MINUTES SENATE FINANCE COMMITTEE April 26, 1999 9:06 AM TAPES SFC-99 # 110, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:06 AM. PRESENT Senator John Torgerson, Senator Sean Parnell, Senator Randy Phillips, Senator Gary Wilken, Senator Al Adams and Senator Pete Kelly were present when the meeting convened. Senator Dave Donley arrived later. Senator Loren Leman was absent. Also Attending: ALISON ELGEE, Deputy Commissioner, Department of Administration; JIM BALDWIN, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law; KAREN PERDUE, Commissioner, Department of Health and Social Services; ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services; BOB BRIGGS, Staff Attorney, Disability Law Center of Alaska; TIM WEISS, Program Director and Past President, Parent's Incorporated; MANYA KONGOWYIE (last name spelling not provided), Developmental Disability Specialist; KEN DANE (last name spelling not provided), Independent Living Specialist; BARRY BURNETT; CHERYL HALL, Alaska Independent Living; WALTER MAJOURIS, Executive Director, Mental Health Board; JEFF JESSEE, Executive Director, Alaska Mental Health Trust Authority; Attending via Teleconference: From Anchorage: HEATHER FLYNN, UAA Adult Learning Center; JAN MCGILLIVARY, Chief Executive Officer, Alaska Mental Health Association, and Coordinator, Building Bridges Campaign for Mental Health; GAIL IGO, President, Anchorage Foster Care Association and Member, Statewide Foster Care Association; ERNEST DUMMANN; From Fairbanks: MONTA LANE, Alaska Caregivers; GENE GRASTO; JEANETTE GRASTO, President, National Alliance for the Mentally Ill - Alaska; From Kenai: LEIGH HAGSTROM-SANGER, Frontier Community Services; EDWARD MARTIN, SR.; WINI CROSBY; HOLLI KRISTIANSEN; From Mat-Su: SANDRA ADAMS; JO RENK; JOHN CANNON, Member, Key Coalition, and Lifequest; From Sitka: MOIRA MCBRIDE, Occupational Therapist SUMMARY INFORMATION HB 161-REDUCTIONS IN BENEFIT PROGRAMS The committee heard from the Department of Health and Social Services, the Department of Law and the Department of Administration. Public testimony was taken. The bill was held in committee. CS FOR HOUSE BILL NO. 161(FIN)(efd fld) "An Act relating to reduction in payments to individuals under certain benefit programs." KAREN PERDUE, Commissioner, Department of Health and Social Services testified in opposition to the bill. She felt there were issues that had not been fully explored when it was heard in the House of Representatives. The bill eroded decades of statutory protections for thousands of the most vulnerable Alaskans. It was one of the most far-reaching bills she believed the Legislature would address this session. In her opinion, the biggest problem was that provisions of the bill were so vague that the implementing agencies were unsure how to execute them. Therefore, she thought it was poorly executed and was too broad of an approach. She recommended the committee should slow down and take a look at some of the issues raised. As one who would be expected to execute the bill, she had two questions. "What programs would this apply to and how would it work?" When she asked that question of the co- chair of the House Finance Committee and was told "No programs come to mind." There was no clear statement on the record to reflect the Legislature's intent. She noted the bill had received limited public input in the House of Representatives. There was only one evening hearing and the House Finance Committee did not accept testimony on the committee substitute. Her interpretation of the bill was that the agency was to reduce the amount of payments to individuals on a pro-rated basis if the appropriation for the benefit program was not fully sufficient to fund all the payments. That was a simple statement. However, she read the bill to also say that no supplementals would be allowed for these programs. She pointed out that supplementals occurred frequently in formula programs and that the bill would result in benefit reductions as early as next year. She shared her vision of formula programs as a special category of programs given extra care in state and federal statutes to define criteria of age, income, disabilities, medical conditions and children in foster care. The intent is that when an individual meets the criteria, the programs will serve them. It was determined that these programs were so important that waiting lists were inappropriate. They addressed basic life, health and safety needs of food, shelter or the safety of children in the case of foster care. She addressed the requirement for the agencies to prepare formula estimates nearly eighteen months in advance of the end of the fiscal year. This was guessing far into the future about how many people would need assistance with these services. These projections were always wrought with uncertainty and there was tremendous discussion in the budget subcommittees about the accuracy of the predictions. There was debate on the merits of conservative versus liberal estimates. The Legislature and the Governor had more recently determined that it was more advantageous to underestimate rather than overestimate demand due to federal funding requirements. Therefore, the supplemental was consistently used to correct shortages in calculations. It was impossible to accurately predict the exact need of funding for each program. She spoke to some of the programs that would be affected. This included the Longevity Bonus Program, foster care, subsidized adoption and adult public assistance, all of which had been conservatively estimated as to their funding requirements for FY00. She compared the funding formulas to building construction, where allowances were made for changes, cost-overruns, and unforeseen expenses. Some of the programs were subject to the state of the economy. If the state suffered an economic downturn, the demand for services would go up. She detailed the adult public assistance programs and the people it served. It was the state's supplement to social security. Many participants in this program were not qualified for social security benefits. The eligibility of the program was tied to Medicaid and required the recipient to be very poor with little assets. Therefore, these participants would not be able to make up for a reduction in benefits from their personal finances. She warned that this legislation could result in the loss of Medicaid coverage for many participants. Another program was the Alaska Temporary Assistance Program (ATAP). She told of the recent reductions in the cost of operating the program due to the rewrite of the Welfare Bill. Half of the participants in the program were currently working, which resulted in reductions in the payments and savings to the state. Wages were replacing the payments. She stressed that this was the way an entitlement program should be done. Further reductions to this program would result in the state violating its "Maintenance of Efforts" and cause significant financial penalties. The bill did not make allowances for federal penalties. The program also serviced "child-only" situations where someone was caring for a child other than a legal guardian or foster parent. These cases were held harmless for work requirements. She wanted to know if it was the intent of the bill to reduce payments for these children also. [RECORDING INTERRUPTION - APPROX. 10 SECONDS] She spoke of poor elderly participants that the department paid Medicaid premiums for. She wanted to know if this was considered an individual benefit, or if it would be exempt. The Legislative Legal Services Division raised concerns about other programs, such as state employee health benefits and worker's compensation payments. She continued by saying that there was great confusion on the effective date of the bill. The bill stated that it was to go into effect July 1999. The effective date did not pass the House of Representatives so it could go into effect ninety days after that. However, the House Finance Committee co-chair was quoted in the media as saying that this would not affect payments this year. She didn't see how that was possible when the caseload estimates were so conservative in many of the formula programs. [RECORDING DIFFICULTIES] She surmised that because the bill gave a mandate that the agencies "shall" reduce benefits. Therefore, it did not matter what direction the committee gave as to intent; the letter of the law would have to be followed. She had been asked her preference of whether to pro-ration payment amounts or to simply cease payments when the funds ran out. She had never had a serious public discussion with any member of the Legislature about completely cutting off benefits. She hoped this Legislature would not consider it either. She felt this was the last area the government should cut because participants were unable to cover the shortfalls. The department considered it a failure if a benefit check arrived one or two days late since the participants relied on the money. She compared the matter to expenditures for the Y2K issue. Logistics and timing were a big issue. She wanted to know if the Legislature intended the department to prorate several times a year or once a year. One of the impacts could be caused if the department was over conservative and pro-rated too much. Only the Longevity Bonus Program was clear in how this provision could be applied. That was because the bill language stated, "programs that have already had a pro- rationing factor would not be included." She wondered if that meant the Legislature intended to continue to honor the formula nature of foster care. There were statutory protections in many of the programs addressing the basic income standards so participants could meet their expenses. She thought it was clear that the Legislature had the authority and the ability to do statutory reform of entitlements. It had been done in the Longevity Bonus Program and the ATAP program thoughtfully and carefully. This bill lacked a couple features present in the past reform bills. First, it gave sufficient notice of two years. It also tended to not cut off participants who currently depended upon payments. There would be substantial cumulative effects for participants who had limited alternatives. If the Longevity Bonus Program and the ATAP were both prorated and the senior property tax exemption bill was adopted and municipalities took advantage of that. The impact on an elderly person would be tremendous. That was why it was important to do changes in a statutory manner looking at all the options. She recommended that this bill needed review. She did not feel individuals were overpaid. Senator Pete Kelly said one of the things he felt motivated the bill were reports that showed Alaskan's benefits were so far ahead of other states. He didn't know if this bill was the answer, but he also felt that too many people were pulled into the system. When he saw outreach programs and inter-agency cooperation that brought in people to many different programs. He described someone he knew who did fair with family support, and then received one benefit that was needed. But then she kept getting more information from the state about other programs she could participate in. He believed that the amounts paid in Alaska might be too high and that there was too much outreach. He wanted to see less pro-ration of medical benefits and more on the ATAP portion. He felt that the state should determine the amount it would spend on the program and begin to bring down the discrepancy with other states. Karen Perdue suggested dividing the programs into those for people who were able-bodied and able to work currently or at some point in the future, and those who did not have the ability to support themselves. She gave children in foster homes as an example of those who would not be expected to support themselves. The ATAP program had made substantial changes and gave time limits for benefits. She did not feel it was safe to say that the paridine of the past was the paridine of the future. She felt that to allow those who could work part time and still be eligible for medical benefits the program was more successful. Some of the programs allowed people to be very productive, but they needed to continue to qualify for medical coverage in order to do so. Senator Al Adams stated that the language of the bill was very broad. He wanted to determine which programs would be affected and listed ATAP, Adult Public Assistance, General Relief Assistance, Medicaid, chronic acute medical assistance, foster care, subsidized adoption and guardianship, the Longevity Bonus Program, K-12 education entitlement programs. Were there any other programs, he asked. Karen Perdue said the listed programs were what came to mind. However, there had not been enough dialog with the Legislature to determine if there were other programs. Co-Chair John Torgerson asked the effect on Medicare. Karen Perdue stated Medicaid was an entitlement program that was tied to the individual eligibility. Health care was not provided to anyone just because they are poor. The individual had to be disabled, elderly or a child. The payments were made to the providers so the interpretation made on the record in the House was that this legislation would not apply to Medicaid. However, there were many questions within that assumption. One was the payment of Medicare premiums to the federal government for 8000 elderly and poor Alaskans. That was cheaper than paying for the health care directly. Therefore, that was actually an individual benefit and subject to the provisions of the bill. Co-Chair John Torgerson said the bill stated "payments to individuals" and the witness kept referring to payments to programs. He wondered if the different intents were not distinct to her. Karen Perdue said it was not and explained that was because there were parts of the Medicaid program that paid premiums. She noted that the Legislative Legal Services Division had raised the questions about state employee health benefits. The bill specifically exempted state employee retirement benefits but not active employee health benefits. She was unclear if that would be considered an individual benefit. JIM BALDWIN, Assistant Attorney General, Government Affairs Section, Civil Division, Department of Law testified to the memorandum he had sent the committee. He had two major areas of legal concern with the bill. He touched on the legal framework involving formula or entitlement programs. The entitlement program was one where the beneficiaries were identified in law as having a mandatory right to receive the benefits. This right became complete where there were sufficient funds available to pay the benefit. When all the elements were present, the individual involved had a "property interest" or vested right that could only be deprived by due process of law. The purpose of the bill, in an expansive way, was to remove one of the three elements; the sufficient funding. Past practice created the assumption that the Legislature would appropriate what was necessary to pay the benefits as stated in the law. If a specific dollar amount or a specific formula was stated, the legal assumption had been that Legislature would provide sufficient funds. A property right was created under that statute and an individual had vested rights, which were protected under the due process clause, the state constitution or the fourteenth amendment as applicable to the states under the US Constitution. The other element of legal concern with the bill dealt with the blanket, single concept approach applied to several different benefit programs. It was done in a skeletal manner as a broad delegation of legislative power to the Executive Branch. He compared it to a former law in the Executive Budget Act where the Legislature gave the Executive Branch the power to reduce amounts to all appropriations if there was insufficient revenues. The Fairbanks Northstar Borough during the Sheffield Administration successfully challenged that law in court. He felt this legislation would be vulnerable to attack based on the findings in the previous suit because of its similarity. It would be a delegation of power to the administrator of a program to decide when funds were insufficient and amend the entitlement established in law. Another problem was that the approach could imply the repeal of other statutes. Such implied repeals were not favored in Alaska law. He was concerned that this legislation, as a command to a state agency not to pay the benefit, may be interpreted as not interfering with an individual's right to receive the benefit. However, it would impede the recipient's right to recover in the form of judgements or claims against the state. He suggested the solution was to address specific programs individually and place the limitations in the enabling act for the grant program. Senator Randy Phillips wanted to know if the Legislature had ever implemented a pro-ration to the Executive Branch for various programs in the past. Jim Baldwin said there had been specific statutory programs where pro-ration had been expressly provided for. Senator Randy Phillips asked for examples. He remembered the Longevity Bonus Program was pro-rationed at one time. Jim Baldwin responded there was a provision in the General Relief Medical program to pro- rate, but none for the General Relief Assistance program. He reviewed the Adult Public Assistance and found mention of sufficiency of appropriations, but it was imprecise and would be inadequate to sustain a claim against pro-ration. The revenue sharing program, Power Cost Equalization and several other programs had pro-ration language. He warned that on the federal level, the argument relating to directing the provisions toward benefit programs for individuals was tried and failed. The court found that if the grantee worked on behalf of individuals, the property right claim was not defeated. To say that this legislation applied to individuals would not necessarily protect non- governmental service providers. He gave an example of schools providing services and felt they would not be insulated from rights of service claims. He was hesitant to give excessive detail on the record in case it was held against the state during a later discovery. He did say the imprecision and vagueness of the bill was an area that concerned him a great deal as it would damage the ability to defend. He felt the ultimate approach would be to do this on a program by program basis. Senator Randy Phillips interjected and again asked if pro- rationing had been done in the past. Jim Baldwin confirmed that it had been done for specific programs. Senator Randy Phillips noted this was therefore not breaking new ground. Jim Baldwin said when it was done, it removed one of the three elements that created the vested right and could be legally defended. However, there still could be federal requirements that could place the state in the difficult position of deciding to either cease operation of the program or to fully fund it, he qualified. Senator Al Adams again referenced the broad language of the bill and asked if the state had liability exposure under class actions lawsuits on behalf of beneficiaries. Jim Baldwin agreed with Karen Perdue's understanding of the testimony heard in the House Finance Committee regarding past instances of short-funded programs. The committee told the departments that certain programs would not be required to immediately pro-rationing benefits. One of his legal concerns was the arbitration of that approach. "What are the limits on reasonable agency activities, then? What are we to do in making those decisions when we have an absolute command like this, which tells us we have to pro-ration? But yet we have a wink and a nod from finance committee members. Can we act on those kinds of assurances legally and validly and withhold benefits or are we required under the law to go forward and pay full benefits?" He warned of class action litigation brought on behalf of the beneficiaries testing the legality of the broad application. Other unanswered questions were "what was a benefit program?" When referring to an individual, did that mean organizations that represented individuals or only benefit programs to individuals? Also, what was an insignificant appropriation? Expensive class action litigation was in store for the state if more definitive terms were not adopted. Senator Al Adams wanted to know if state statute had a definition of "benefit". Jim Baldwin said there was one in the PDS program but was unaware on any that could be applied to Title 1. Senator Al Adams asked the witness to state for the record the benefit program was for an individual or an organization. Jim Baldwin only knew how the bill was explained in the House Finance Committee. He thought those terms could be read to include organizations based on the federal precedent. As Senator Sean Parnell read the benefit programs provision, it was clearly defined. He didn't think it was vague. Jim Baldwin responded that he didn't think that this area was the only area of statutory construction that would be applied to this. When the intent was to impliably amend many statutory programs the courts would try to construe the two statutory schemes together and harmonize them if possible. If not, the area with necessary aide going to individuals for necessities, strict construction may not be applied by a court. He didn't believe it was clear. ALISON ELGEE, Deputy Commissioner, Department of Administration testified against the bill and the implications it would have to the Longevity Bonus Program. She stated there were a number of seniors who were dependent on the payments. She told of the methods that the department applied to determine funding needs using a computer model. However, there was no way to ensure the exact amount needed. If the department had begun to pro- rate payments based on the first model generated in September, benefits would have been withheld unnecessarily. There was nothing in the legislation to give the department direction on how to deal with a circumstance like that. In projecting the program for the fiscal year 2000, a low- case scenario anticipated the amount appropriated by the Legislature would be short by approximately $2.4 million. Under those circumstances, the department saw no other option but to prorate the payments beginning on the effective date of this legislation if it passed. Based on committee testimony from the House Finance Committee, that was not their desire. The department supported the income cap legislation and felt that was a better way to reduce the program. BOB BRIGGS, Staff Attorney, Disability Law Center of Alaska, testified. He asked the committee to not pass the legislation. Tape: SFC - 99 #110, Side B 9:53 AM He spoke of the current funding options. This legislation would eliminate one of them. He felt that was bad policy. He quoted Harry S. Truman. The federal government provided support that was inadequate to meet the needs of those living in Alaska. The Legislature had decided to provide the remaining funds to supplement the federal poverty level. He suggested changing the formula or the level of support. He had concerns with the legal problems in the bill. He disagreed with Senator Sean Parnell's assessment on the clarity of the language. He detailed his interpretation. Alaskan's with disabilities were not faceless. He told of a logger in Coffman Cove who had been denied social security benefits. His injuries were work related. He wanted the Legislature to balance the budget but felt this bill was the wrong approach. TIM WEISS, Program Director and Past President, Parent's Incorporated, the statewide organization of parents of children with disabilities, testified in opposition to the bill. He told of his son's multiple disabilities. BARRY BURNETT testified on behalf of his family in opposition to cuts to disability payments. In his opinion, there should be not cuts whatsoever to these benefits. He spoke about the difficulties of families where a spouse receives a paycheck and the benefits are eliminated. He didn't want to ask for a handout, but felt that the state should provide job training instead of cutting benefits. Senator Sean Parnell asked if the witness was under the impression that this bill or the current budget reduced benefits to the disabled. Barry Burnett responded that any legislation passed that cut any funding from the Department of Health and Social Services resulted in cuts to the disabled. Senator Sean Parnell made further comments about the budget this year that increased funding for the disabled. [Audio Interruption] MANYA KONGOWYIE (last name spelling not provided), Developmental Disability Specialist since 1987, testified. She told the committee of her past work history in the social services field. She was the mother of a child who had multiple disabilities and had multiple disabilities herself. She spoke of her reliance on the programs at different times in her life. She was afraid this bill skewed the priorities. She said the recent Legislators' per diem increase equaled the amount of monthly payments to many program participants. KEN DANE (last name spelling not provided), Independent Living Specialist, testified. He felt this created a type of cast system. He said this bill would not provide any happiness for those living on less than $1100 a month. He thought this bill could affect the veteran's preference programs. He had problems with denial of benefits to disabled veterans who were injured in service to their country. HEATHER FLYNN, UAA Adult Learning Center, testified via teleconference from Anchorage. She had concerns with the welfare reform efforts. She congratulated the Legislature for the success of the programs. However, the child care programs were essential for the continued success of maintaining welfare recipients in the workforce. JAN MCGILLIVARY, Chief Executive Officer, Alaska Mental Health Association, and Coordinator, Building Bridges Campaign for Mental Health, testified via teleconference from Anchorage in opposition to the bill. Co-Chair John Torgerson announced that written testimony was welcome and would be distributed to members. GENE GRASTO, representing himself, testified via teleconference from Fairbanks. He felt it was demeaning for disabled Alaskans to have to plead and beg for no benefit reductions. He noted these people were not corporate executives. JEANETTE GRASTO, President, National Alliance for the Mentally Ill - Alaska, testified via teleconference from Fairbanks in opposition to the bill. She was ashamed the bill was even before the Legislature. She spoke to the need of many individuals. She noted that many mentally ill could participate in the work force if they were given opportunities. She compared this to a family in need deciding to feed the baby and the grandmother less to make up the shortfall. EDWARD MARTIN, SR., testified via teleconference from Kenai. He was against the bill. He spoke about collecting signatures for the dividend program, which gave him an opportunity to speak to many about this bill. Most of the feedback he received told him Alaskan's did not want the budget balanced in this manner. WINI CROSBY testified via teleconference from Kenai about her concerns with the bill. The bill was too vague. She talked about the need to move children from foster homes into adopted families. She recommended the bill be returned to the Senate Health and Social Services Committee for further review. JO RENK, Foster Mother and Adoptive Mother, testified via teleconference from Mat-Su. She opposed the bill, as it would adversely impact foster children. JOHN CANNON, Member, Key Coalition, and Lifequest, testified via teleconference from Mat-Su. He felt the bill was unfair and threatened the lives of Alaskan's with disabilities. MOIRA MCBRIDE, Occupational Therapist, testified via teleconference from Sitka. She said the bill was not well conceived. CHERYL HALL, Alaska Independent Living, testified in person to the need of the Longevity Bonus Program. She asked that the committee not pass this bill. WALTER MAJOURIS, Executive Director, Mental Health Board testified in person. He told about his organization. He was concerned that this bill would threaten the basic life needs of many mentally ill. He spoke of programs that would be affected. He appreciated past efforts by the Legislature to support programs for disabled and mentally ill. However, he felt this legislation would be a setback to the many advances. JEFF JESSEE, Executive Director, Alaska Mental Health Trust Authority testified against the bill. He referred to comments made by the House Finance Committee that this was only one of many attempts to reduce the budget. He spoke of the difficulties in determining the funding levels needed each year and compared it to predictions of annual snowfall amounts. He detailed the methods used to predict the needs of these programs. He suggested the committee look at each program individually and to address cost-overruns specifically. The alliance would assist in that process. Fundamentally the point was who would face the risk. It would not be the Legislature; it would be the beneficiaries. GAIL IGO, President, Anchorage Foster Care Association and Member, Statewide Foster Care Association, testified via teleconference from Anchorage. She spoke against the bill. She had spoken to many foster families and learned that many would be unable to continue to provide foster care if the benefit amounts were cut. ERNEST DUMMANN, Parent of a child with a disability, testified via teleconference from Anchorage. He said it was a misperception that this bill would not affect programs. Tape: SFC - 99 #111, Side A 10:40 AM He also commented on behalf on the Key Coalition. MONTA LANE, Alaska Caregivers, testified via teleconference from Fairbanks. He disagreed with the statement that too many people were pulled into the system. He also disagreed that the benefit levels were too high. The Legislature had already imposed a cap. He warned that the programs needed to be addressed individually and not left to future legislatures and commissioners to repair. HOLLI KRISTIANSEN testified via teleconference from Kenai in opposition to the bill. She felt this was a dangerous bill that worked against everything the state had done to help children. She believed this would only broaden the gap between the "haves" and the "have-nots". LEIGH HAGSTROM-SANGER, Frontier Community Services, testified via teleconference from Kenai. She told of a demonstration planned at the Kenai LIO to show opposition to the bill. SANDRA ADAMS, Representing her children and all of Alaskan's needy, testified via teleconference from Mat-Su. She spoke of the disabilities of her children and wondered about the level of support if this bill passed. She asked the members' to search their souls to find a solution. Co-Chair John Torgerson announced that time did not allow for further public testimony. He ordered the bill held in committee. SB 4 was added to the next meeting's agenda. ADJOURNED Senator Torgerson adjourned the meeting at 10:49AM. SFC-99 (3) 4/26/99