MINUTES SENATE FINANCE COMMITTEE 6 May, 1998 9:40 a.m. TAPES SFC 98 # 159, Side A (000-593) Side B (593-173) CALL TO ORDER Senator Bert Sharp, Co-Chair, convened the meeting at approximately 9:40 a.m. PRESENT In addition to Co-Chair Sharp, Senators Donley, Torgerson, Adams, Parnell and Phillips were present when the meeting was convened. Senator Pearce arrived later. Also Attending: Senator LOREN LEMAN; Representative CON BUNDE; Representative JOHN DAVIES; CAROL CARROLL, Director, Division of Support Services, Department of Natural Resources; BOB BARTHOLOMEW, Deputy Director, Division of Income and Excise Audit, Department of Revenue; ROBERT BUTTCANE, Administrative Probation Officer for Youth Corrections, Division of Family and Youth Services, Department of Health and Social Services; JON SHERWOOD, Medical Assistance Program Officer, Division of Medical Assistance, DHSS; MARILYN HOLMES, Direct Entry Certified Midwife; MIKE GREANY, Director, Division of Legislative Finance and aides to committee members and other members of the Legislature. via Teleconference: From Anchorage: KEVIN BANKS, Director, Division of Oil and Gas, Department of Natural Resources; BARBARA BRINKS, Director, Public Defender Agency, Department of Administration; From Fairbanks: JEFF COOK, Vice President, External Affairs and Administration, MAPCO Alaska Petroleum. SUMMARY INFORMATION HOUSE BILL NO. 469 "An Act approving the sale of Prudhoe Bay Unit royalty oil by the State of Alaska to Mapco Alaska Petroleum, Inc.; and providing for an effective date." Co-Chair Sharp asked if there was anyone present from the Department of Natural Resources to speak to the bill and open the dialog. CAROL CARROLL, Director of the Division of Support Services, came to the table and introduced KEVIN BANKS, Director of the Division of Oil and Gas, who was linked to the meeting via teleconference from Anchorage. Co-Chair Sharp requested an overview on what the bill would do and the essentials of the contract. Mr. Banks answered as follows: "The contract that I helped to negotiate with MAPCO is a five-year contract, which will begin in December 1, 1998 and expire December 31, 2003. We propose to sell to MAPCO approximately 28,000 barrels a day of Prudoe Bay oil. Or that calculates in the contract specifically to about 20 percent of Prudoe Bay production, royalty production that is, in the first year. But that percentage will increase each year as production declines to about 33.5 percent, which will make for a relatively constant delivery of 28,000 barrels per day over the life of the contract." "The price is calculated based on what we receive in for our royalty in value paid by the lessees. Actually, the volume weighted average price that we receive from the lessees, plus 15 cents." "The contract also includes the provision in the event that MAPCO defaults. We have a - the contract is secured by a letter of credit equal to a value - equal to the value of 75 days of delivery of royalty oil." "We have a provision that also requires that MAPCO process up to at least 80 percent of the oil that we sell to them in their North Pole refinery." "And there is a local-hire provision as well in the contract were we define Alaskan residents in the same way as they are defined in the North Star lease amendments that were approved by the Legislature in 1996. Also the local hire clause includes a provision that to the extent practicable, MAPCO hire local contractors for the work that they do." "I believe that sort of touches on most of the high points on the contract. I'd be happy to take any questions at this time." Senator Adams noted this proposed contract was for five years and approximately 28,000 barrels per day. He wanted to know what were the provisions in the old contract with MAPCO. Mr. Banks responded that the other contract was for 25 years with 35,000 barrels of oil delivered per day. That contract would also expire on December 31, 2003. He added that there was also a one year contract that would expire When this one began. That contract was for 13,000 barrels a day. Co-Chair Sharp called upon JEFF COOK, Vice President of External Affairs and Administration for MAPCO Alaska Petroleum, to testify next. Mr. Cook spoke via teleconference from Fairbanks as follows: "We appreciate the committee hearing this bill today. We feel that this bill both enables as well as expands a great partnership between MAPCO and the State Of Alaska. We are well into our $70 million expansion." "This contract will feed what we call our 'crude unit number three'." "We're - we probably have about 125 Alaska workers out there right now and our primary contractor is TCI, Vern Boyles out of Fairbanks." "This stand alone crude unit will process an additional 14,000 barrels of jet fuel a day and 3,000 barrels of diesel. We will not be able to refine any additional gasoline with our new crude unit." "Last year we did tell you that if we were able to get jet fuel tax equalization that we would expand. We would put people to work and we would make up the deficit of 14,000 barrels a day of jet fuel that now has to be imported from outside the state. And we're happy to report we're doing that and I wish you could all be here to see the tremendous progress on this project and to drive through the parking lot and count up all the Alaska plates that I see out there as I drive through every day." "And with that - and I will say that we will refine all of that crude oil. We will exceed the 80 percent. We will refine all of that at our North Pole refinery." "And with that I just appreciate your passing this bill out today and getting it on its way so we can start refining that crude in December. And if there's any questions, I'd be pleased to answer them." Senator Adams wanted to know if with the acquisition of MAPCO Company by Williams Energy Groups, would the local hire provision be in place. Would Alaskans stay on board versus bringing in Oklahoma residents to take those jobs, he asked. Mr. Cook responded that the company had been under the ownership of WEG since the end of March and had not seen any changes. He did not expect any changes in the local hire provisions in the Alaskan operation. They would all carry on as before and WEG would assume the contracts with the local hire obligations, he stated. Senator Phillips had a question for the representative of the Division of Oil and Gas. He had looked at the background of the contract and saw that there had been no public comment. He asked if that was correct. Mr. Banks replied that the division had only received minimal comment consisting of one letter faxed to the Royalty Board. Senator Phillips wanted to know what were the comments, and what consideration did they receive. Mr. Banks turned to the letter, which was written by Hal Whitley, owner of Wet Willy's Car Wash. The letter expressed concerns about the prices charged by MAPCO gas stations and that his gas stations were having a difficult time trying to compete. Senator Phillips clarified that the complaint was unfair competition. Mr. Banks agreed saying that Mr. Whitley claimed that he was unable to buy gasoline wholesale for less than the retail prices charged by MAPCO. Co-Chair Sharp noted there was no one else signed up to testify and there were no further questions of the previous speakers. Senator Adams offered a motion to move HB 469 from the committee with accompanying fiscal notes. Without objection, Co-Chair Sharp so ordered. SENATE CS FOR CS FOR HOUSE BILL NO. 16(JUD) "An Act relating to delinquent minors, to the taking of action based on the alleged criminal misconduct of certain minors, to the services to be provided to the victims of criminal misconduct of minors, and to agency records involving minors alleged to be delinquent based on their criminal misconduct; providing for the dual sentencing of minors who commit certain felony offenses; relating to violations of municipal ordinances by minors and to civil penalties for violation of municipal ordinances by minors; relating to semi-secure residential child care facilities and secure residential psychiatric treatment centers; relating to programs and shelters for runaways; relating to placement of children in need of aid and delinquent minors in secure residential psychiatric treatment centers; amending the Interstate Compact on Juveniles to which the state is a party; allowing use of hearsay evidence at temporary detention hearings in juvenile delinquency proceedings; and amending Rules 3, 10(c), 21, and 27 and repealing Rules 6 and 7, Alaska Delinquency Rules; and providing for an effective date." Senator Tim Kelly was the sponsor of this bill and Co-Chair Sharp called upon his aid, BRUCE CAMPBELL, to testify on its behalf. Mr. Campbell spoke as follows: "I'm pleased to bring you our priority legislation for this session. HB 16 is a long hard worked product of the last several years. It is a bill that deals with the juvenile justice system and provides them a number of tools" "Perhaps the most visible tool is going to be the dual sentencing of serious offenders within the juvenile justice system so that for Class C and B felonies, judges will have an opportunity to give 17-year olds both a juvenile sentence and an adult sentence. If a kid re-offends then he would - the judge would then have the opportunity to sentence him right directly to adult jail. And it's driven by the kid's behavior. And if he had repetitive or repeat offender or some other problem like that then the judge will get to send him right straight to adult jail." "But, equally important, perhaps more so, are some of the tools we're trying to give communities to allow communities to optionally get involved at lower and earlier levels of juvenile misbehaviors. We've learned from our work and from work of many others nationwide, that it is that the earliest, lowest offenses that a juveniles become amendable to treatment. And so we'll allow communities to get involved in the process. Anchorage as you know now has a system where they take kids to civil court. This makes it clear that any community can do that. And it makes it clear that when they do that we ask them to send the records to Health and Social Services so that they have a complete pattern of records on those kids." "We're also allowing police officers to testify in disciplinary hearings. These correlate to the probable cause hearing for an adult. And the police officer can provide the testimony on the events, much as happens in the adult treatment system and reducing the burden on victims. We found that victims have a very difficult time getting their part in the juvenile justice process and they often feel like they're being burdened extensively by a system that requires them to show up again and again and again for hearings but they'll suddenly miss one and it drops through the cracks." "We increase the amount of community service that - options are available to judges. We increase communications with federal and state officials. We did for - within state agencies last year, but the agencies came back and said, 'Well that's nice but gee they passed this new federal law. Can we include the Gang Crimes Commissions of the federal agencies and some of the DEA groups that work with kids a lot?' And we said yes, and those are part of this bill." "I'll certainly answer any questions." Senator Torgerson asked if currently municipalities were required to give notice to the commission of the Department of Health and Social Services on any juvenile violations. Mr. Campbell was unsure what the City of Anchorage was doing. He believed they were working with the department. It was not actually required. But, he warned, if DHSS did not have those records, they would not have the evidence to make a more serious case. Having the records helped establish a pattern of behavior. Senator Torgerson wanted to know if that information wasn't already available to the DHSS through the Alaska State Troopers, the local police or the court. He wondered if because there already was a record, this would just be duplication. Mr. Campbell said the bill would create a link so that when the record was created in the court system that it would be linked to DHSS. Senator Torgerson's next questions related to page 5 line 15, where language referred to a certificate of a shelter designated for runaways. He read, "...is designated a shelter for runaways by a corporation that is licensed to make the designation..." and wanted to know what that meant and if it wasn't a duplication of the requirement that the department also make the designation. Mr. Campbell said that no, it was a collateral reference. The term "non- profit" was being taken out of several statutes. Because of that, reading only sections 10 and 11 would not make sense unless the entire statute was taken into account. The issue, Mr. Campbell explained, was that Charter North, Brightway Hospital in Utah, a small foster care facility in Fairbanks and other entities wanted to be able to offer some of these treatment services and they are corporations not non-profits. He spoke further about the requirements for setting up a non-profit corporation. He shared with the committee Charter North's desire to set up a facility within Alaska, which would save the trouble and expense of shipping the youths out of state. Senator Torgerson wasn't satisfied with the explanation for shelter designation. He didn't understand the language and wanted to know what other corporation was going to make the designation for the first corporation to have a license. Mr. Campbell responded that the DHSS made that determination. The only change made in the bill was the word "non-profit" was deleted, he stressed. Senator Torgerson had another question. On page eight, language read, "...is charged by complaint or indictment...information..." He wanted to know more about the "information". Mr. Campbell explained that this was language used in the criminal code. The word "arraigned" was being deleted. To show the reason for this change, Mr. Campbell referred to a recent incident in Anchorage where two youth were killing taxi cab drivers. When the court system interpreted the statute to waive juvenile court, it determined that names could not be released until after the defendant received a grand jury indictment. Mr. Campbell felt the Legislature and the Attorney General's Office did not intend that to be the case. The DOL then asked the language to be changed to reflect comparable language in the adult criminal code, which said, "complaint, information or indictment." This referred to information supplied to the court for indictment. Senator Torgerson said he read the language differently and had never heard the term, "charged by information." He had heard, "charged by complaint and indictment." Senator Parnell said that while he was not a criminal attorney, he had some knowledge of the situation. The word "information" was a term used in criminal law that could say the same thing as "complaint, he said." Senator Torgerson was satisfied, although he felt his task was to help write the statutes in language that could be understood. Senator Parnell addressed Senator Torgerson's question on page 5 line 13-16. He had also been confused by the language, but realized that in lines 13 and 14, it was the corporation that was holding itself out as a shelter for runaway miners. Therefore, the corporation was making the determination that the facility was a shelter and it was licensed to run it as such. Senator Adams told the committee he had an amendment to offer, which pertained to Section 4 and affected the implementation of provisions by an entity selected by the department. He detailed the proposed changes on page 25 starting on line eight. The language would read, "...the entity that the department may select in order to exercise authors is limited to a municipality, a corporation, or two or more persons recognized by the community and operating under contract or license from the department. He requested that the sponsor's representative comment on the amendment. Mr. Campbell responded that they supported the amendment because it would allow DHSS to expand community involvement throughout the state in bringing in communities with two or more persons who could react more quickly to juvenile matters. He felt that was a very important option for communities. Co-Chair Sharp indicated he wished the committee to hear all testimony before beginning action on amendments. There were no further questions of Mr. Campbell. Co-Chair Sharp noted ROBERT BUTTCANE, Administrative Juvenile Probation Officer with Youth Corrections for the Division of Family and Youth Services, DHSS, had signed up to comment and answer questions. He offered Mr. Buttcane an opportunity to speak. Mr. Buttcane identified himself and testified as follows: "The HB 16 before you is the outcome of the Governor's Conference on Juvenile Justice that was held throughout the state in 1996. And a number of provisions in this bill have come out of the recommendations of that statewide bipartisan group." "We do support this bill. We have worked closely with the sponsor on crafting language that took care of a number of some specific issues that we had in our delinquency procedures and our philosophies." "I can go over section by section of the bill if you wish. I know that you've got a busy schedule. But basically I think I will just be available for questions if you have anything specific. But that the department and the Administration do support HB 16." Co-Chair Sharp chose the latter approach of posing specific questions to Mr. Buttcane rather than having him detail each section of the bill. Senator Phillips wanted to know if by Mr. Buttcane's comments that meant the Governor would sign the bill into law. Mr. Buttcane didn't pretend to speak for the Governor, but he believed the department would make that recommendation that he do so. Senator Phillips felt it would be nice to have some sort of commitment one way or another, but he understood Mr. Buttcane's position. Senator Parnell asked if the department had any concerns or questions with Amendment #1, drafted by Senator Adams. Mr. Buttcane replied they would support it, since it would enable them to work more closely with communities in an effective way to hold young offenders accountable. He felt it was an appropriate amendment. Senator Parnell wanted clarification of, "...two or more persons recognized by the community..." Mr. Campbell explained that the department needed some vehicle to make sure the individuals were at least known amongst the community and recognized by the people in the community. Senator Parnell asked, "recognized as what?" Mr. Campbell replied the individuals should be recognized as people able to handle matters in a way the community was comfortable with. It was not intended to be any particular focus for the department. Senator Parnell wanted to know it the department was asking that the people were competent and operating under contract, or just be that others would recognize them on the street. Mr. Campbell related an incident in a village where one group claimed to be responsible for the community but the mayor didn't actually recognize that group. He felt it would be of value to make sure the department had some sense from the community that the group would be effective. Senator Parnell asked if they were looking for some sort of validation from a governing body. Mr. Campbell listed some of the options for recognition as access through a public hearing process or a governing body. Senator Parnell stated that he had wanted some more information on the record as to the meaning and intent of the language. Co-Chair Sharp noted there was no further questions of the department or the sponsor, nor were there any others signed up to testify. Senator Adams moved for adoption of Amendment #1. There was no objection and it was adopted. Senator Parnell offered a motion to move SCS CS HB 16 (FIN) from committee with accompanying fiscal note. Co-Chair Sharp voiced concern with the price of this program of a quarter million dollars to start with and escalating in future years. However, he was in favor of the legislation and realized that the costs were necessary so he would not object to the motion. The bill was moved from committee without objection. Co-Chair Sharp announced there was someone signed up to testify via teleconference from Anchorage he had overlooked. Because the committee still had the bill in its possession, it had the option of changing actions taken. He apologized and called upon BARBARA BRINK from the Public Defender Agency in the Department of Administration to offer her comments. She testified as follows: "I appreciate this opportunity to speak even though it sounds like understandably this is a done deal. I wanted to point out a couple of my concerns because I want to thank the sponsor who has worked with me carefully in narrowing the scope of this bill and also addressing some of my concerns. But I still have a couple more and I wanted to let the committee know about those concerns." "My number one concern Mr. Chairman, has to do with Section 52 on page 28, which amends Rule 10-C of the delinquency rules. And I heard the sponsor's aid comment that this would simply bring how hearings are conducted in the juvenile arena in line with how things are conducted in the adult arena. And I think this bill goes broader than that and I wanted to explain how." "A temporary detention hearing - a probable cause hearing is sort of like a grand jury process in the adult world. In the adult world, hearsay evidence is not admissible in a grand jury. The point of a grand jury is to determine whether or not there's probable cause to believe this individual committed a crime. And hearsay isn't admissible at grand jury because it's not reliable it's not trustworthy. It's sort of like playing that game of telephone when you were a child. By the time it goes through two or three people, it's not exactly what was said initially. You can introduce hearsay at a grand jury if you prove manifest necessity and there are certain exceptions for child sex abuse crimes. But as a general rule you cannot introduce hearsay testimony. A police officer can testify about what other police officers told them. But not about what the alleged victim is claiming happened." "And so I really think that this section erodes the fairness of the process in the juvenile world and it changes it much more greatly than as expressed by the sponsor. So if I had anything to offer this committee, I would suggest that you take a good hard look at Section 52 and question the wisdom of allowing hearsay unreliable and untrustworthy testimony at a probable cause hearing." "Mr. Chairman, my other concern has to do with the dual sentencing provision. And part of it is simply a basic philosophy question. I understand that many states around the country are moving toward treating more children as adults. I would just like to point out for the committee's perusal the Department of Justice has indicated that there is no evidence that treating kids like adults is a more effective crime solution than keeping them in the juvenile system. There's no proof that it increases crime prevention [undecipherable] rehabilitation or lowers crime in any way." "Secondly, while we all think juvenile crime is going up and up and up, that simply is not the case. The Alaska justice forum just printed a ten-year study from 1987 to 1996 showing that the rate of juvenile crime has actually declined in the last ten years. Now that's a myth that permeates how we are creating criminal justice legislation, not only in Alaska, but throughout the country. And the statistics hold true nationwide as well. Juvenile crime is not increasing." "And finally, I just want to point out to this committee that we already treat juveniles in the juvenile system very harshly. Alaska is fortunate in that we're 37th in the country in the amount of juvenile crime that we have. That means only 13 states are doing better than we are. But we are second in the country in the numbers of kids that we lock up and second in the country in how long we lock them up for in the juvenile system. So I think to pass this bill because we think we're not treating kids harshly enough would not be a correct reflection of how we are actually dealing with juvenile crime." "Finally, two other details I'd like to point out to the committee. We're actually creating a system where juveniles get treated more harshly than adults. In Section 25 at page 15 lines 29 through 30, we are passing a bill here that requires juveniles to go to jail if they mess up on their juvenile probation and get the adult sentence imposed. That section provides that they must have some portion of their jail time imposed. Even adults in the adult system don't have that requirement for certain crimes." "And finally, we are treating children who violate their probation much more harshly than adults because we let an individual probation officer determine what conditions they must obey. And also we make the child, once it's proven that there's been a violation, we make the child prove that he is amenable to further treatment. In the adult system if you have [undecipherable] probation proven against you, the judge takes everything into account from the day you were released on probation 'til the end to decide whether or not to impose further jail on you. So we're actually creating a system that's not parallel for adults and children. We're creating a system where the juvenile who fails in the juvenile system is treated much worse than the adults in the same system are." "And finally, Mr. Chairman, I do support the idea of having secure psychiatric facility within the state to send our children to. It is a problem when we end up sending children outside. The separation from their family actually hurts in the rehabilitative process. But I have concerns that the system we've set up in this bill does not provide the kind of due process that we provide for adults again. For example, if you want to lock up an adult in API against their will, they're entitled to a lawyer. They're entitled to probable cause hearing within 72 hours. They're entitled to another hearing for a 30-day commitment. They're entitled to a jury trial if they are to be locked up over 90 days. In this system, there's no right to jury trail. A kid gets a hearing only after 90 days and the state is allowed to keep them against their will under a much lower standard. So I just want to let the committee know I have some concerns about the due process in the secure psychiatric commitment portion of the bill." "Thank you very much Mr. Chairman. I really appreciate the time." There were no questions of Ms. Brink. SENATE CS FOR CS FOR HOUSE BILL NO. 239(TRA) "An Act relating to the liability of motor fuel dealers for payment of tax imposed on certain credit transactions involving motor fuel sales or transfers that become worthless debts or on sales or transfers to persons who declare bankruptcy; and providing for an effective date." Representative GARY DAVIS, the bill's sponsor was invited to join the committee. He testified as follows: "HB 239 deals with an issue that was brought to my attention. Currently the motor fuels tax - the system that we have in the state, we require the distributors that deliver the fuel to customers to pay the tax to the state. And then as it's - even prior to them receiving the payment from the client. And in a case, what this - and then the distributor waits to get paid from the client for his fuel and the taxes that he has paid on the fuel." "What this legislation does, there's been a couple instances. I don't know how many instances but it addresses a case where there's been a major fuel delivery to a customer and the distributor has paid the motor fuel taxes to the state and then the customer has gone bankrupt so the distributor doesn't get reimbursed. Of course he doesn't get reimbursed for his - get paid for his fuel plus his taxes. So what this does, in a situation like that when it's - when he's paid over $500 in motor fuel taxes to the state, and then doesn't receive those taxes back from the client, then the state issues a credit to that distributor until the amount of taxes that he's paid is retrieved by the distributor." "That's in essence what the legislation does. And I - you know the rationale for it is of course, as a state we tell him that he must pay the tax before he gets paid for the tax. So I feel the state has a responsibility in that regard to assist them when they've actually made a payment to the state and then have gotten shorted themself. So that's the rationale. And as I indicated, it's not for small amounts. It's for when a distributor has a large tax debt $500 or more that this comes into play." "The department is here. It's hard to get a handle on the possible fiscal impacts of this. I believe they've, to try and keep numbers nice and orderly they tried, I guess they've used the estimate of one-tenth of one percent of motor fuel taxes. So I guess I think it's a possibility of $40,000 as might be impact the state but that's easy to understand that there'd be a real hard number to get a hold of the actual fiscal impact to the state. So, Mr. Chairman, that's the essence of the bill and I'll be answer any comments, like I indicated the department is here and I have staff here who's worked on it that if I get stumped, I rely on her." There were no questions of the sponsor at that time and Co- Chair Sharp called upon BOB BARTHOLOMEW, Deputy Director of the Division of Income and Excise Audit for the Department of Revenue. Mr. Bartholomew spoke as follows: "I guess I can just briefly give you the information we gathered in taking a look at proposed legislation. We were working last year with the motor fuel industry to revise the forms and to enhance our compliance effort. And it was during the time that we were working with the industry that the issue of whether there should be some relief for bad debt was brought up." "What we did was contact some other states to find out one if it's something that they do, and two, some experience on the volumes of bad debt that they saw. And we also - that's what led to the requirements that you either had to be - your customer either had to have claimed bankruptcy in the courts or have met the IRS rules for writing off a bad debt. So it's not like you can just not get paid and then claim it from the state. We tried to put some kind of guideline in there that says basically you know usually don't get to the bankruptcy stage or to the Internal Revenue Service guidelines for writing something off until you've gone through some sort of collection measure." "So that's the protections that we thought were important for the state to have. And the fiscal note basically, again we don't have experience in Alaska. They don't report to us the history of bad debts. In talking to other states, they said it's a program that they do allow and that it has a very small fiscal impact for them. And that's what - were we came up with our estimates of $44,000." Co-Chair Sharp wanted to know the procedure. He outlined what he understood the process to be. If a distributor filed with their monthly tax remittance, a credit for $300 worth of taxes previously submitted on a company that since went bankrupt, the department would verify information and give the distributor a credit to be used against future taxes. Mr. Bartholomew said his assessment of the process was correct but that the tax payment would have to exceed $500. Anything below that amount would not qualify. Senator Parnell asked if the legislation was retroactive or would it only apply to bankruptcy filings done after the effective date of the bill. Mr. Bartholmew replied that the sales transactions would have to take place after the date of the bill becoming law in order to participate. Co-Chair Sharp reiterated the qualifications for the bad debt as bankruptcy filing or situations meeting the guidelines for IRS bad debt deduction. A bounced check or a longtime outstanding account would not qualify alone, he asked. Mr. Bartholomew affirmed. Senator Parnell noted that the bill had a five-year life. He asked what the life was of similar laws in other states. Representative Davis replied that his staff was not aware of any sunset provisions in the laws of the other states that they contacted. Senator Torgerson asked if the sponsor would object if the sunset provision were removed from the bill. Representative Davis did not have any objection and told the committee that the original bill did not have the clause. The House Finance Committee inserted it during a meeting that he was not present. He felt the sunset provision was not altogether bad, just that a five-year sunset would not be enough time to gauge the program's performance. He would prefer either a greater sunset period or none at all. Senator Torgerson posed the same question to Mr. Bartholomew. Mr. Bartholomew said that when the proposed legislation was brought to the attention of the commissioner, Mr. Condon had the sense that it was an equity or fairness issue. He didn't think it was inappropriate for the State to share in the risk of tax collection. Mr. Bartholomew qualified that while he had not spoken to Mr. Condon specifically about the sunset issue, the commissioner was in support of the bill and therefore, Mr. Bartholomew felt the department would support the absence of a sunset clause. Senator Donley had a question about the definition of a dealer and asked for clarification of who it would apply to. Did it include large multi-national companies, he asked. His impression was to think of smaller "mom and pop" establishments. Mr. Bartholomew gave the definition as a "qualified dealer". The big fuel providers would generally not qualify because they sell their product down through a distribution chain. Most of the refiners sold their fuel to a distributor, and don't pay tax at the manufacturing level. If a big manufacturer had its own distribution system, they could qualify, he stated. He gave further details of possible examples of qualified dealers and potential situations. Tape #159 Side B 10:25 a.m. Senator Torgerson spoke of court action attempts to recoup the lost revenue and commented on the option of dealers checking credit history of its customers before selling fuel on credit. Mr. Bartholomew said the tax would only be five to eight percent of the total debt owed to the distributor. The distributor would therefore give greater effort to collecting the larger portion of the debt rather than the taxes owed, he speculated. Senator Torgerson moved for adoption of Amendment #1, which would extend the sunset clause. He then moved to Amend Amendment #1 to delete line 17 and essentially eliminate the sunset clause. He commented that no other states had the sunset. He felt that the dealer should not be saddled with the uncollected tax because its customer went bankrupt. He offered that the Legislature could require a report each year detailing the success of the program. However, he did not wish for any more reports. Senator Phillips objected to the amendment to amendment. Senator Parnell said he agreed with the policy being made. He supported the original amendment Senator Torgerson offered and felt that the Legislature should have the opportunity to revisit the matter again. He thought ten years was a reasonable period of time. He therefore opposed the amendment to the amendment. With that, Senator Torgerson removed his amendment to Amendment #1 without objection. There was no objection to Amendment #1 and Co-Chair Sharp ordered it adopted. Senator Torgerson offered a motion to move from committee SCS CS HB 239 (FIN). Without objection, Co-Chair Sharp so ordered. SENATE CS FOR CS FOR HOUSE BILL NO. 459(HES) "An Act establishing new eligibility for medical assistance for certain disabled persons and giving their eligibility for services the highest priority among optional services and groups under the medical assistance program; amending the definition of 'personal care services in a recipient's home' as used in the medical assistance program; moving midwife services from being the first to being the 14th service eliminated under the medical assistance program when there is insufficient funding; and adjusting the priority of optional services and optional eligible groups under the medical assistance program in order to reflect the new priorities given to the newly-eligible disabled persons and to midwife services but without otherwise changing the relative order of the other optional services and optional groups." After some discussion as to which version of the bill was before the committee, it was noted that there were several versions the committee could reference if desired. Co-Chair Sharp spoke to his concerns to the bill as amended saying that it re-prioritized the list for the eligibility of midwives or any other services. He noted the committee already had other bills in its possession, which would put other services higher on the list. He did not want to get into a battle of which services should be prioritized at what level. Different people had different ideas of where the services should be listed. He gave an example of medical assistance for certain disabled persons. He then invited Representative CON BUNDE, the bill's sponsor to join the committee and speak to the bill. Representative Bunde commented as follows: "Mr. Chairman, obviously I think the original idea was a good and sound idea and do not find any fault with your reasoning." Senator Parnell requested an explanation of the original idea. Representative Bunde continued: "Mr. Chairman, Senator Parnell, the original idea was to allow people who have suffered serious disabilities, an opportunity to get back to work." "Often after disabled people have gone through a recovery period, they find it very difficult to get back to work because their medical expenses are greater than what they could earn and support themselves." "This bill basically allows them a period of time where they can buy into Medicaid, go back to work, have this federal medical insurance helping them out in a transition period. And simply what it does, is it frees them of being prisoners of their own disability because they can't work because the SSI covers their medical but for their own self-worth, for the betterment of the State. For just the - I think to improve their prospects of recovery. Many of them would love to go back to work but it's that catch-22. If they do they can't afford their medicine and this allows them a buy- in on a sliding scale that gives them an opportunity to go back to work. And as I say, transition from full hundred percent support on SSI and their medical expenses to the point where they can be self-sufficient." "It certainly - the bill I think that is a benefit to people who suffer from disabilities. And I guess we're all one bicycle wreck away from that happening to us. And it's certainly a benefit to the State. We'd have more working and productive people in this era of welfare reform and trying to get people an opportunity to work. It seems as if it is a very positive step." Senator Parnell wanted an explanation of the changes that were made to the bill, with regard to midwife services, as it progressed through the Legislative process. He also wanted an overview of the testimony heard on the matter. Representative Bunde requested his aide, Patty Swenson, be allowed to speak on the topic. He could not be present at the committee meeting where the changes were made and sent Ms. Swenson to sit in during his absence. Ms. Swenson testified as follows: "The changes in the midwife - the change that occurred with the midwifes occurred because an amendment was offered in House Finance that would opened up or given a way around the Medicaid list where people drop off. So instead of giving that way around, they chose to move midwives from the top of the list to 15th. And it accomplished the same goal. That's why the bill changed that way." "And then in Senate HESS, I believe there was a formula - the formula was tightened up as to how they figure out the amount they get. But Bob Briggs is here from the Disability Law Center and he's done a lot of work on that bill. If he can come up and address that..." Representative Bunde felt that Mr. Briggs could also answer Senator Parnell's question on the relationship with the midwife and how the formula changed. Senator Parnell interjected that he understood how the formula worked, but wanted to know why the change was made. Ms. Swenson responded that the change was made because if they had given a way around the list for the midwives it would have opened it up for other services to be paid. For that reason, the amendment was made. Co-Chair Sharp invited BOB BRIGGS, a staff attorney from the Disability Law Center, to come to the table to answer questions. Senator Parnell commented that the co-chair had made his position clear about not making changes to the list of priorities. He wanted to hear the sponsor's wish. Representative Bunde said he thought the version proposed by the House HSS Committee accomplished the purpose of the bill, which was to allow the disabled to return to work. Senator Parnell clarified that the representative would like the Senate Finance Committee to adopt the House HSS version. Representative Bunde affirmed. Co-Chair Sharp wanted to know how much was 250 percent of the federal poverty level in Alaska for a family of four. Mr. Briggs said he had previously submitted a breakdown of figures to the committee showing the threshold of eligibility. For 1998, the federal Department of Health and Human Services set the poverty guideline at $20,570 for a family of four. He calculated 250% of that amount to be $51,425. He said the eligibility standard was defined in the Medicaid option that Congress provided. The amount was the maximum net earnings allowed for a family of four with one disabled member to be eligible for this benefit. But only the disabled family member would be eligible for the Medicaid benefit under this provision. Co-Chair Sharp asked what was the definition of a disabled person that would qualify for under this. Mr. Briggs responded that the definition was established under federal law and was based on eligibility and said that the person must have impairment severe enough to meet a listing or combination of impairments under Social Security law. The qualified individual must also continue to have those medical limitations. What was the length of the window of opportunity for a qualified person to participate in the program and buy into Medicare coverage, Co-Chair Sharp asked. Mr. Briggs replied that as long as the individual continued to qualify under the federal disability guidelines and as long as they paid their premium, they could participate. Co-Chair Sharp wanted to know if this would allow employers to deny coverage to a new employee because that employee already qualified under this plan. Mr. Briggs thought there were other laws that governed the extent to which an employer could discriminate against a disabled person in offering health insurance. Typically, individuals who would qualify for participation in this program already found it difficult to get coverage he shared. He gave examples of some of his employed clients who had applied for health insurance after satisfying their probationary period only to be refused because of their medical conditions. This was due to the pre-existing clause in the insurance coverage. However there were some protections under the federal Health Insurance Portability Act that governed some situations but was not an absolute solution for every person with a disability. To be covered by the act, the individual must have coverage before becoming disabled, he explained. He felt that the program in this legislation would not allow for a carte blanc denial of coverage by a new employer simply because the employee could qualify for this coverage. He suggested that this program would be a bridge to employment and was not intended as a permanent reliance. Co-Chair Sharp commented that the reason he brought the question up was because he did not want this program to become an excuse for employers to deny coverage to disabled workers. Senator Donley was reluctant to dramatically change a system overseen by the Health and Social Services committees because that was not this committee's area of expertise. But he also wanted to ask the sponsor what he wanted the committee to do with this legislation. Representative Bunde stated he would like the bill to pass the Legislature and become law. If the midwives portion of the bill complicated the process and hampered the success of the disabled workers portion, he would rather eliminate the midwife portion. His ultimate goal was to help the disabled get back to work. Senator Phillips wanted to make the record clear that the sponsor supported the House HSS, version "B" of the bill. There was some discussion to clarify the intended version. Senator Donley noted a problem with returning to Version "B" because the midwives section was added in the House Finance Committee and would therefore need a title change. Co-Chair Sharp pointed out that the committee could adopt or draft any version of the bill and if it involved a title change, could write a resolution to do so. There was more discussion between Senator Donley and Ms. Swenson and it was determined that the bill would not require a title change if the "B" version were adopted. Representative Bunde restated his ultimate goal of getting the bill to the floor and deferred to the chair to determine which version of the bill would go forward. He excused himself from the meeting to attend the House floor session. Co-Chair Sharp assured him the committee would attempt to pass a bill out that met the sponsor's goal. Co-Chair Sharp, Senator Phillips and Ms. Swenson discussed the severity of the disability standards and income requirements. MARILYN HOLMES was signed up to testify and Co-Chair Sharp called upon her at this time. She spoke as follows: "I have some information here about the midwifery portion if I could pass this out. I don't know if you've received this or not. [Undecipherable]" Co-Chair Sharp allowed the material to be handed out to committee members and staff. Ms. Holmes continued: "I appreciate your concerned about changing the laundry list on Medicaid funding. And I'm here to speak to that issue." "One of the reasons that it's possible to change this right now is that the federal Social Security Act provides for - that Medicaid funds can be allotted directly to pregnant women as a specific and special group. This is a 1987 Social Security Act. I believe its called Title 19. And the Department of Health and Social Services use this law as the basis for legislation written for the Governor's Smart Start Program earlier this session, which provided for the allocation of Medicaid funds to Direct Entry Midwives." "Now, one of the other reasons why this can be changed this year is because of the S-Map funds, which I'm sure you're all familiar with. But those funds [Undecipherable] allegedly are allocated to help children and pregnant women in part. I mean they're Medicaid funds but [U.S. Senator] Murkowski and [President] Clinton have both made agreements with our Governor that those funds should be used to help children, families and improve health services through Medicaid funding." "Now, one of the things I'd like to point out about changing this is we have been on the list for five years. To start funding Medicaid to Direct Entry Midwives would save the state money. Because right now 4500 pregnant women a year only have access to the medical model, which costs 57 cents more on the dollar than the midwifery model and has poorer outcome. It's been proven over and over and over again that the European model of midwifery care has much healthier outcomes for women and children. As a matter of fact, the five nations with the lowest infant mortality rate use midwives for 70 percent of their births. We use midwives for five percent of our births in this country and we are 22nd on the list of developed countries for infant mortality and Alaska is lower than the national average." "So we've got a problem here and just legislation could improve those outcomes and it could save money further down the line because when you have midwifery birth you have less technical intervention, you have healthier babies, you have more independence and more self-responsibility on the part of the mother and the families. So all the way down the line, you're getting a good deal financially on these births. I have no idea how much money would be saved eventually." "This also has to do with restraint of trade in a way because right now, midwives can not get third party reimbursement for their services through Medicaid. And all other birth attendants can. And somehow that's not quite fair because they're not only a viable group but they provide excellent health care all the way down the line." "Now in countries that have the best birth outcomes, three things happen. One, there's universal health coverage. In Alaska that could be Medicaid funding for low-income families. There is reprossity between the medical and the midwifery communities, which is our state our Board of Direct Entry Midwives has two medical professionals out of the five board members. And the third thing that creates healthy birth outcomes in those countries that have the low infant mortality rates is they have continuous and early health coverage for pregnant women. And this would provide that for low-income women." "So I strongly urge you to not delete that section from this bill and to consider the cost savings. Plus there has not been an uproar, Mr. Chairman, over changing this list and I don't think you're going to get one. Because there's just too many things in its favor." Senator Parnell was starting to understand what was happening. With the available Medicaid funds, the department had cut the list off below midwife services so they've never been funded even though it was in statute. Other reproductive services were funded through Medicaid except for midwife services, he pointed out. He suggested that part of the question was where on the list that should they go at that point. He felt that if the other birthing services were covered, than midwives should be covered as well. He was unsure how to best accomplish that without starting a feeding frenzy. Senator Phillips noted that other conflicts could arise. Ms. Holmes interjected that he was concerned about problems that may or may not happen and that she didn't feel that would happen. Co-Chair Sharp pointed out that there were already two other bills in the committee asking to change the priority on other items. Ms. Holmes argued that there was federal legislation that allowed the change to midwifery. There was further debate between members about the inclusion of coverage for midwifery services and it's location on the priority list. Senator Donley felt the handout offered some compelling arguments saying the change could actually save the state money and possibly allow funding for services further down the list. There was discussion about incorporating HB 234 into the same package. Members debated that matter. Ms. Holmes interjected final comments saying that federal legislation was moving toward helping families and this was something that the Legislature could do to move toward that goal. Co-Chair Sharp offered JON SHERWOOD of the Division of Medical Assistance and opportunity to speak. He testified as follows: "I'd just like to say the department supports this bill. We support it as it is now or without the change in the priority list. We had similar language in a Governor's bill that would have allowed us to cover midwife services. But it was never part of this legislation. Never our intention to attach these two pieces of legislation. So either way we would support this legislation." Senator LOREN LEMAN was invited to speak to the bill. His comments were as follows: "Thank you Mr. Chairman, committee members. I just encourage you to adopt and report the Senate HSS Committee version. This is one that was worked out in arrangement with the House and the Governor's office. And for me the reasons that Ms. Holmes just talked about, I believe this will end up saving money. The midwifery reorganization has not been a controversial issue. I don't believe it will be. That was the one change we made the other was in the transition provisions that we worked on and came up with that in Senate HSS. I believe both of those are important provisions for you to consider. So I'd recommend that you take the Senate HSS Committee version." Co-Chair Sharp remembered when the Legislature added midwifes certification and then added it to the priority list. Senator Leman pointed out that under the current list, they were not being funded so it was not possible to see the benefit of the savings. These women were going to deliver their children. The question was that some of them would opt for the lower cost midwife alternative, he stated. Senator Phillips requested an At Ease. Co-Chair Sharp noted committee members were due on the Senate Floor. HB 459 was set aside. ADJOURNMENT Co-Chair Sharp recessed the meeting subject to the call of the chair, at approximately 11:05 a.m. SFC-98 (23) 5/06/98 am