HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE March 2, 2000 3:07 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 member present COMMITTEE CALENDAR HOUSE BILL NO. 346 "An Act relating to services for persons with developmental disabilities." - MOVED CSHB 346(HES) OUT OF COMMITTEE HOUSE BILL NO. 373 "An Act relating to return of contributed capital, or payment of a dividend, to the state by the Alaska Student Loan Corporation; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 396 "An Act transferring the assets, liabilities, and responsibilities of the Alaska Municipal Bond Bank Authority and of the Alaska Student Loan Corporation to the Alaska Housing Finance Corporation; and relating to the Alaska Housing Finance Corporation." - BILL HEARING CANCELED PREVIOUS ACTION BILL: HB 346 SHORT TITLE: SERVICES FOR DISABLED PERSONS Jrn-Date Jrn-Page Action 2/07/00 2118 (H) READ THE FIRST TIME - REFERRALS 2/07/00 2118 (H) HES, FIN 3/02/00 (H) HES AT 3:00 PM CAPITOL 106 BILL: HB 373 SHORT TITLE: STUDENT LOAN CORP PAYMENTS TO STATE Jrn-Date Jrn-Page Action 2/16/00 2207 (H) READ THE FIRST TIME - REFERRALS 2/16/00 2207 (H) HES, FIN 2/16/00 2207 (H) ZERO FISCAL NOTE (DOE) 2/16/00 2207 (H) GOVERNOR'S TRANSMITTAL LETTER 2/16/00 2207 (H) REFERRED TO HES 3/02/00 (H) HES AT 3:00 PM CAPITOL 106 WITNESS REGISTER REPRESENTATIVE REGGIE JOULE Alaska State Legislature Capitol Building, Room 405 Juneau, Alaska 99801 POSITION STATEMENT: Sponsor of HB 346. CHRISTINE HESS, Staff for Representative Reggie Joule Alaska State Legislature Capitol Building, Room 405 Juneau, Alaska 99801 POSITION STATEMENT: Answered questions on HB 346. BETH LAPE, Special Assistant Office of the Commissioner Department of Education & Early Development 801 West Tenth Street, Suite 200 Juneau, Alaska 99801 POSITION STATEMENT: Answered questions on HB 346. CONNIE ANDERSON, Developmental Disabilities Program Administrator Division of Mental Health & Developmental Disabilities Department of Health & Social Services PO Box 110620 Juneau, Alaska 99811 POSITION STATEMENT: Testified in support of HB 346. LYNN HETTICK PO Box 2554 Seward, ALASKA 99664 POSITION STATEMENT: Testified in support of HB 346. ERNEST DUMMANN 6721 Stives Place Anchorage, Alaska 99801 POSITION STATEMENT: Testified in support of HB 346. SCOTT CALDER PO Box 75011 Fairbanks, Alaska 99707 POSITION STATEMENT: Testified in support of HB 346. MARLA ADAMS PO Box 82619 Fairbanks, Alaska 99708 POSITION STATEMENT: Testified in support of HB 346. KATHLEEN FITZGERALD, President Key Coalition 4521 Southpark Bluff Drive Anchorage, Alaska 99516 POSITION STATEMENT: Testified in support of HB 346. DIANE BARRANS, Executive Director Alaska Commission on Postsecondary Education Department of Education & Early Development 3030 Vintage Boulevard Juneau, Alaska 99801 POSITION STATEMENT: Answered questions on HB 346. SHEILA KING, Finance Officer Division of Finance Alaska Commission on Postsecondary Education Department of Education & Early Development 3030 Vintage Boulevard Juneau, Alaska 99801 POSITION STATEMENT: Presented HB 346. ACTION NARRATIVE TAPE 00-26, SIDE A Number 0001 CHAIRMAN FRED DYSON called the House Health, Education and Social Services Standing Committee meeting to order at 3:07 p.m. Members present at the call to order were Representatives Dyson, Whitaker, Brice, Kemplen and Coghill. Representatives Green and Morgan arrived as the meeting was in progress. HB 346 - SERVICES FOR DISABLED PERSONS Number 0065 CHAIRMAN DYSON announced the first order of business as House Bill No. 346, "An Act relating to services for persons with developmental disabilities." Number 0079 REPRESENTATIVE REGGIE JOULE, Alaska State Legislature, sponsor, came forward to present HB 346. He mentioned there is a proposed committee substitute (CS) in the packets. The title was changed to make it more accurately represent the purpose of the bill. The second change deleted some language in Section 1(d)(3). Number 0219 REPRESENTATIVE COGHILL made a motion to adopt the proposed CS for HB 346, version 1-LS1347\H, Lauterbach, 3/1/99, as a work draft. There being no objection, that proposed CS was before the committee. REPRESENTATIVE JOULE stated that HB 346 will provide a tool to better internally manage the wait-list process, provide more effective use of the wait list, and provide better information to the public and to individuals with developmental disabilities. More specifically, the bill establishes periodic reviews of the wait list, along with an annual report to the legislature and governor. The information provided in the annual report will be useful to individuals with developmental disabilities and their families, the administration, the legislature and a variety of service agencies. The information can also be used by the division for a variety of purposes, including evaluating the existing system, evaluating the number of people and the length of wait for services, and the type and effectiveness of available services. Additionally, the bill requires the Division of Mental Health & Development Disabilities (DMHDD) to establish written procedures and consumer information that will be available to the general public. REPRESENTATIVE JOULE explained that this new information will greatly aid the general public. It will help individuals with developmental disabilities to understand the process and their rights. As of December 1, 1999, there were 786 people on the developmental disabilities wait list and 333 on the infant learning program wait list; approximately 2,100 individuals are being served. It has been a difficult process for those who have had to wait for services, and this will help. REPRESENTATIVE COGHILL referred to page 2, lines 18-19, paragraph (6). He asked if the 90-day period starts when people get service or when they are identified. Number 0556 CHRISTINE HESS, Staff to Representative Reggie Joule, answered it would be from the time that people came on the waiting list. However, the first 90 days of reporting would be 90 days after the bill became effective. Number 0571 REPRESENTATIVE COGHILL referred to page 2, lines 11-12, and said he believes that the word "feel" is subjective in reporting. MS. HESS said that language probably got into the bill because when looking at people's developmental disabilities, the department asks for the input of the family and the person with the developmental disability. REPRESENTATIVE COGHILL suggested a friendly amendment, dropping the words "they feel" on page 2, line 12. REPRESENTATIVE JOULE said he didn't object to that. Number 0672 REPRESENTATIVE COGHILL made a motion to adopt Amendment 1: page 2, line 12, strike "they feel are" and add "that may be". CHAIRMAN DYSON asked if there was any objection. REPRESENTATIVE BRICE objected. He asked for it to be a pending amendment. He said he believes that the way services are developed involves a tremendous amount of input from the family, and "they feel are" might show more empowerment toward the family. It is a technical thing, but he would like to hear from the department. CHAIRMAN DYSON suggested "they want". REPRESENTATIVE COGHILL noted that it was already in there, at the beginning of the sentence. REPRESENTATIVE BRICE withdrew his objection. Number 0761 CHAIRMAN DYSON announced that Amendment 1 was adopted. CHAIRMAN DYSON referred to page 2, line 23. He asked if it would be steering around a problem to say "finishing" instead of "graduating." BETH LAPE, Special Assistant, Office of the Commissioner, Department of Education & Early Development, stated that currently in statute students either receive a diploma or a certificate of attendance after 2002. CHAIRMAN DYSON asked Ms. Lape if she sees leaving "graduating" in the bill as limiting, or is it okay. MS. LAPE said she believes it will be limiting. Number 0877 REPRESENTATIVE JOULE responded that while to some it may seem limiting, some students with developmental disabilities will graduate. On the other hand, if during the process another way comes up so that all students with developmental disabilities are getting not just a certificate of attendance but will be graduating - maybe in a specified area, for example - that high school diploma will mean something to them. He would like to see the language remain as-is because it holds out that level of achievement for those individuals. MS. LAPE said if the EED decides to move away from the diploma, there will need to be a statutory change. This concern could be handled at the same time. REPRESENTATIVE BRICE commented that this is an annual report being talked about, not changing the high school graduation requirements or anything else. The DHSS is just trying to find out a specific number of students who might have an IEP [individual education plan] and how they're doing on the test. Nothing is being changed with the exit exam. It would show some good data, keeping it the way it is. Number 1054 MS. HESS stated that the purpose in drafting that section was to get some hard-core data, to see if 70 percent of the special education students are dropping out. If that is the case, then the services need to be looked at to find out what's going on. The purpose is to find out what is happening to the students with developmental disabilities as they work through the system or if they drop out, and to tie a lot of data from different departments together to look at the success of the services being provided. CHAIRMAN DYSON referred to page 2, lines 25-26, about the legislators receiving copies of the written policies, manuals and procedures used by the department. He said he doesn't want to receive all of that. If people want the information, they can easily get it. REPRESENTATIVE JOULE said he preferred that it stayed in there. NUMBER 1144 REPRESENTATIVE BRICE suggested a middle ground where this information could be available electronically. CHAIRMAN DYSON said that is an excellent suggestion. He suggested changing page 2, line 25, to say those items may be available either written or electronically. Number 1227 CHAIRMAN DYSON offered a conceptual amendment, page 2, line 25, which adds the phrase "and make available in written and electronic form" before the words "policies, manuals and procedures". There was no objection; therefore, Amendment 2 was adopted. Number 1270 CONNIE ANDERSON, Developmental Disabilities Program Administrator, Division of Mental Health & Developmental Disabilities (DMHDD), Department of Health & Social Services, came forward to express support for HB 346. The bill will require the DMHDD to review the wait list for persons with developmental disabilities (DDs) and report the results of this review annually to the governor and the legislature. MS. ANDERSON explained that the wait list exists because there are insufficient resources to meet the service needs of all consumers eligible for DD services. Historically, there has been little opportunity to report accurate information about the wait list to the governor and the legislature, as well as to the consumers, families and other stakeholders. In spring 1999 - for the first time since the inception of the wait list in 1989 - the division proactively took on the responsibility of a comprehensive assessment of the wait list. The results of the assessment proved to be of great value to consumers, families and other stakeholders of the DD service delivery system. This bill gives the division an ongoing opportunity to submit regular and accurate information to guide decision making and program planning. The opportunity to have this information available in the public arena will also eliminate inaccuracies and misunderstandings about the wait list and the division's policies and practices relating to the needs of its consumers. CHAIRMAN DYSON asked Ms. Anderson if she had any problems with any of the amendments made today. MS. ANDERSON answered no. Number 1399 CHAIRMAN DYSON referred to page 2, line 11-13, and asked if the information is used by the department for some sort of ranking or prioritizing for the prospective recipients of the service. MS. ANDERSON affirmed that. CHAIRMAN DYSON asked Ms. Anderson what criteria are used for advancing people on the list. MS. ANDERSON said when she took the position almost a year and a half ago, people had been waiting since 1985 for services; that was not acceptable to her. The department looks at how long the person has been waiting and what the level of need is, from the most critical to the least critical level. CHAIRMAN DYSON said he was surprised there was no fiscal note with this bill. It seems to him that a significant amount of work is demanded and wondered how the division would do that for nothing. MS. ANDERSON answered that the information about the wait list is very current, clean and up to date. That was not the case a year ago. A significant amount of time has already been invested to provide the most accurate information available. As part of working in partnership with the stakeholders, the division has developed ways to share information, and this is one of them. It was something planned on anyway with the existing resources. CHAIRMAN DYSON asked if the bill is necessary, then. MS. ANDERSON replied that she believes the bill is necessary because it provides a regular opportunity to share information. CHAIRMAN DYSON said he wouldn't know what would keep the division from sending this information to the legislature and the governor now. MS. ANDERSON answered that it is always nice to have the invitation. Number 1629 MS. LAPE added that the EED is capable of providing the information requested by the DHSS. Number 1663 LYNN HETTICK testified via teleconference from Seward. The mother of three disabled children, she shared her experiences in dealing with the DMHDD and expressed support for HB 346. She said parents have no idea what the wait list is for. Two of her children were on the wait list for 1.5 to 2.5 years. Parents need to know what the process is because right now there is no process. Parents don't hear about the wait list until they receive a letter from the state saying they are eligible. Parents still don't know what they are eligible for, because no one has told them what services are available. CHAIRMAN DYSON encouraged her to establish some relationship with her legislator. The legislator can often help get information for a constituent in situations like this. Number 1757 ERNEST DUMMANN testified via teleconference from Anchorage. He is the parent of a child with a severe developmental disability. He asked the committee to support HB 346. His child will require lifelong services. He shared some of the experiences his family had with his son. They began to seek services in 1988, only to find out there was a wait list for services. There was no way to know when services would be available. There was no formal information on who would be selected for services or what services may be available. Nor was there a written policy manual from the state nor a formal appeal process to get any of this information. MR. DUMMANN stated that his family anguished for the next five years, not so much from not having services but from not knowing or being able to plan for their son and his future. Not having information in a desperate situation is a torture. They did receive services in 1994. With help, the family has returned somewhat to normal. Right now, over 800 Alaskan families are in the same position and are suffering, with little or no information. He asked for the committee's support of HB 346 to give families and the citizens of Alaska the knowledge to plan for their futures. Number 1877 SCOTT CALDER testified via teleconference from Fairbanks. He expressed his support for HB 346. He commented that providing information to parents on many programs is important because the uncertainty is worse than torture. Number 2003 MARLA ADAMS came forward to express support for HB 346. She agreed it would be helpful to have the information. Number 2039 KATHLEEN FITZGERALD, President, Key Coalition, came forward to testify. She stated that the families and stakeholders had advocated for a long time to have written policies and procedures to follow the process. It is much easier to wait if one knows what the process is and what he/she is waiting for. She urged the committee to pass this bill. REPRESENTATIVE COGHILL asked Ms. Fitzgerald if there is a structural understanding of who goes where in the department and how the Key Coalition connects with the department. MS. FITZGERALD said she believes so. The Key Coalition works with the Governor's Council on Disabilities & Special Education, the stakeholder organization and the division to try to plan. There is some collaboration, but there hasn't been a written policy. Once everyone involved comes up with how the system should work, it needs to be written down. REPRESENTATIVE COGHILL said that as a freshman legislator, it was difficult to get that type of information. He suggested that Key Coalition may want to help line it out a little better. MS. FITZGERALD said the Key Coalition was looking at a desk manual similar to what the elder Alaskans use for providers and individuals. It lays out for everybody the way things should work and the policies and procedures and hearing rights are in there together. There needs to be something like that on the developmental disabilities side. She hopes that this generates that. Number 2200 CHAIRMAN DYSON commented that Ms. Fitzgerald made a good point that getting this in law should help get past the "changing of the guard" and administrations who have different emphases. Number 2257 REPRESENTATIVE BRICE made a motion to move CSHB 346, version 1- LS1347\H, Lauterbach, 3/1/00, as amended, out of committee with individual recommendations and attached fiscal notes. There being no objection, CSHB 346(HES) moved from the House Health, Education and Social Services Standing Committee. The committee took an at-ease from 3:52 p.m.-3:57 p.m. HB 373 - STUDENT LOAN CORP PAYMENTS TO STATE CHAIRMAN DYSON announced the next order of business as House Bill No. 373, "An Act relating to return of contributed capital, or payment of a dividend, to the state by the Alaska Student Loan Corporation; and providing for an effective date." DIANE BARRANS, Executive Director, Postsecondary Education Commission, Department of Education & Early Development, came forward to testify. She noted that the Alaska Student Loan Corporation endorses this bill and asked Sheila King to present it. Number 2319 SHEILA KING, Finance Officer, Division of Finance, Postsecondary Education Commission, Department of Education & Early Development, came forward to present HB 373. The Alaska Student Loan Corporation board endorsed this bill as another step as an enterprise agency of the state. The corporation's return of capital payment under this bill would be based on a percentage of net income when net income is in excess of $2 million. The structure of the payment was crafted to allow the corporation to continue to issue new low-interest student loans to Alaskan residents that would meet the criteria of the loan program while continuing to increase their financial stability to continue to provide services in the future. While the corporation's efforts through this bill is focused on making a return to the state general fund, she mentioned that when the Governor introduced the bill, he expressed a desire to use the payment to provide a fund source for the Alaska Scholars Program. REPRESENTATIVE KEMPLEN asked Ms. King to explain how this payment to the state works providing students with low-interest rates and this return of capital to the state. The purpose is to provide affordable education to Alaskan students so interest rates should be kept as low as possible, and one way is to take the money recovered from loans and plow it back into the principal. He asked if capital is moved to something else, are lower interest rates to students given up. Number 2223 MS. KING answered that the calculation on the interest rate on the loans is driven by the cost of the program with the component of the administrative cost and the cost of borrowing to provide funds for the loans. Loan receipts are recycled to provide a portion of the loans, and the remaining portion is bonded. This payment to the state would not affect those numbers significantly. The only effect it would have to the income statement would be an investment earning component on that portion which is not considered in the calculation of the loan rate. The loan rate is made up of two components: 1) the administrative cost of running the program and 2) cost of borrowing to fund the loans. The majority of the funds are recycled back into the program to keep the borrowing at a manageable level. There are requirements in the indenture that require certain tests are met before any money could be taken out of the trust which would be taking it out of the program. The levels projected for this payment are in the range of $600,000 to $2.2 million each year over the next five years. REPRESENTATIVE KEMPLEN asked if she had any written information so he could actually see the model that has been developed for those calculations. MS. KING said she would get that for him. Number 2122 REPRESENTATIVE BRICE believes it is a real novel approach for paying for the Alaska Scholars Program. He appreciates it was put forth by the Administration and the University of Alaska. Number 2102 REPRESENTATIVE WHITAKER commented that the Alaska Scholars Program has nothing to do with the student loan program. MS. KING said in developing the idea of the dividend, the corporation board has expressed an interest that the funds be used for an educational purpose. The desire to use it for the Alaska Scholars Program came from the Governor's office and that is an educational purpose which is under the broad purview of what the board has expressed. REPRESENTATIVE WHITAKER said certainly the scholars program is admirable, but he is concerned that it may be asking those who would be utilizing an educational loan to somehow help fund the Alaska Scholars Program with students that may not have the financial need that those intended to be helped by the loan program would have. MS. KING answered the structure of the payment wouldn't impact the interest rate on the loans. The payment would be considered a return of capital and under the parameters in the indenture, it can be taken out and passed on. Number 2024 REPRESENTATIVE WHITAKER said the loan program is designed to help those in financial need; the Alaska Scholars Program is not necessarily designed to help those in financial need. If the two cost factors are the cost of administration and the cost of borrowing, certainly the proceeds from past borrowing could be utilized to offset administrative costs, therefore the cost to the borrower could be decreased. If funds are not borrowed but rather earnings utilized for lending purposes, certainly again the rate charged to those borrowing the money could be reduced. MS. KING reiterated that cash is recycled to the extent to reduce the borrowing to a manageable level. The amount of the dividend with the parameters keeps it at a level that would not pass that cost on to the borrowers. The amount of the dividend is not included in expense calculation so it doesn't inflate that interest rate to the borrower. Additionally, the program is open to all Alaska residents whether they're in financial need or not. It has a minimal impact on the corporation's bottom line on the net income. Not everything in the net income computation is considered in the rate charged on the loans. Number 1851 REPRESENTATIVE BRICE said the state legislature established the interest rate that students pay a couple of years ago. He understood the ability to turn the profits of the corporation into lower rates would not be possible without a separate piece of legislation. MS. BARRANS answered the corporation board could have chosen to recycle all of its net income into new loans. Philosophically a couple of different issues were on the table when this idea was endorsed. One is that the corporation has asked this legislature and the administration to treat it as an enterprise organization. Toward that end, the corporation was interested in having the state have "a share of the positive return." The corporation board wanted to do that in terms of moving this symbolic level of money back to the general fund to be used as the legislature and administration saw fit. If in turn the legislature wanted to reappropriate these funds back to the corporation and create some offset for existing interest rates, it could do that. The corporation is not seeking that because it's offering very competitive interest rates as it is. However, that is something that could be done. She noted that the interest rates are fixed. Those can't be reduced without creation of a fund that would actually pay the corporation to offset those rates. Going forward it can reduce interest rates as has been done for the last two years and hopefully will be done in the future because the program costs portion are reducing the interest rate formula. REPRESENTATIVE BRICE asked what the interest rate is for next fall semester. Number 1749 MS. BARRANS answered the note rate is 8 percent, and there is still the interest free period while someone is in school so the effective rate of interest is below 8 percent when the six-months grace period is calculated. MS. BARRANS explained that the interest rate is calculated based on the average of the last five years program costs. It is an average thing moving forward and it's all fairly speculative. It presumes that interest rates on bonds are going up when actually the corporation has gotten very good rates on bonds. One of the ways it has been able to reduce interest rates on loans is there have been better rates on the bonds sold. The bonds have been upgraded to AA and are very competitive as those are sold. It wouldn't necessarily reduce the interest costs. REPRESENTATIVE KEMPLEN asked if it is possible to create another fund to help reduce the interest rates. MS. BARRANS said if the corporation received an appropriation from the state to pay in lieu of the borrowers paying their fixed rate of interest, then the state could give those funds. There would need to be an external revenue source in order for that to actually be feasible. The interest rates borrowers are paying on the notes are reflected in all of the corporation's official statements. Those rates are fixed and cannot be arbitrarily reduced. As far as the cash flow, certain warranties have been made to the bond holders that the corporation will charge that rate on those loans without an infusion of cash; it wouldn't be able to just arbitrarily reduce the rate on those loans. REPRESENTATIVE KEMPLEN asked why the capital can't be recycled and use that money to lower the interest rate on those old loans. Number 1603 MS. BARRANS answered if this bill passes and $2.2 million is returned to the state in the form of general funds, and if the legislature were to reappropriate those funds to the corporation for that purpose, the corporation could do that. REPRESENTATIVE KEMPLEN asked if she was saying that the existing statute prohibits the corporation from recycling the return on capital into reducing the interest rates on existing loans. MS. BARRANS answered no. She is suggesting that the indenture on the bonds prevents that. The corporation has made a commitment to run the program with these financial terms and conditions in place. If the corporation were to arbitrarily just reduce its net income in order to offset those rates, it would be in violation of the bond covenants. REPRESENTATIVE KEMPLEN said he is concerned that they are taking money away from students and putting it into the general fund where it can be used for road maintenance. Number 1532 CHAIRMAN DYSON asked what the cash balance is this week. MS. KING answered about $240 million. CHAIRMAN DYSON asked what that is invested in. MS. KING said a large portion is invested in investment agreements that are similar to repurchase agreements. There are some short-term repurchase agreements and a few government securities. CHAIRMAN DYSON asked if additional appropriations were needed during the years the collections weren't very good. Number 1483 MS. KING said she believes that 1993 was the last year there was any general fund appropriations received. CHAIRMAN DYSON asked Ms. King if she would get information on those amounts that were made from the general fund to the corporation. REPRESENTATIVE KEMPLEN requested additional information about exactly what prohibits the corporation from using this return on capital to lower interest rates on existing loans and future loans. REPRESENTATIVE GREEN asked what was the sudden change from running in the red to running in the black around 1993. He wondered if it had anything do with garnishing permanent fund dividends (PFD). Number 1411 MS. KING replied that the change really came from legislation passed that gave the corporation additional collection tools such as credit checking and credit reporting; wage garnishing will be implemented soon. The collection department has been beefed up and some electronic devices to help contact people have been added. MS. BARRANS added that occupational licensing has been a leverage tool for several years as well as an internal policy shift. The PFD garnishment tool has been in effect since the late 1980s. The garnishments have risen dramatically with the increase of the dollar amount of the PFDs. In the past, the commission would take the amount that was past due on the borrower's original schedule; now the entire amount is taken. CHAIRMAN DYSON asked if the corporation is able to go after Native corporation dividends. Number 1306 MS. BARRANS answered there is probably an ability to issue an order to withhold and deliver; the commission hasn't gotten to that stage of flexing the administrative garnishment authority right now. The wage garnishing is the "big bang for our buck." The commission will continue to explore what that authority allows us to do. CHAIRMAN DYSON announced that HB 373 would be held over. ADJOURNMENT There being no further business before the committee, the House Health, Education and Social Services Standing Committee meeting was adjourned at 4:25 p.m.