HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE January 25, 1993 3:00 p.m. MEMBERS PRESENT Rep. Cynthia Toohey, Co-Chair Rep. Con Bunde, Co-Chair Rep. Gary Davis, Vice Chair Rep. Tom Brice Rep. Bettye Davis Rep. Pete Kott Rep. Irene Nicholia Rep. Harley Olberg Rep. Al Vezey MEMBERS ABSENT None OTHER LEGISLATORS PRESENT Rep. Jim Nordlund COMMITTEE CALENDAR Overview of the Department of Health and Social Services, Division of Public Assistance WITNESS REGISTER Jay Livey, Deputy Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, Alaska 99811-0601 (907) 465-3030 Jan Hansen, Director Division of Public Assistance Department of Health and Social Services P.O. Box 110640 Juneau, Alaska 99811-0640 (907) 465-2680 ACTION NARRATIVE TAPE 93-4, SIDE A Number 000 CO-CHAIR CON BUNDE called the meeting to order at 3 p.m., noted members present, and announced he would chair the meeting. He noted that the purpose of the meeting was to hear a 90-minute overview presentation on the Department of Health and Social Service's Division of Public Assistance. JAY LIVEY, DEPUTY COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (DHSS), turned the presentation over to Ms. Jan Hansen. JAN HANSEN, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, began her presentation. She announced her intention to describe the various and complex welfare programs the division administers so as to help the committee understand proposed program changes both in Alaska and the rest of the nation. She said she would describe client characteristics and program achievements to provide a context for proposed changes the department plans for FY94. She acknowledged that national and state increases in welfare rolls and program expenditures were raising new interest in meeting such problems. MS. HANSEN said welfare rolls and expenses were tied to and grow along with economic factors, such as unemployment and worker migration, and with social factors such as teen parenthood. MS. HANSEN introduced key staffers: Randy Moore, the division's administrative officer; Curt Lomas, program officer for the Aid to Families with Dependent Children (AFDC) program; and Sandy Armstrong, program coordinator for the Job Opportunities and Basic Skills (JOBS) program. MS. HANSEN referred to two documents: a FY94 program overview of the division (Attachment 1); and an article in the January 1993 issue of "Alaska Economic Trends," entitled "Welfare in Alaska -- Help or Hindrance to Self- Sufficiency?" (Attachment 2) MS. HANSEN referred to page one of Attachment 1, showing the division's program in a chart form. Cash assistance programs included AFDC and Adult Public Assistance (APA). Assistance for specific needs includes programs for medical, home energy, food, emergency shelter and burial needs, and the specific programs that provide them. In providing such services, the division works cooperatively with the Division of Public Health, the Departments of Labor, Education, Revenue and Community and Regional Affairs, and with private industry councils for various health, education and training programs. MS. HANSEN also described the division's programs to increase self-sufficiency among welfare recipients. The JOBS program, with a wide range of specific programs, is a key element of this effort, but there is also a program requiring some recipients of food stamps to enter education, job search and placement programs. Other programs provide recipients with child care and Medicaid for a year after they take jobs to ease the transition from welfare to full employment. MS. HANSEN briefly described the division's quality control function, which she said ensures that benefits go only to those truly qualified; and its fraud investigation function, which investigates and refers for prosecution cases of welfare fraud. She described a complex computerized eligibility information system, which stores information on applicants and helps division workers assess applicants' eligibility. Number 196 MS. HANSEN referred to page two of Attachment 1, showing FY92 expenditures of $182 million ($79 million from state general funds and $103 million from direct and matching federal funds) and how those expenditures were allocated among various programs. She noted that AFDC is paid on a 50-50 federal-state split basis and food stamps are paid directly from the federal government to the recipients, though the state and federal governments split administrative costs 50-50, with the state's share of AFDC administrative costs at approximately $5 million. MS. HANSEN referred to a graph on page three showing the annual totals of people on AFDC, APA, food stamps and Medicare programs, totalling some 64,000 people, though some recipients were enrolled in more than one program. MS. HANSEN referred to page three, which described the qualifications for AFDC, the level of payments to families of various sizes, the number of families enrolled, comparisons with other states and federal averages, and other information. She differentiated between AFDC Basic, the traditional welfare program aimed at children of single mothers, and Unemployed Parent (UP), a federally-mandated program, which, as of October 1990, required states to include two-parent households in which one parent is unemployed. The requirement resulted in larger caseloads in Alaska, and makes up about 40 percent of the increase in caseloads. The AFDC program was supposed to be a short-term benefit for families, not a permanent means of support, she said. MS. HANSEN stated that approximately 5.6 percent of the state's 586,000 residents (200,000 families) receive AFDC benefits, representing the poorest segment of the population. Number 338 MS. HANSEN referred to page four of Attachment 1, a graph based on a client survey, showing reasons why people were enrolled in AFDC, including the inability to find work, low wages, poor job skills, and lack of child care or health insurance. MS. HANSEN referred to pages five and six of Attachment 1, containing graphs breaking down AFDC cases by geographic location, race, and months of participation. Fifty-five percent of AFDC cases have been on the rolls for less than two years, and 39 percent of current cases have been on the rolls for more than three years, she said. Number 371 MS. HANSEN referred to page seven, displaying average caseloads per month since FY88, and showing growth from 7,657 in FY88 to a projected 13,858 in FY94. The increase is due both to the expansion into the UP program, and also increases in basic AFDC cases. The page also showed an increase in the budget from $58 million in FY88 to a projected $125 million in FY94. MS. HANSEN referred to page eight, describing the Adult Public Assistance programs. A federal supplemental income program pays APA recipients $434 per month, which APA supplements with up to $374 per month. An interim state assistance program pays up to $280 per month to those waiting for the federal government to determine whether they are eligible for supplemental security income. Number 375 MS. HANSEN referred to charts on page nine, showing average APA caseloads rising from 6,030 in FY88 to a projected 9,664 in FY94, and a projected growth rate of 8.5 percent. Program costs also rose from $120 million in FY88 to a projected $36 million in FY94. CURT LOMAS, AFDC PROGRAM OFFICER, noted that APA funds were paid entirely from state general funds, with no federal match. Number 403 MS. HANSEN referred to page 10, which showed information including that 43,500 people in Alaska received food stamps, representing 7.4 percent of the population, below the 10 percent national average. She compared the 5.6 percent of the population on AFDC with the estimated 11.8 percent of the population living below the poverty level in the state. She said Alaskans living in rural areas, where marketbasket surveys show that food costs more, received higher food stamp benefits. MS. HANSEN referred to page 11, showing the food stamp caseload increased from 9,701 in FY88 to a projected 15,536 in FY94. Another graph showed the cost for the program rose from $27.2 million in FY88 to $52.6 million in FY94. Number 426 MS. HANSEN spoke on the division's fourth major program, the federal Job Opportunities and Basic Skills (JOBS) program, as outlined on page 12, which is aimed at helping welfare recipients who are least able to get jobs to do so. She stated that the 39 percent who remain on AFDC for more than three years consume too much of the program money. Teenage parenthood and the lack of a high-school diploma are prime indicators of long-term welfare dependency, she said. Number 458 REP. TOM BRICE asked where funds for JOBS came from. MS. HANSEN responded that the program is funded by the federal government at varying matching levels for different elements of the program. The division also uses the services of other state and federal agencies for the JOBS program, she said. MS. HANSEN returned to page 12, briefly describing the services provided under JOBS, and the barriers to successful training and employment. Number 475 MS. HANSEN referred to page 13, which showed graphs outlining the different programs being used, such as basic education, job readiness, or post-secondary education, by the program's 930 participants as of December 1992. The federal government will increase the required percentage of AFDC recipients to be enrolled in the JOBS program which, she said, will help increase the participation from 930 to 1,340 people in FY94. Number 500 MS. HANSEN began to explain why the AFDC caseload is growing in Alaska. She said the national trend since July 1989 has been steady growth, to record levels. She referred to page 14. While Alaska ranked fifth in the nation last year in percentage of the population on AFDC, the state now ranks eighth, she said. MS. HANSEN referred to page 15 and to graphs showing that unemployment rates have generally been higher over the past three years, which she said was a partial cause of increased AFDC caseloads. She also said client surveys showed that the Exxon Valdez oil spill and attendant expectations for employment opportunities drew workers to Alaska from the depressed Lower 48 states. Tourism ads in Outside publications also tempt former Alaska residents to return to the state, the survey showed. MS. HANSEN said that federally mandated increases in the Medicaid program, aimed at drawing pregnant, low-income women into prenatal care, also attracted some people to the AFDC rolls who had not previously known they might be eligible. Other reasons for the increase in caseloads were increases in high school dropouts, teen pregnancies and unwed mothers, single-parent households, immigrants, and the poor, she said. Number 560 MS. HANSEN referred to page 16, which included charts showing the reasons why those on welfare came to Alaska, and the percentage of recipients who have been in the state less than one year, broken down by geographical area. Number 572 Answering a question from REP. HARLEY OLBERG, Ms. Hansen said the division compared 1992 rates to 1985 rates because the 1985 statistics were the only past numbers available. REP. CYNTHIA TOOHEY asked whether the division made allowances for seasonal fluctuations in unemployment rates as reflected in a chart on page 15. MS. HANSEN answered that the department did not, but before 1990 the AFDC caseloads did decrease in the summer. She said the absence of seasonal job opportunities in recent years, in such fields as fishing or construction, has caused caseloads to stabilize, but not decrease, in the summer. Number 600 MS. HANSEN began speaking of efforts to contain growth in AFDC caseloads, which she called a more realistic goal than trying to reduce the load. She referred to page 17. According to Ms. Hansen, the first step is a rigorous application process, somewhat akin to a mortgage application, which included computerized database cross- references in an effort to screen out unqualified applicants. A quality control effort in recent years has reduced the error rate from 19 percent in 1980, the nation's worst, to 3.3 percent in 1992, she said. The federal government allows a 6 percent error rate, but rebates 1 percent of its contribution to AFDC (in this case, $1.2 million) for each percentage point reduction the state realizes. The state received $3.6 million in rebates last year, she said, justifying the staffing expense. Number 642 MS. HANSEN stated another tactic in lowering caseloads is the requirement that recipients submit monthly income and assets statements, which the department verifies. An early fraud detection effort allows the department to check out suspicious new applicants before activating a claim. Last year the department checked out 400 applicants, 40 percent of which were found to be fraudulent. A post-certification fraud detection effort catches a few offenders. Ms. Hansen said the division works with the Department of Law to prosecute deliberate fraud, and handles intentional noncriminal fraud by itself, suspending eligibility and deducting the amount fraudulently obtained from any future grant if those committing fraud are still enrolled, or requiring repayment if they are not. The JOBS program represents a long-term effort to reduce AFDC caseloads by helping the recipients find jobs, according to Ms. Hansen. Number 666 MS. HANSEN discussed cost-containment efforts in the AFDC program. She said the department is interested in lowering the level of benefits for some AFDC recipients. They plan to suspend the cost of living allowance (COLA) normally granted at the start of a new calendar year. They plan to begin paying welfare recipients less than their full needs, lowering the rates to the 1991 level for the AFDC program and to the 1990 level for the APA program. The change would cut $53 from the maximum AFDC monthly benefit, but would cut $8.6 million from the program overall, she said. MS. HANSEN noted that welfare reform generally takes three forms: changing behavior, saving money, and restructuring welfare systems; and Alaska is taking the money-saving approach. Number 700 MS. HANSEN said the division will attempt to eliminate inequalities between the basic AFDC program and the unemployed parent program (AFDC-UP). The AFDC-UP program pays $1,040 per month to a family with two parents and one child, compared to $950 to a mother with two children. Lowering the AFDC-UP rate by $90 per month to equal the AFDC rate would save the division about $1.9 million per year, she said. TAPE 93-4, SIDE B Number 000 MS. HANSEN stated the department will also require those on Adult Public Assistance who receive the $280 monthly interim benefit while waiting for a determination of eligibility for federal supplemental income benefits to repay those benefits to the state after they receive their retroactive payments of $434 per month from the federal government. MS. HANSEN noted another small effort to reduce costs would be to prorate benefits from the date of application instead of from the first day of the month in which they apply. This change, which could be easily achieved, would save $475,000 in the APA program, she said. MS. HANSEN explained that the reduction in welfare rates as of July 1 (the start of FY94) will have the largest impact on welfare expenditures. MS. HANSEN referred to the division's effort to determine barriers to self-sufficiency among welfare recipients, including a survey of clients and staff, focus meetings, and analysis of federal waiver restrictions and of other state's welfare waiver programs. The study showed that those on welfare want to work but face barriers. Results of the study are contained in Attachment 2, an article from the January 1993 issue of "Alaska Economic Trends" entitled "Welfare in Alaska -- Help or Hindrance to Self- Sufficiency?" MS. HANSEN said the division plans to put most of its hopes into the JOBS program, both because she believes it will be effective at winning jobs for long-term welfare recipients, and because the federal government requires that it be expanded. She stated the department will also budget more money to give division staffers time during client contact to ask about welfare applicants' employment plans and capabilities, and to direct them toward appropriate basic employment and training resources. Number 165 MS. HANSEN mentioned the job sampling program, which allows JOBS participants to visit job sites to observe those in an occupation of interest. She mentioned a $120,000 federal grant to an alternative school in Wasilla, which is being used as a model of how to keep teen mothers in school. She discussed a system that allows the division to cooperate with the Department of Labor to track JOBS program participants to see if they found jobs in the fields for which they trained, their pay levels, and other information. Number 213 MS. HANSEN noted other initiatives not yet decided upon. She said the division knows it would like waivers of some federal welfare program requirements that are disincentives to quit AFDC and go to work. She would like to see those on AFDC who find jobs be able to keep more of their pay instead of having their welfare benefits reduced. She would like waivers of a federal rule barring welfare payments to anyone working more than 100 hours a month, even if the resulting wages are low enough to qualify for welfare, which she said discourages people from taking low-paying but available jobs. She would like waivers of the restrictions that disqualify welfare recipients who own cars worth more than a certain amount of money, which she said prevents such people from owning the reliable transportation they need to hold jobs. MS. HANSEN stated the federal government requires rigorous study and evaluation of any waiver project, and requires a year-long demonstration project for half of the case load, that would also require outside evaluation. Given such restrictions, she said, the up-front costs of such work, when applied to the relatively small client load in Alaska, do not balance out the projected savings through waivers. Demonstration programs for such waivers of disincentives would cost $750,000 over three years, she estimated. Number 267 With President Bill Clinton coming to office promising welfare reform, and with other states finding problems with the waiver process requirements, MS. HANSEN suggested it would be better to spend a year working with the American Public Welfare Association, the National Governors' Association and the U.S. Department of Health and Social Services to encourage Congress to lighten the legal strictures for waiver demonstration projects in hopes of later imposing a full set of waivers. Number 282 MS. HANSEN mentioned other possible efforts, including offering vouchers to provide parents receiving AFDC with vouchers for child care, possibly on a 50-50 federal-state split, to allow such parents freedom to find a job, at which time they qualify for regular child care benefits. Another possibility would be to allow welfare recipients, who will see their needs level decrease from $950 to $893 on July 1 (the start of FY94), to earn back that $53 difference, or more, without penalty. However, raising the needs standard to increase that difference would expand the pool of people qualified for AFDC and Medicaid, thus costing the state. Such changes are more attractive than waivers, she said, because they do not require the lengthy and expensive waiver process. Number 346 CHAIR BUNDE asked Ms. Hansen to present her final points to allow time for committee questions. Chair Bunde thanked her for the presentation and for her division's efforts at welfare reform. Responding to a question from CHAIR BUNDE, Ms. Hansen stated the current poverty level for a three-person household was $1,205 per month. CHAIR BUNDE mentioned Department of Health and Social Service Commissioner Ted Mala's proposal to inform all welfare applicants about the JOBS program, and expressed a desire to speak with Ms. Hansen about it in the future. Number 364 In response to a question from REP. BRICE, Ms. Hansen said there is no differences in AFDC benefits or poverty levels for geographic differences, though there are such allowances for food stamp allotments. MR. LIVEY explained that the poverty level for Alaska was set at a level 25 percent higher than in other states. MS. HANSEN, responding to a question from REP. BRICE, said the $950 monthly AFDC benefit level, representing 77 percent of the federal poverty level, was derived from the cumulative addition of COLA adjustments to the basic federal needs standard set in the early 1980s. Number 403 REP. TOOHEY commended the division for the low error rate. Number 412 REP. IRENE NICHOLIA asked if the department considered the individual communities in setting needs levels, or set a statewide level. MS. HANSEN answered that she could not answer precisely, as records did not show how the needs levels were set. However, she said, social workers had usually set needs levels in the past, but not based on precise methods, and possibly based on legislative funding levels or historical rates. She continued, saying that there are geographic differentials for food stamps and for some housing assistance and energy assistance programs. Given those other allowances for geographic differences, it was not clear that it was necessary to include more allowances in AFDC benefits, Ms. Hansen said. Number 441 In response to a question from REP. NICHOLIA, Ms. Hansen said approximately 20,600 children were receiving benefits through AFDC. (Rep. Jim Nordlund was recognized by Chair Bunde as being present in the audience.) REP. JIM NORDLUND asked whether the department planned to notify AFDC recipients about the impending reduction in welfare benefit rates planned to take effect July 1, the start of FY94. Number 470 MS. HANSEN responded that no, they had not, though they had started talking about the issue, which, along with making the actual program changes and reprogramming, must be done to effect the change. Number 476 MS. HANSEN answered a question from REP. OLBERG by saying the division will wait until January 1, 1994, to suspend the COLA adjustments to AFDC because that is when the adjustments will otherwise take effect. Number 489 MS. HANSEN, responding to a question from REP. OLBERG, attributed much of the near doubling in the cost of AFDC from the expansion of the program to include the unemployed parent program, which will bring in an additional 2,000 families in FY93 and 2,300 in FY94. She further attributed it to the COLA adjustments and to the increased needs for the service due to increased unemployment and other factors. Number 500 Responding to a question from REP. PETE KOTT, Ms. Hansen said none of the benefit reductions she discussed would require waivers, but they would require a change in the state welfare plan and state regulations. Number 525 MS. HANSEN, answering a question from REP. KOTT, said she believed there was a good chance federal laws would change to make waivers easier, and it would not be cost-effective to proceed with starting a waiver demonstration project at the same time it worked to ease the waiver process. She referred to other information available on the waiver process, both information from the self-sufficiency study done by her staffer, Christina Klein, and a federal publication, "The Rush to Reform," on states' efforts to reform welfare, upon which she based her judgments. Number 537 REP. KOTT asked the reason behind the projected decrease in APA expenditures in FY94. MS. HANSEN answered that the decrease resulted from the suspension of COLA and the reductions in the welfare benefit rate, despite a projected 8.5 percent growth in the caseload. Without the cuts, she said, APA FY94 costs would have risen $4.3 million over FY93 costs. Number 554 REP. TOOHEY asked if the federal social supplement would increase to compensate for any reduction or loss of the longevity bonus. MS. HANSEN said no, the bonus was not now considered in setting aid levels, but without the $250 per month would still leave the maximum AFDC benefit for an adult over 65 at more than the poverty level. Number 574 REP. NORDLUND asked whether the department had considered the economic impact, especially in smaller rural communities with limited cash economies, of the reduction in welfare benefit rates and suspension of COLA planned to take effect July 1. MS. HANSEN answered that the department had made no such analysis. But, she noted, food stamps would increase by about one-third, somewhat mitigating the impact of the loss. She further noted that total AFDC outlay to Bush communities would rise along with the increasing caseloads, despite the benefit and COLA reductions. Number 598 REP. BRICE asked about any possible cuts in funding for job training, child care, and other programs that were related to APA benefits. MS. HANSEN answered that the federal Jobs Training Partnership Act, a significant element of federal job training, would see a budget cut in FY94, requiring a compensatory increase in state funding for such work. Number 616 REP. BUNDE asked about the possibility of waivers allowing children to work and save their money, possibly for education, without it reducing the family's welfare benefits. MS. HANSEN said she would study the idea. CHAIR BUNDE reminded the committee of a meeting on January 26 in the regular HESS committee room, but a meeting on January 27 would once again be held in the House Resources committee room. There being no other questions, he ADJOURNED the meeting at 4:25 p.m.