HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE February 22, 2000 3:36 p.m. MEMBERS PRESENT Representative Fred Dyson, Chairman Representative Jim Whitaker Representative Joe Green Representative Carl Morgan Representative Tom Brice Representative Allen Kemplen Representative John Coghill MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 302 "An Act relating to disclosure of public assistance information to report suspected abuse or neglect of children or vulnerable adults." - MOVED CSHB 302(HES) OUT OF COMMITTEE HOUSE BILL NO. 298 "An Act requiring that health care insurers provide coverage for treatment of diabetes." - MOVED CSHB 298(HES) OUT OF COMMITTEE HOUSE BILL NO. 322 "An Act relating to the financing of construction and major maintenance of public school facilities; authorizing the commissioner of revenue to sell the right to receive a portion of the anticipated revenue from a certain tobacco litigation settlement to the Alaska Housing Finance Corporation; authorizing the issuance of bonds by the Alaska Housing Finance Corporation with proceeds to finance public school construction and major maintenance grants; providing for the creation of subsidiary corporations of the Alaska Housing Finance Corporation for the purpose of financing or facilitating the financing of public school construction and major maintenance grants; relating to the annual public school construction and major maintenance grant application and approval process; providing for allocation of additional reimbursement of public school construction debt; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 375 "An Act relating to abuse of inhalants." - ASSIGNED TO SUBCOMMITTEE HOUSE BILL NO. 260 "An Act relating to coverage of children and pregnant women under the medical assistance program; and providing for an effective date." - BILL HEARING CANCELED PREVIOUS ACTION BILL: HB 302 SHORT TITLE: DISCLOSURE OF PUBLIC ASSISTANCE INFO Jrn-Date Jrn-Page Action 1/21/00 1965 (H) READ THE FIRST TIME - REFERRALS 1/21/00 1966 (H) HES, JUD 1/21/00 1966 (H) INDETERMINATE FISCAL NOTE (ADM) 1/21/00 1966 (H) 2 ZERO FISCAL NOTES (ADM, DHSS) 1/21/00 1966 (H) GOVERNOR'S TRANSMITTAL LETTER 1/21/00 1966 (H) REFERRED TO HES 2/10/00 (H) HES AT 3:00 PM CAPITOL 106 2/10/00 (H) Scheduled But Not Heard 2/22/00 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 298 SHORT TITLE: REQUIRE HEALTH INS COVERAGE FOR DIABETES Jrn-Date Jrn-Page Action 1/21/00 1961 (H) READ THE FIRST TIME - REFERRALS 1/21/00 1961 (H) HES, L&C, FIN 1/24/00 1996 (H) COSPONSOR(S): PHILLIPS 2/22/00 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 322 SHORT TITLE: PUBLIC SCHOOL CONSTR/MAINTENANCE FUNDING Jrn-Date Jrn-Page Action 1/28/00 2028 (H) READ THE FIRST TIME - REFERRALS 1/28/00 2028 (H) HES, FIN 1/28/00 2028 (H) 2 FISCAL NOTES (DOE, REV) 1/28/00 2029 (H) GOVERNOR'S TRANSMITTAL LETTER 1/28/00 2029 (H) REFERRED TO HES 2/22/00 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 375 SHORT TITLE: INHALANT ABUSE Jrn-Date Jrn-Page Action 2/16/00 2209 (H) READ THE FIRST TIME - REFERRALS 2/16/00 2209 (H) HES, JUD, FIN WITNESS REGISTER ELMER LINDSTROM, Special Assistant Office of the Commissioner Department of Health & Social Service PO Box 110601 Juneau, Alaska 99811 POSITION STATEMENT: Presented HB 302. DWIGHT BECKER, Protective Services Coordinator Division of Senior Services Department of Administration 3601 C Street, Suite 310 Anchorage, Alaska 99503 POSITION STATEMENT: Testified in support of HB 302. REPRESENTATIVE LISA MURKOWSKI Alaska State Legislature Capitol Building, Room 406 Juneau, Alaska 99801 POSITION STATEMENT: Presented HB 298. GLORIA TOKAR 2324 Hialeah Drive Anchorage, Alaska 99517 POSITION STATEMENT: Testified on HB 298. GORDON EVANS, Lobbyist Health Insurance Association of America 211 Fourth Street, Suite 305 Juneau, Alaska 99801 POSITION STATEMENT: Testified against HB 298. MARY LOU KELSEY PO Box 894 Homer, Alaska 99603 POSITION STATEMENT: Testified in support of HB 298. LAUREN BELL PO Box 894 Homer, Alaska 99603 POSITION STATEMENT: Testified in support of HB 298. MICHELLE CASSANO, Alaska Executive Director American Diabetes Association 801 West Fireweed Lane, Number 103 Anchorage, Alaska 99508 POSITION STATEMENT: Testified in support of HB 298. JANEL WRIGHT, Attorney Disability Law Center of Alaska 2945 Emory Street Anchorage, Alaska 99508 POSITION STATEMENT: Testified in support of HB 298. DONALD NOVATNEY 1120 Timberline Court Juneau, Alaska 99801 POSITION STATEMENT: Testified in support of HB 298. KAREN REHFELD, Director Education Support Services Department of Education & Early Development 801 West Tenth Street, Suite 200 Juneau, Alaska 99801 POSITION STATEMENT: Presented HB 322. JAMES BALDWIN, Assistant Attorney General Governmental Affairs Section Civil Division (Juneau) Department of Law PO Box 110300 Juneau, Alaska 99811 POSITION STATEMENT: Testified on HB 322. EDDY JEANS, Manager School Finance and Facilities Section Education Support Services Department of Education & Early Development 801 West Tenth Street, Suite 200 Juneau, Alaska 99801 POSITION STATEMENT: Answered questions on HB 322. BRAD PIERCE, Senior Policy Analyst Office of the Director Office of Management & Budget Office of the Governor PO Box 110020 Juneau, Alaska 99811 POSITION STATEMENT: Answered questions on HB 322. ACTION NARRATIVE TAPE 00-19, SIDE A Number 0001 CHAIRMAN FRED DYSON called the House Health, Education and Social Services Standing Committee meeting to order at 3:36 p.m. Members present at the call to order were Representatives Dyson, Whitaker, Green, Morgan, Brice, Kemplen and Coghill. HB 302 - DISCLOSURE OF PUBLIC ASSISTANCE INFO Number 0008 CHAIRMAN DYSON announced the first order of business as House Bill No. 302, "An Act relating to disclosure of public assistance information to report suspected abuse or neglect of children or vulnerable adults." Number 0012 ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health & Social Services (DHSS), came forward to present HB 302. He stated that HB 302 is a simple bill trying to solve a simple problem. Prior to federal welfare reform, it was clear under federal law that employees who do the eligibility determinations in the Division of Public Assistance had to report when they had probable cause or good reason to believe that there had been abuse of either a child or a vulnerable adult. MR. LINDSTROM said he doesn't believe that was a frequent experience, but on occasion it would come up in the course of their duties. The public assistance employees are not part of the child protection system or the adult protective services system. The language disappeared under federal law that replaced the AFDC program. Because of confidentiality laws related to their duties in public assistance, information about who is on public assistance is not public information. In the absence of that previous federal law, which said "you shall report if you come to believe there has been abuse," public assistance employees are getting a mixed message. MR. LINDSTROM explained that HB 302 removes that ambiguity and makes it clear that public assistance employees should, if they have good cause to suspect abuse, report that abuse both to the child protection system and to adult protective services. He stated the DHSS provided a zero fiscal note, and there is either a zero or indeterminate fiscal note from adult protective services. Number 0205 REPRESENTATIVE GREEN asked Mr. Lindstrom if it would accomplish the same thing to put the public assistance employees with all the other persons required to report in AS 47.17.020 or AS 47.17.010. MR. LINDSTROM agreed that would be possible, but the DHSS prefers this approach. He noted that most of the people on the list are external to state government. It is more appropriate to make that exemption to the public assistance confidentiality rule right within the public assistance statute. MR. LINDSTROM mentioned he did meet with Representative Green's staff and understands there was a concern about the mandatory aspect. He believes that could be accomplished simply on page 1, line 5 of the bill. The suggested change would read: (d) Notwithstanding (a) of this section, the department, an employee of the department, or a staff employee of a departmental contractor or grantee shall disclose information concerning ... MR. LINDSTROM acknowledged that the Department of Law agrees that is superior language. Number 0589 DWIGHT BECKER, Protective Services Coordinator, Division of Senior Services, Department of Administration, testified via teleconference from Anchorage. He expressed support for HB 320. It may bring more reports of harm to the division. Many of the people who are vulnerable are on public assistance. Public assistance is one way he feels the division would be able to reach that vulnerable population. REPRESENTATIVE WHITAKER asked Mr. Lindstrom what are the fail- safes for possible abuse between the public assistance employee and the person applying for assistance. He wondered what would protect that individual from false allegations. Number 0754 MR. LINDSTROM stated in this case, the best assurance he can give is simply the fact prior to 1995, when federal welfare reform passed, this in fact was the law of the land. There was a requirement on the public assistance employees to report. In his seven years plus with DHSS, he has never seen or heard of a complaint where the genesis of it was the public assistance employee. He believes the track record speaks for itself. He has never heard of that being an issue. These employees are subject to the department's rules and policies and discipline. REPRESENTATIVE WHITAKER asked for an estimate of the number of appropriate actions of those who are going to report incidents of this nature. MR. LINDSTROM mentioned he thought there might need to be a fiscal note on the bill in case reports had to be made, but he heard back from the Division of Public Assistance that while this is not unheard of, it is insignificant and the division has not even kept statistics on the number of times it has occurred. CHAIRMAN DYSON asked if there is a report of neglect or harm on a vulnerable adult, does that follow the pattern of a child who goes before a magistrate or court to take custody of that adult. MR. BECKER confirmed that Adult Protective Services would conduct an investigation at a preliminary assessment of the situation to see if in fact the adult was in need of a guardian. They would assess if the adult was deficient in mental capacity to make his/her own decision. If that were the case, they would make a recommendation that a neurological examination be conducted. The most important thing is they want to protect the individuals rights to remain in the community to remain free and make their own decisions. They take a very conservative approach to this and only recommend that the petition be filed when it is absolutely necessary for the individual's own protection. CHAIRMAN DYSON asked Mr. Becker at what point to they have to go before a judge to proceed in this process. MR. BECKER said they work with the attorney general first in preparing the petition. Once a petition is filed, a hearing is set and that is when they would go before a judge. If it is an emergency hearing, they would go before the judge within 72 hours, otherwise it is usually about two month. CHAIRMAN DYSON said he assumed that vulnerable adults are provided with representation. MR. BECKER replied absolutely. They are provided with an attorney to represent them. Number 1060 REPRESENTATIVE BRICE asked Mr. Lindstrom if it was a concern that parents might not file for public assistance if they thought they would be reported for abuse. MR. LINDSTROM noted that wasn't something that came up. REPRESENTATIVE COGHILL asked what is the accountability if there is a misuse of the reporting. MR. LINDSTROM indicated that the report of harms goes to the agency that is then charged with the investigation. The public assistance employee is simply making a report of suspected harm. The accountability historically lies with the agency doing the investigation. Number 1175 REPRESENTATIVE BRICE made a motion to adopt Amendment 1 which read: (d) Notwithstanding (a) of this section, the department, an employee of the department, or a staff employee of a departmental contractor or grantee shall ... CHAIRMAN DYSON asked whether there was any objection. There being none, Amendment 1 was adopted. Number 1216 REPRESENTATIVE BRICE made a motion to move HB 302, as amended, out of committee with individual recommendations and accompanying fiscal note. There being no objection, CSHB 302(HES) moved from the House Health, Education and Social Services Committee. The committee took an at-ease from 3:56-3:59 p.m. HB 298 - REQUIRE HEALTH INSURANCE COVERAGE FOR DIABETES Number 1241 CHAIRMAN DYSON announced the next order of business as House Bill No. 298, "An Act requiring that health care insurers provide coverage for treatment of diabetes." Number 1250 REPRESENTATIVE LISA MURKOWSKI, Alaska State Legislature, came forward to present HB 298 as the sponsor. She informed the committee that diabetes affects over 30,000 Alaskans. She has willingly brought forward this legislation that would require insurance carriers to provide for diabetes coverage for diabetes equipment which would include things such as pumps and meters, supplies such as test strips, medication and insulin, and training and education. It has become apparent that the training and education aspect of diabetes is the key. Diabetes is a disease without a cure, but it can be controlled and maintained through proper education by training people how to deal with their disease on a daily basis. REPRESENTATIVE MURKOWSKI noted the controversy surrounding this bill is that insurance is being mandated. If the disease is treated and dealt with on a daily basis, the long-term insurance costs will be reduced by education and preventive maintenance. Similar legislation has been passed in 37 states; 35 of those have passed legislation that would require the coverage as opposed to just offering the coverage. Studies were done in those states looking at whether or not the cost of insurance is increasing or in the long run reducing health care costs; those studies are coming back very heartening and supporting the position that the American Diabetes Association has taken. Number 1462 REPRESENTATIVE GREEN commented that he is reluctant to force an industry to do something that the industry should see is to their benefit anyway. REPRESENTATIVE MURKOWSKI replied she doesn't disagree with him. However, many insurance companies have chosen not to follow the good advice, and sometimes they just need to be encouraged a little bit more. Many of the major insurance carriers do provide for the education, equipment and supplies. This coverage is addressed under the state's insurance program, but about 30 percent of the insurers in the state do not provide for this kind of coverage. There is discussion at the federal level that would require the coverage as well. She admitted she sponsored this bill with trepidation because it goes against the grain of doing the right thing because it is the right thing, rather than having the government direct people to do it; however, she was moved by the statistics that maybe the insurance carriers need just a bit of a kick. Number 1631 REPRESENTATIVE BRICE made a motion to adopt the proposed committee substitute (CS) for HB 298, version 1-LS1218\D, Ford, 2/17/00, as a work draft. There being no objection, that proposed CS was before the committee. REPRESENTATIVE BRICE commented that he is also uncomfortable about a mandate, but sometimes the insurance company just needs a nudge. He asked Representative Murkowski what kind of general ailments and sicknesses are associated with diabetes when it is not addressed. Number 1740 REPRESENTATIVE MURKOWSKI answered that it is blindness, renal failure, amputation and all the bad and ugly things people don't want to happen to themselves or their loved ones. Number 1788 GLORIA TOKAR testified via teleconference from Anchorage. She told the committee that she has her diabetes covered, but there are many people with diabetes who are not as fortunate to have insurance coverage. There are people who don't have the professional help she enjoys through her insurance carrier. She doesn't want people to die for a lack of education. The help is available in the community, but people need to be able to afford it. She shared experiences from her personal life. She is a Type 2 diabetic. She does not have to be on insulin but does have to monitor her glucose three times a day, and that gets to be costly. Number 1924 GORDON EVANS, Lobbyist, Health Insurance Association of America (HIAA), came forward to testify. He read the following testimony: [Health Insurance Association of America] HIAA is a national trade association of commercial health insurance companies which provide health insurance for approximately 55 million Americans. I would like to preface my remarks on House Bill 298 by saying that when Representative Brice introduced a similar bill, HB 420, two years ago, I told him my client could support the bill so long as it called for a mandated offering and did not mandate that the benefit had to be included in all health insurance policies issued in the state. [House Bill] HB 420 at that time did indeed call for a mandated offering -- that is, all insurers at least had to offer policyholders the opportunity to purchase coverage for the particular need. Unfortunately, HB 420 was not considered. As I have noted on previous occasions in testimony before this committee, HIAA favors the preservation of a system that allows the prospective purchaser of health insurance free choice of which risks he or she wishes to cover from among the various coverages offered by competing insurance carriers. [Health Insurance Association of America] HIAA also believes that the choice of how the policyholder spends funds available for health insurance should be free of government decree, and we continue to adamantly oppose the proliferation of benefits through government mandates. Anytime the government requires or mandates certain coverage, that mandate becomes one of the rating factors which insurance companies use in making their underwriting decisions. Mandated benefits can impose significant burdens on health insurance carriers and drive up premium costs for consumers. Studies have shown that mandated benefits discourage small employers from offering health benefits to their employees. The result is a large and more costly uninsured population. One recent study indicates that with each 1 percent increase in premiums, small business sponsorship of health insurance drops by 2.6 percent. People can find studies to support whatever position they advocate. Mandates also affect the cost of, and therefore, the number of individual health insurance policies as well as group policies. Finally, on that topic, just for your information, a 1999 study ... showed that nationwide the number of state mandates has increased dramatically, almost 25- fold, during the last two decades, making health insurance disproportionately more expensive for small companies and causing as many as one in four Americans now to be uninsured. In Alaska, we currently have, to my knowledge, seven mandated benefits ... mental health, 48-hour hospitalization after birth, nurse midwife, alcohol/drug abuse, mammograms, PKU [phenylketonuria], and prostate and cervical cancer detection. We also have two mandated offerings ... acupuncture and dental, vision and hearing. Number 2096 MR. EVANS continued by saying his client would like to support this legislation, but unfortunately HIAA can't because of the mandate. The mandate would not affect all self-insured employers or others that are covered by ERISA [Employee Retirement and Income Security Act]. In Alaska that could include Safeway/Carrs, BP {British Petroleum] Amoco, the Municipality of Anchorage and other municipalities around the state. The state has covered most of the mandates in its policy. It is hard to know how many of the 30,000 Alaskans with diabetes are under ERISA regulations. The cost of dialysis is one of the most expensive procedures, so the savings of $917 dollars pointed out in the sponsor statement, while it affects those that do have the coverage, can raise the premiums considerably for those that don't have it. MR. EVANS noted one of the good things about this bill is that it does provide that the diabetes treatment can only be covered if it is recommended by a health care provider. Because of the status of the proposed CS as a mandated coverage, his client must oppose the bill. Number 2188 REPRESENTATIVE COGHILL asked Mr. Evans why don't the insurance companies already offer coverage at a premium rate if it will reduce costs. MR. EVANS answered that he assumed that the insurance companies have studies that show there isn't a reduction in costs. REPRESENTATIVE COGHILL commented he is reluctant on mandates as well. He asked Mr. Evans if page 1, line 11 would give enough room to adjust the deductible and co-pay to make it compatible to those who might have various needs. He asked if this bill would give the industry enough room to say under certain conditions a co-pay is better, and the company can decide what the scale is even though it is mandated insurance. MR. EVANS said he would have to ask his client about that. It is his understanding that the deductible and co-pay apply to the entire policy and not to a specific coverage. REPRESENTATIVE COGHILL mentioned he would like to see some of the competing studies. TAPE 00-19, SIDE B Number 2344 REPRESENTATIVE GREEN asked Mr. Evans if there are insurance companies operating in the state now that cover this; has he checked the competition to see how much higher the premiums are for the coverage. Representative Green wondered if it is a minor or fairly significant difference. MR. EVANS indicated he had not checked with other companies. There are not many companies that offer health insurance in Alaska as compared to other states. At one time there were 10-12 other companies that provided health insurance in Alaska. He noted that Blue Cross is not a member of HIAA, so he cannot speak for them, and most individual policies in the state are issued by Blue Cross. He is not sure there is any way to find out because the companies do not report to HIAA. The companies do report their charges to the Division of Insurance. Alaska is lucky because Wisconsin has 47 mandates, and the premiums there are out of sight; Alaska is on the low end right now. REPRESENTATIVE GREEN said it would be interesting to know if by mandating this, they are creating either a general increase to all those insured by companies who don't presently offer this service, or if those who are offering it now are doing so at an elevated premium. MR. EVANS agreed to try to find out that information. Number 2234 REPRESENTATIVE BRICE asked Mr. Evans how many companies are selling policies in Wisconsin. It sounds like there shouldn't be but one or two if the idea is the more mandates put in, the more it drives people out. MR. EVANS answered he didn't know how many. He has seen a list of what mandates various states do have. The membership of HIAA consists of all these companies. REPRESENTATIVE BRICE asked Mr. Evans what was the difference in the mandates he could support and HB 298. Number 2192 MR. EVANS said he couldn't give an answer for what the official line would be, but his personal feeling is that those mandates were so popular and so heavily wanted by the public that the public was willing to pay. CHAIRMAN DYSON asked Mr. Evans if the industry didn't oppose the mandate of cervical cancer and prostate cancer, why didn't the insurance companies get ahead of the curve and start offering it. MR. EVANS said he couldn't answer that question. CHAIRMAN DYSON asked Mr. Evans if he heard correctly that the Municipality of Anchorage insurance carrier doesn't cover diabetes. MR. EVANS clarified that the Municipality of Anchorage and other municipalities are self-insured so they do not necessarily have to follow mandates. They can, but they don't have to. He doesn't know whether or not the Municipality of Anchorage insurance carrier covers diabetes. Number 2108 CHAIRMAN DYSON told Mr. Evans his client needs to answer the question and refute the presupposition that good education, well- equipped and well-trained self-care is a financial bargain for the insurance companies, the society and the patient. Those people who are well trained and educated to take care of themselves can continue to work and avoid costly disabilities and hospitalizations and care. Money is saved for the individuals, the carrier and society. MR. EVANS said he would contact his client and tell them the committee's concern and see what HIAA can do. REPRESENTATIVE COGHILL noted that the pool of people in ERISA should be known. Number 2022 MR. EVANS indicated that someone from the Division of Insurance could best speak to that. REPRESENTATIVE COGHILL asked if there were more than two types of diabetes. Number 1954 MARY LOU KELSEY came forward to testify. She and her daughter, Lauren Bell, came for "show and tell" of what people with diabetes have to deal with on a daily basis. She explained there are two types of diabetes. Childhood diabetes, Type 1, is insulin dependent where the person must either inject shots or use an insulin pump on a daily basis because the pancreas no longer functions. Characteristically, Type 1 is a juvenile disease through life, although a few adults get Type 1. Type 2 is insulin-resistance or adult onset diabetes. There can be a combination of those two types. Number 1893 LAUREN BELL came forward to testify. She is 11 years old and has had Type 1 diabetes for about three years. She has been on an insulin pump for about two years. She showed the committee her supplies that she uses about six times per day. She said it would be very helpful if insurance would cover those products. Those products are the only way to keep her blood sugar under control. MS. KELSEY had Lauren show the committee her insulin pump which provides continuous infusion. She indicated that their family has insurance coverage, but it is difficult to find out answers about how much premiums cost when shopping for insurance. All the data needs to be submitted through the employer, or personally, to find out anything about premium numbers. She fears for her daughter coming of age to buy her own insurance and not having insurance available that covers diabetes. They have had difficulty under their family coverage: the insurance company eliminated the prescription coverage and arbitrarily decided it cost too much and, that ended the coverage of supplies and medicines. Their family can afford the $300-$500 per month for supplies and medicines, but Ms. Kelsey wants to focus on diabetes being a self-managed disease. If people can pay for supplies and want to buy private insurance that has that option available, it makes sense to standardize coverage. MS. KELSEY referred to Representative Coghill's question about why diabetes wouldn't be covered. It seems like the focus has changed from coverage for hospitalization and inpatient care. Now they would like it to focus on outpatient self-care because that is what people with diabetes do on a daily basis. REPRESENTATIVE COGHILL asked if it would be helpful to Ms. Kelsey to understand there was a co-pay provision on a particular item for diabetes, not on the whole policy. He asked that so the insurance companies get the message that that kind of information is better. Number 1729 MS. KELSEY agreed that would be helpful. She pointed out there is still language in the bill that says "subject to standard policy provisions," so the insurance company could still say to her that her policy does not cover insulin, but it will cover the test strips. If that were outlined in the policy she bought, it would allow differences in policies in terms of the standard policy provision. REPRESENTATIVE COGHILL asked Ms. Kelsey if her insurance carrier gives her any description of what equipment, supplies, self- management or training would be covered. He asked her how she deals with her insurance company on those issues now. MS. KELSEY said she basically submits her claims and waits to see what is accepted and what isn't. When they got the insulin pump, they were denied twice and had to go back to the insurance company and inform the company about a study out of England that shows people who have good control will not have complications of pregnancy, blindness and kidney failure. Ms. Kelsey had to write the letter twice to say "please help pay for this insulin pump now." The difficulty seems to be getting the insurance company to pay now instead of paying for more expensive care later. REPRESENTATIVE COGHILL asked Ms. Kelsey if education is something a health care provider can say is necessary. MS. KELSEY answered yes. MICHELLE CASSANO, Alaska Executive Director, American Diabetes Association (ADA), came forward to testify. She is a nurse and has been with ADA since 1984. She pointed out that many other states have gone with this coverage, and the majority are mandates. In regard to the insurance industry, it is not being said that the premiums might not go up. The Wisconsin study, mentioned earlier by Mr. Evans, says it goes up .1 percent. Another study was done three years after the mandate, and it says of all the insurance money spent in Wisconsin over those three years, the money spent for diabetes was less than 1 percent. As the states have mandated coverage for diabetes, she has gone back and talked to numerous colleagues to ask if their legislators or their insurance industry were asking for those studies. The savings on the back end are so dramatic that Maine is just now doing a study. MS. CASSANO pointed out that a lot of the mandates have come forth with technology. She would like to say that diabetes is a well understood disease, but it is very serious; untreated diabetes ultimately ends in death. MS. CASSANO noted that in her 16 years, the number one advocacy issue with her constituents has been insurance, even for well- developed procedures. In the fall the federal government picks a carrier, and January 1 the carriers that covered certain items for federal employees start denying those claims. The insurance companies just need to be nudged to get back into the coverage mode. Insulin, except for one very new kind, is a non- prescription item which companies don't cover. Insulin is life- sustaining; there is no issue. Medicare and Medicaid have increased what they cover in diabetes care over the past few years. Medicare now covers testing supplies, meters, education and has just added pumps. The public sector people are being taken care of for diabetes. There is just a wedge of private sector people who aren't getting consistent care. MS. CASSANO indicated that the American Diabetes Association has generally been accepted as leaders in providing standards of care. They have a huge research division, second only to the National Institute of Health. She also noted that those standards are a very integral part of the state diabetes plan. This legislation is necessary to protect a large portion of people. The insurance companies have not kept up with the technology. Self-management are very key words in this bill; that is what keeps people working and producing. She asked the committee to support this bill. Number 1357 JANEL WRIGHT, Attorney, Disability Law Center of Alaska, came forward to testify. She has had diabetes for 25 years. She passed out a quiz to committee members which tells if they are at risk of having diabetes. She reiterated that there are over 30,000 Alaskans diagnosed with diabetes, but that number does not include the people who have not been diagnosed. One in seven health care dollars in the United States are spent on treatment of diabetes and its complications. The importance of this bill is it will reduce the complications for people who have been diagnosed with diabetes because diabetics will be able to manage their own care. MS. WRIGHT told the committee that before she moved to Alaska, her insurance policy did not cover a blood test machine or test strips or syringes; her parents basically funded her care. She didn't use a blood machine or the test strips because the cost for her family was prohibitive. Her blood sugar was so out of control when she went to college, she almost got sent home. She begged her parents to let her stay to get her education. She went to law school but couldn't see the blackboard. She had no idea her eyes were failing because of her diabetes; she had never been educated and didn't have a way to monitor her blood sugar. She moved to Alaska and her life changed. She got health insurance and got a blood test machine, test strips, an insulin pump and attended diabetes education. MS. WRIGHT reported when she had her first hemoglobin A1C (HA1C), which is the test that shows control over the previous three months, her HA1C was 8.5, which meant her average blood sugar was probably over 250. That was in February 1988. She just got a report from her doctor on February 8, 2000, and her HA1C was 5.4 which means her blood sugar is on the average, 94. Good control is between 90 and 120. MS. WRIGHT spoke not only from her personal perspective, but as a staff attorney with the Disability Law Center of Alaska. Through her job she meets a lot of people with diabetes. Her office assists people with disabilities to get benefits and entitlements if they have been denied. A lot of people with diabetes have been denied social security, and they are no longer able to work because their diabetes is so out of control, and they can't afford to take care of themselves. MS. WRIGHT sees this bill as something that will enable not only those with diabetes who can't afford to maintain their control, but it will also enable others to gain control and go back to work. Number 1156 MS. WRIGHT referred to the concern about forcing insurance companies to do something that they should see the value in doing anyway. Unfortunately the insurance companies are not seeing the value; they need that extra push. This bill should be passed to help the constituents with diabetes. It is impossible for anyone to control diabetes without access to blood test machines, syringes, insulin and test strips. Once diabetes is under control, there is a significant reduction in the cost of health care utilization and fewer individuals will be in need of public benefits. MS. WRIGHT referred to the concern about increased insurance premiums. The studies that have been done have shown that there is no appreciable impact on the cost of health insurance and it has only gone up about .01 percent. New Mexico and Maine reported no increase in health insurance premiums. After the legislation was passed in Maine, there were 32 percent fewer hospitalizations due to complications from diabetes. In Maryland there were 50 percent fewer visits to the emergency room, and in Rhode Island there were 60 percent fewer visits to the emergency room. That shows that the cost of insurance is going to decrease once diabetes is under control. Ms. Wright noted that the American Diabetes Association has a goal for all 50 states to pass legislation such as this. Number 1007 DONALD NOVATNEY came forward to testify. He spent ten years in the Army but was kicked out when he was diagnosed with diabetes. He has had diabetes for 22 years and works as a registered nurse. He has not had the complications because he had good control. Ten percent of Alaska Natives, 10 percent of the Hispanic population, and 10 percent of Blacks will have diabetes in their lifetime. For the 80 percent of the people with Type 2 diabetes in their lifetime, 58 percent of them will need insulin. Many people are not doing the minimum amount to prevent complications. The standards of practice need to be checked. He would like to see everyone have the opportunity to have insurance that is reimbursed. Number 0838 REPRESENTATIVE COGHILL asked Mr. Novatney if his insurance covers the diabetes education and training. MR. NOVATNEY answered it was covered for the first time. As time goes on, things have improved and the insurance won't pay for a second time for his self-management classes. REPRESENTATIVE COGHILL asked if there was some way Mr. Novatney can suggest to the insurance company that under a mandate it is going to be paying a substantial amount and wondered if this would be heading in the direction of creating a roadblock. Number 0763 MR. NOVATNEY said he would hope that the insurance companies would provide the same coverage, 80 percent, for his medicines like other prescriptions. There shouldn't be a distinction. It should be fair across the board for everyone. The committee took an at-ease from 5:03 p.m. to 5:05 p.m. Number 0716 REPRESENTATIVE BRICE made a motion to move CSHB 298, version 1- LS1218\D, Ford, 2/17/00, out of committee with individual recommendations. Number 0702 REPRESENTATIVE COGHILL objected. CHAIRMAN DYSON distributed the written testimony from Rick Mystrom to the committee. Mr. Mystrom wasn't able to call in to testify. Number 0661 REPRESENTATIVE WHITAKER wished to make a statement: I too am a Republican and a proud Republican. I don't particularly like the notion of mandates, but that seems to be the hinge point that we're concerned with. We live under a lot of mandates. Many of us choose to live under the mandates, or try to anyway, of the Ten Commandments, and we do that by our choice, but it is nonetheless a mandate. There's another pesky little book full of mandates that occasionally we have to deal with. This is called the Constitution of the State of Alaska, Article VII, Section 4, Public Health. "The legislature shall provide for the promotion and protection of public health." That's easy; that's a mandate. We swore an oath to uphold that mandate, and I'm going to do that. I'm going to vote in favor of this. Number 0580 A roll call vote was taken. Representatives Brice, Kemplen, Whitaker, Green, Morgan and Dyson voted in favor of moving the bill. Representative Coghill voted against it. Therefore, CSHB 298(HES) moved from the House Health, Education and Social Services Committee by a vote of 6-1. The committee took an at-ease from 5:07 p.m. to 5:11 p.m. HB 322 - PUBLIC SCHOOL CONSTR/MAINTENANCE FUNDING Number 0556 CHAIRMAN DYSON announced the next order of business as House Bill No. 322, "An Act relating to the financing of construction and major maintenance of public school facilities; authorizing the commissioner of revenue to sell the right to receive a portion of the anticipated revenue from a certain tobacco litigation settlement to the Alaska Housing Finance Corporation; authorizing the issuance of bonds by the Alaska Housing Finance Corporation with proceeds to finance public school construction and major maintenance grants; providing for the creation of subsidiary corporations of the Alaska Housing Finance Corporation for the purpose of financing or facilitating the financing of public school construction and major maintenance grants; relating to the annual public school construction and major maintenance grant application and approval process; providing for allocation of additional reimbursement of public school construction debt; and providing for an effective date." Number 0537 KAREN REHFELD, Director, Education Support Services, Department of Education & Early Development (EED), came forward to present HB 322. She explained that HB 322 provides a mechanism for funding for school construction and major maintenance projects over the next three years. She provided the following testimony: With over a billion dollar investment in school facilities in this state, we cannot afford to neglect the major maintenance needs or replacement of schools when necessary. The Department of Education & Early Development has consistently advocated for a long-term stable source of funding for school construction and major maintenance projects. We think this legislation goes a long ways to accomplishing that. The legislation is designed to address three major goals: first, to provide adequate, safe places for children to learn by clearing up the backlog of statewide major maintenance and school construction projects; second, to address needs in both urban and rural school districts with an emphasis on addressing major maintenance projects quickly to avoid more costly future capital construction costs; and third, to address concerns that were raised in the Kasayulie lawsuit. The package totals $510 million including $360 million in grants for school construction and major maintenance, and $150 million for school debt retirement. The projects included in the Governor's package are funded in the order in which they are ranked on the department's priority list. As proposed, all 86 projects on the current major maintenance list and 40 of the 69 new construction projects would be funded. The current list then would be frozen over the next three years to allow these projects to be funded. The rationale behind the legislation is based on meeting the goals that I've outlined, sticking to the priority list and completing as many of the projects as possible over the three-year period. Adjustments to the amount of funding for particular projects and the final projects in the bill will need to be made as a result of appeals on the priority ranking that are being addressed right now and any other issues related to the Kasayulie settlement. CHAIRMAN DYSON asked about the appeals. MS. REHFELD explained that every year the department annually prepares a listing of school construction and major maintenance projects which is released on December 15. School districts who have issues with the ranking of their projects on those lists can appeal those decisions. A hearing officer is appointed and is addressing those appeals at this time. The State Board of Education & Early Development will meet in March and consider any of the decisions by the hearing officer, so the list will be final following the March meeting. MS. REHFELD continued her testimony: As the state continues to work on addressing the issues raised in the Kasayulie case, the legislation may need further modification. Mr. Baldwin, the Assistant Attorney General who is with me today, has been working on the Kasayulie case and is here to discuss not only the mechanics of the bill, but where we are with the plaintiffs at this time. Funding for school construction and major maintenance projects is critical in both rural and urban Alaska. This bill goes a long way towards addressing these needs, and we ask for your favorable consideration of this bill. Number 0240 JAMES BALDWIN, Assistant Attorney General, Governmental Affairs Section, Civil Division (Juneau), Department of Law, came forward to testify. He explained the idea of the bill is to authorize the sale of a part of the stream of revenue that is coming in from the tobacco settlement. Based on the best estimates of the value of that revenue stream, it is expected to raise approximately $260 million on the sale of that asset. There is a section in HB 322 that authorizes the sale through Alaska Housing Finance Corporation (AHFC). There are other sections in the bill that reaffirm the arrangement that the state has with Alaska Housing Finance Corporation which allows the corporation to use its general obligation debt capacity to issue another $100 million in bond proceeds for the purpose of constructing the facilities. The amount of bonds that are authorized to be sold is somewhat higher than that to cover for reserve funds and other financing requirements that could be imposed by the bond market in order to make the bonds marketable. The actual amount that can be raised is subject to the bond market, so the precise amount available for projects won't be known until the actual sale. There is sufficient authority built in to be able to do the projects that are set out in the bill. MR. BALDWIN noted that the bill also lists the projects that would be funded according to priorities listed in AS 14.11. "Construction, Rehabilitation, and Improvement of Schools and Education-Related Facilities." This bill was constructed largely in mind with resolving some of the claims that were faced in the Kasayulie lawsuit. That lawsuit was brought alleging discrimination in the way the state has funded certain rural schools in the state, and there are also claims in the case involving the administration of the Public School Trust Fund. He explained where the state is in the Kasayulie case. There have been discussions with the plaintiffs to determine what would resolve their claims. TAPE 00-20, SIDE A Number 0001 MR. BALDWIN said if the legislature agrees that this is something that is in the public interest to do, this case can be settled and resolved and the claims can be withdrawn, at least on the public facilities part of the case. He explained there are two parts of the case: the trust administration side and the public facilities side. The ability to resolve all of the claims in the case, in a global way, is difficult to do. They are not able to get there at this point in time so their discussions have centered on focusing on the public facilities side of the case, the ability to fund what had been identified as the needs in the rural school districts. Number 0100 REPRESENTATIVE KEMPLEN referred to page 13, lines 9-14. He asked about the reimbursement and if it would apply to the current school bonds that will go before the Anchorage voters in April. Number 0222 EDDY JEANS, Manager, School Finance and Facilities Section, Education Support Services, Department of Education & Early Development, came forward to answer that the majority of the Anchorage projects that will be before the voters in April will be covered under the allocation in SB 11, so this would be an additional allocation over and above that. REPRESENTATIVE KEMPLEN asked Mr. Jeans for more definitive information on the majority of the projects on the April ballot. Number 0280 REPRESENTATIVE COGHILL asked if taking the settlement monies through AHFC sidesteps general bonding practices. MR. BALDWIN replied that in other jurisdictions, it is becoming an accepted bonding technique to attempt to secure ties to the tobacco settlement for various reasons. Alaska would not be the first state in the nation to do that. There is an advantage to fixing the amount that can be derived from the settlement because there are certain variables that lead to the uncertainty of the amount of revenue the state might derive from this revenue stream over a period of time in the future. Other jurisdictions are doing this to eliminate the risk associated with waiting for that money to come in over the term of years that the settlement is going to provide it. REPRESENTATIVE COGHILL commented it seems to him that this should happen through the legislative process rather than AHFC. He wondered if that is going to create some trouble. MR. BALDWIN answered that this bill will use a revenue bonding approach to funding these facilities rather than some other approach. Some of the general obligation assets of the Alaska Housing Finance Corporation will be pledged rather than the full faith and credit of the state. REPRESENTATIVE COGHILL said he wanted to land on the policy call of the pledge of the assets. Obviously the Governor wants to put them in this particular setting, and it does keep the state from getting into a further bind through the Kasayulie case. There are a lot of health needs out there that the tobacco settlement was designed for. He suggested the health obligation of the tobacco settlement needs to be debated. REPRESENTATIVE KEMPLEN asked if using the revenue stream from the tobacco settlement was really dedicating that revenue stream to this indebtedness. MR. BALDWIN replied that he didn't believe so. He explained that the asset is being sold. Things like this have been done in the past where notes and mortgages have been sold to public corporations so the corporations could have the revenue streams. In some cases, the legislature has just given them away in order to capitalize the public corporations, but this would be an instance where the state would be getting value for the revenue stream. The state would be selling the revenue stream to AHFC and getting the proceeds that could then be spent on public schools. This bill is proposing to allow the legislature to cash in those future revenues now and then appropriate the funds; the legislature retains the power of appropriation. There is not a problem with dedicated fund prohibition. REPRESENTATIVE KEMPLEN asked if future legislatures were being precluded from using those revenues. MR. BALDWIN answered not all of them. This bill is not proposing to use all of the revenues. There will come a time when revenues are no longer needed to retire this particular indebtedness. REPRESENTATIVE WHITAKER asked about the dedicated funding. MR. BALDWIN explained typically the way a dedication works is that there is a revenue source that may only be used for a specific purpose. It comes in, and the legislature has no power or ability to use it for any other purpose. That is the invalid dedicated fund scenario. Here they are taking an asset, the right to receive money in the future, and they are selling those rights to the AHFC and the state is receiving back money for those rights. Those dollars are here in the present, and the legislature then would be appropriating those dollars for the projects in the bill. In that instance, the legislature is not deprived of its power of appropriation whatsoever; it has merely brought forward those revenues to the present and is exercising its powers. MR. BALDWIN clarified that what goes along with this bill would be appropriations set out in the capital budget which would be the way the legislature would be appropriating these dollars. REPRESENTATIVE COGHILL asked Mr. Baldwin to explain the subsidiary corporation structures. MR. BALDWIN explained that the various governments have secure ties, the tobacco revenue, and they have set up a separate entity or corporation that would actually be the issuer of the bonds that would be sold to raise the bond proceeds to buy the rights to receive the tobacco revenues. The idea of doing that is that it is recognized as a transaction that has some degree of risk. How the settlement is set up depends on some variables as to what amount of revenue can be received. The state would be gaining certainty by getting a set amount of money instead of the possibly fluctuating revenue stream. In order to make sure that the state and AHFC are insulated from the risk, a separate corporation is created for the issuance of the debt. The idea is to make it a less risky transaction for the state and AHFC to guard against what could happen in the future if there were some drastic reductions in the revenues that come in under the settlement. REPRESENTATIVE WHITAKER asked if the purchaser of the bonds were essentially under the onus of "buyer beware." MR. BALDWIN answered that is correct, but there will be very sophisticated investors who will understand the risks and the advantages of the transaction. REPRESENTATIVE WHITAKER asked if the revenue stream is somewhat erratic, would there be a higher interest rate associated with these bonds. MR. BALDWIN said there would be a certain rating, but he is not the person to talk to about that. He further explained that a separate corporate entity created specifically to deal with the funding mechanism will be the issuer of the bonds. REPRESENTATIVE WHITAKER asked if there would not be any incumbent or inherent liability for the state and/or AHFC. MR. BALDWIN said that is what they are striving for. Number 1095 CHAIRMAN DYSON expressed concern about the court case. He asked Mr. Baldwin what data the state presented to the court to show what the funding had been for construction. MR. BALDWIN said there was limited data presented. There was some data that showed there had been about $110 million appropriated. (He admitted he might not have the right dollar amount.) He further answered that there is not a lot stated in the opinion about what data the court did use to come it its decision. There was some limited information in the briefs, but it is not evident what the judge relied on in the opinion. CHAIRMAN DYSON asked Mr. Baldwin what years of the record of the money the state spent were given to the court by the state. MR. BALDWIN said he would have to check on that. He noted that the plaintiff concentrated on four or five fiscal years; he believed it was 1994-1998. CHAIRMAN DYSON said it is his understanding that the court literally relied upon the data that was supplied by the plaintiff, not by the state. Number 1196 MR. BALDWIN agreed that was accurate. CHAIRMAN DYSON asked Mr. Baldwin if the data supplied by the plaintiff was accurate. MR. BALDWIN answered he didn't believe it was complete. CHAIRMAN DYSON asked Mr. Baldwin if the state did a good job of putting on that case. Number 1217 MR. BALDWIN said he believed the state did a good job. He noted the state focused on some things that maybe other people wouldn't agree should have been focused on. The strategy at that point was to deal with the question about whether the constitution provides a fundamental right to education. He believes that is an unsettled area of the law in Alaska and other states. That strategy did not work with the trial judge. If it could be done over again, it might have been done differently. He can't say that those issues were handled badly. CHAIRMAN DYSON commented in layman's terms "we argued the law and not the facts." MR. BALDWIN agreed that was the strategy that was followed. It was a motion for partial summary judgment; it did not resolve the entire case. It was directed towards the law, and the strategy was to present it in a way that would indicate there were no genuine issues as to material facts. CHAIRMAN DYSON asked Mr. Baldwin if the state is going to appeal. Number 1293 MR. BALDWIN indicated that is a decision that hasn't had to be made yet because of the posture of the case. Appeal can only be done if there is a final judgment in a case. In this case there is a judgment on partial summary judgment which means there is not a total final judgment in the case. The plaintiff has moved to a procedure which is known as Rule 54(b) to certify that part of the case as being final. Since that motion was made, the state has not had a requirement to respond to the motion as yet, so the decision about appealing is not ripe. When the judgment has been made final, there is a 30 day window for appealing. There have been discussions to see if there is something that can be done to take the "wind out of the sails" of the plaintiff's claims. If there were substantial funding of public school projects by this legislature, he believes the state would have a better chance with this case than if there were not. Since there is a perceived willingness on the part of this legislature to fund a substantial amount of public school construction, it would be best to try to take advantage of that from the state's side of things. CHAIRMAN DYSON asked if the plaintiffs are going to proceed like that is the final decision on that portion that the judge decided. MR. BALDWIN explained that the plaintiffs have to convince the judge, that in the interest of justice, that decision on a part of the case should be certified as a final judgment. CHAIRMAN DYSON asked if that's what the plaintiffs have asked for and does the state have an opportunity to appeal. MR. BALDWIN noted the state has an opportunity to argue about that. He further explained that there is a stipulation with the other side that as long as they are talking about ways to work out the differences, the state needn't respond to that. CHAIRMAN DYSON asked if the portion of the decision that the plaintiffs have appealed to be final is some set of dollars or some number of buildings or what. Number 1435 MR. BALDWIN said it is just a decision on the principles of law concerning the discrimination claims as to whether or not the villages were discriminated against in the way the REAAs [Rural Education Attendance Area] and the state appropriated the dollars. There is also the Title VI claim as to whether or not it involves racial discrimination. CHAIRMAN DYSON said it seems to him that the facts did come into the case because the facts of the supposed discrimination in the dissemination of funds was a defacto discrimination. He asked how much money that was spent in the different years was a part of the evidence to prove the discrimination. MR. BALDWIN replied that the allegation had to do with whether or not the process in AS 14.11, amounted to discrimination or the failure to fund the projects that were set out on the list. The question was did they or did they not do that; that is the difficult part of the case. That is what carried the judge more than whether there was some parity provided over the past 10-20 years. The plaintiffs pressed the issue of was the statutory process followed for funding rural and urban schools. They argued very strongly and persuasively that it was not followed, and those are the arguments that the judge accepted. It was definitely a question of mixed law and fact. People might disagree as to what kind of facts bear on that: whether you can go back 20 years and make a case for parity based on that time period or whether you should only focus on the four or five fiscal years that were raised by the plaintiff. CHAIRMAN DYSON asked Mr. Baldwin if anyone brought up 1994 when the rural schools received $580 million. MR. BALDWIN replied he was not sure what numbers Chairman Dyson was using but he has done that analysis. He can say that the legislature has been very good in funding the major maintenance list. The proof gets more difficult in the construction list. CHAIRMAN DYSON asked if the state has the option of introducing any more evidence in the case. Number 1594 MR. BALDWIN replied he believes it is possible, but it is only at the discretion of the court. In his view, it would have to be done by asking the judge to open up the judgment under the theory that there has been a mistake, either in fact or law. It is difficult to do because the judge has to be convinced that he made a mistake on the law or the facts; there are lots of factors involved. It is not impossible, but it is not something to invest the family's money in. There may be possibilities: if on appeal, the Supreme Court has the power to suspend the rules and to permit supplementation of the record, but that is at the discretion of the Supreme Court, and the Supreme Court likes to consider itself as being a court that decides cases on the record that has been established in the lower courts. CHAIRMAN DYSON asked if the tobacco revenues were spent last year or haven't they been allocated in the Governor's budget this year. MS. REHFELD referred that question to Elmer Lindstrom from the Department of Health & Social Services. She explained that debt- service costs would come into play. There is some material on the financing mechanism on the fiscal notes having to do with the debt retirement program that could be a couple of years out. She said those costs are shown in general funds; the tobacco settlement stream that's been appropriated to this point is not considered in this packet. CHAIRMAN DYSON asked who was the judge in the case. MR. BALDWIN answered Judge Reese. He also answered Chairman Dyson that he has heard rumor that Judge Reese was with Alaska Legal Services and pled the Molly Hootch case, but he hasn't confirmed that. He further noted that Assistant Attorney General Tom Dahl presented the state's case. CHAIRMAN DYSON said it seems that the plaintiff is saying that the state needs to provide enough resources for the students to get a well-rounded education. He asked what the cutoff number should be of what provides a well-rounded education. MS. REHFELD noted she can't answer that question but understands where he is going. She further explained to Chairman Dyson that in those rural areas where there are children that require educational services, they should have adequate, safe facilities. CHAIRMAN DYSON asked if there was anything in this decision that indicates that a building is not enough, that there has to be a broader education program. MR. BALDWIN indicated the decision is dealing with concrete and steel. The judge is indicating that having appropriate facilities bears on the learning process and directly bears on the right to education. CHAIRMAN DYSON asked Mr. Baldwin if making this a general obligation bond was considered to give the people in the state a chance to vote on it. Number 1864 MR. BALDWIN answered if this were to be funded by a general obligation bond approach, that would be an acceptable approach, but there are certain advantages to this approach that would better allow the money that is raised to be focused on resolving problems in the rural school districts. It presents opportunities for "securitizing" an uncertain revenue source in the future. It allows a device used in the past which is the general obligation bonding capacity of AHFC. CHAIRMAN DYSON referred to the Kasayulie case and asked what is the criterion, and what did the judge find wrong with it that he would have the state do differently. MS. REHFELD answered that she doesn't believe that the judge found that there were any particular issues with the evaluation or prioritization of projects the department does in generating those lists. She believed that the question the judge raised was whether or not the department, in seeking and securing appropriations, had followed the list in actually doing that. MR. BALDWIN added the fact that the department had provided a reimbursement program for organized municipalities that was not available to the REAAs. In other words, the REAAs were required to go through the list and were required to rely on front-end appropriations from the legislature, which in the words of the court "didn't materialize in a general way or a uniform way." During this same period, there were substantial amounts of money that were made available under the bond reimbursement program for organized municipalities, and the plaintiffs felt there was a disparity in that treatment between the organized areas and the unorganized areas of the state. Number 2001 REPRESENTATIVE KEMPLEN referred to the fiscal note where it speaks about debt service. He asked: Why not use AHFC transfer payments to retire all of the debt? Why mix it up with the tobacco settlement money? Number 2029 BRAD PIERCE, Senior Policy Analyst, Office of the Director, Office of Management & Budget, Office of the Governor, came forward to answer questions. He informed Representative Kemplen that there isn't enough money. Somewhere around $360 million is needed for funding the list; about $260 million can be leveraged out the tobacco settlement, there is another $100 million in general obligation (GO) capacity in AHFC. REPRESENTATIVE KEMPLEN asked if that untapped capacity equals $100 million. MR. BALDWIN answered approximately, yes. REPRESENTATIVE KEMPLEN asked if AHFC pays the legislature a dividend. MR. BALDWIN agreed and noted that the amount is $103 million a year. About $53 million goes to AHFC capital projects and about $50 million goes to the general fund or to debt service. Right now about $34 million is being spent on debt service from the 1998 package which was $200 million dollars worth of bonds. Over the next five years about $100 million worth of projects will be financed. Mr. Baldwin further explained that about $260 million would be raised from the tobacco settlement, and that would be through 2021. It generates about $24 million a year. About $1.4 million will be taken off the top for anti-tobacco efforts. REPRESENTATIVE KEMPLEN asked when is a "right to receive" not an appropriation. Number 2181 MR. BALDWIN answered that an appropriation is when the legislature authorizes the expenditure of money from some funding source for a specific purpose. The right to receive is like a mortgage in the eyes of a lender. The lender has the right to receive the payments of principal and interest over a period of time. That particular right, that mortgage, can be sold to another investor or another lender. So there is quite a bit of difference between the concept of an appropriation and the right to receive. One is the right to expend money the other one is a right to receive it, to earn it. REPRESENTATIVE KEMPLEN commented, "It certainly appears that we're obligating and precluding future legislatures from spending the tobacco settlement revenue stream on health issues. That seems to be the relevant question for this committee." CHAIRMAN DYSON responded, "Only if you think that the tobacco settlement things ought to go to tobacco and health-related issues, which has a certain logic to it. REPRESENTATIVE KEMPLEN said it seems to him that the committee might want to get an interpretation or opinion from Legislative Legal and Research Services about the concepts of the right to receive and appropriation. CHAIRMAN DYSON said Representative Kemplen has raised an interesting question: Are judges' decisions going to usurp the role of the legislature in making appropriations and withdrawals of funds from the public accounts? CHAIRMAN DYSON suspended the hearing on HB 322. [HB 322 was heard and held.] HB 375 - INHALANT ABUSE TAPE 00-20, SIDE B Number 2274 CHAIRMAN DYSON appointed a subcommittee to work on House Bill No. 375, "An Act relating to abuse of inhalants." He announced that the subcommittee would consist of Representatives Green, Dyson and Brice. [End of action relating to HB 375.] ADJOURNMENT Number 2217 There being no further business before the committee, the House Health, Education and Social Services Committee meeting was adjourned at 6:05 p.m.