmed that there is a level of recidivism. He could not quantify the rate. He acknowledged that he has seen inmates that have gone through all of the substance abuse programs return.  1251 Representative Joule Stressed the need to utilize traditional cultural programs in conjuncture with western methodologies.  1420 Commissioner Antrim Acknowledged that 34 percent of the incarcerated population is Native. He agreed that what is occurring is not working and spoke to the consideration of including Native entities to work with inmates.  1516 Commissioner Antrim Discussed the Division of Community Corrections/Probation and Parole. He noted that it staffs field probation officers in most major cities. Caseload is between 70 and 75 inmates. The caseload should not exceed 60-65 when there is a requirement for 1-2 pre- sentence reports per month.  1712 Commissioner Antrim Reviewed the caseload and noted that the state is at the edge of the standard requirements.  1748 Commissioner Antrim Referred to the Interstate Compact Agreement, which allows prisoners to be transferred between states.  1818 Commissioner Antrim Discussed budget units. The Department was reduced to two budget review units in order to provide flexibility: Administration and Operations and Community Residential Centers.  1922 Commissioner Antrim Observed that there are 3,123 prisoners in state facilities. They are at 98 percent of capacity at present. There are 622 prisoners incarcerated at the contract facility in Arizona. There are 21 prisoners in other out of state facilities (due to medical and other reasons).  2035 Representative Joule Asked when the Arizona contract would be up for renewal. He asked the impact of a 5 or 10 percent reduction.  2075 Commissioner Antrim Responded that the out-of-state contract is up in June 30, 2003.  2122 Mr. Burnett Noted that there is an option for a one- year renewal, with an additional four- month extension at the end of that period. The state can enter renegotiations in the current year or do an automatic extension up to October 2004.  2149 Commissioner Antrim Stressed that the Department is heavy in general fund spending. It would be difficult to incorporate a reduction.  2226 Commissioner Antrim Spoke to the electronic monitoring.  2242 Representative Questioned if the Department anticipates Stevens increasing the use of electronic monitoring.  2305 Commissioner Antrim Acknowledged that electronic monitoring is cost effective, but noted that it doesn't prevent actions by prisoners. He felt that there was room for expansion, but stressed that it would have to be done cautiously. The monitoring is not  GIS locating.  2515 Representative Questioned how success was defined.  Samuels 2527 Commissioner Antrim Clarified that recidivism rates have not been determined, but that the technology is successful in monitoring the inmates and the inmates successfully complete their requirements.  2631 Representative Joule Questioned if there has been an expansion of roles for village public safety officers. He observed that there are no contract jails in villages. He observed the difficulty of allowing prisoners to travel to participate in family funerals.  2735 Commissioner Antrim Stated that the issue is: To what degree is the Department able to get the prisoner back to their hometown to participate in family funeral services. It is difficult to arrange transportation, even in a larger town. Prisoners may require a high level of custody, which requires escorts. There is a question as to who is responsible for payment of the escort and travel.  2847 Representative Joule Noted that the family often offers to pay the transportation and escort costs. A larger issue is that village jails are not state contract facilities.  3100 Commissioner Antrim Reviewed the Department's staffing level. There are 1484 authorized positions. There are 143 vacancies.  3207 Commissioner Antrim Discussed the Department's larger role as a social service provider. The Department is going to engage in medical cost containment.  3329 Commissioner Antrim Looked at population management. The Department has decided not to install temporary housing, as the increase in prisoner population has not manifested.  3421 Representative Spoke in support of the use of temporary Stoltze housing.  3429 Commissioner Antrim Stressed the need to engage in staff recruitment. Over the last eight years the Native Alaskan staff has dropped from 6 to 4 percent. The number of female staff has decreased, to a point which makes it difficult to operate.  3609 Commissioner Antrim Spoke to workforce employment monies for training.  3626 Commissioner Antrim Observed that the Department would continue to work on missions and measures.  3700 Commissioner Antrim Approximately 300 prisoners are mentally ill. He questioned if the Department of Corrections is the best place to house these individuals.  3742 Commissioner Antrim Pointed out that there are few sleep off centers. The Department of Corrections was intended to be the last resort but has become the first resort.  3818 Commissioner Antrim Anchorage and Juneau are the only communities that routinely charge arrested persons with violations of city ordinances. Most cities and towns arrest persons for violations of state charges, leaving the Department and State to assume all the costs.  3956 Mr. Burnett Clarified that Anchorage and Juneau do reimburse the state.  4019 Representative Questioned if the Department receives Stoltze Alaska Mental Health Trust Authority funds.  4031 Mr. Burnett The Department receives a little over $4 million in general fund mental health dollars.  4049 Commissioner Antrim The Department is anticipating a need for an additional $1.2 million stemming from a vehicle accident out of Seward for direct health care costs and the lost of the transportation van.  4116 Commissioner Antrim Added that the Department is trying to work on charge back costs associated with ITG costs. There are a large number of openings for probation officer and correctional officers, which transfers to a high level of overtime.  4149 Representative Referred to the cost schedule on page 2. Hawker He asked for the calculated support of the numbers. He noted that there are over 600 prisoners housed in the Arizona facility and questioned if outside housing is an acceptable as a cost reduction solution.  4248 Commissioner Antrim Replied that it is a logistical problem. There are costs associated with transport. He discussed other problems and noted that doctors are being shared with other units. There is a policy question of whether Alaskan citizens should be in Alaska.  4501 Representative Questioned if the inmate population is at Hawker risk in Arizona.  4520 Commissioner Antrim Did not think that prisoners in Arizona were at risk and noted that grievances  are monitored.   ADJOURNMENT The meeting was adjourned at 3:54 PM