MINUTES SENATE FINANCE COMMITTEE February 23, 2000 9:02 AM TAPES SFC-00 # 35, Side A and Side B 36, Side A CALL TO ORDER Co-Chair Sean Parnell convened the meeting at approximately 9:02 AM. PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Dave Donley, Senator Lyda Green, Senator Loren Leman, Senator Randy Phillips and Senator Gary Wilken. Also Attending: ALISON ELGEE, Deputy Commissioner, Department of Administration; DAN SPENCER, Director, Division of Administrative Services, Department of Administration; KEITH GERKIN, Architect, Facilities Section, Division of General Services, Department of Administration; YVONNE CHASE, Director, Division of Early Development, Department of Education and Early Development; EDDY JEANS, Manager, School Finance and Facilities Section, Education Support Services, Department of Education and Early Development; JANET CLARKE, Director, Division of Administrative Services, Department of Health and Social Services. Attending via Teleconference: From Anchorage: MARLA GREENSTEIN, Executive Director, Alaska Commission on Judicial Conduct, Alaska Court System; BRANT MCGEE, Public Advocate, Office of Public Advocacy, Department of Administration; BARBARA BRINK, Director, Public Defender Agency, Department of Administration. SUMMARY INFORMATION SB 250-APPROPRIATIONS: CAPITAL/SUPP/REAPPROP The Committee heard from the Alaska Court System, the Department of Administration and the Department of Education and Early Development about items requiring a supplemental appropriation. The bill was held. SENATE BILL NO. 250 "An Act making and amending capital, supplemental, and other appropriations and reappropriations; making a reappropriation under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; making appropriations to capitalize funds; ratifying certain expenditures; and providing for an effective date." ALASKA COURT SYSTEM Alaska Commission on Judicial Conduct - $18,917.80 MARLA GREENSTEIN, Executive Director, Alaska Commission on Judicial Conduct, Alaska Court System, testified via teleconference from Anchorage. She explained the Commission is charged with the responsibility of enforcing the code of judicial conduct, which is the code of ethics for judges. She noted the limited budget provided to the organization and the occasional need for additional funds when a serious matter arises. Ms. Greenstein spoke to the total cost of attorney fees of $28,917.80 but pointed out that the Commission is able to apply $10,000 from the previous year's appropriation to the balance. She explained this debt is owed to one attorney, most of which is to cover the costs of one matter and the remainder is to cover costs of a matter from the previous year but argued before the Alaska Supreme Court in July 1999. She noted the Commission is still awaiting a decision in that case. Senator Donley asked for the specifics of the two matters. Ms. Greenstein replied that the matter before the Supreme Court involves an administrative hiring situation in which the Commission determined that Karl Johnstone failed to follow proper hiring procedures in selecting a coroner for Anchorage. The Commission found the action to be an ethics violation and recommended a public sanction to the Alaska Supreme Court, according to Ms. Greenstein. Ms. Greenstein then told the Committee that the second matter is currently in the "probable cause" stage, which means the specific details are not yet public information. She was able to provide a generalized account of a judge's action regarding a court proceeding. Senator Donley asked the amount of disciplinary actions that were not made public. Ms. Greenstein replied that no public sanctions where given last year out of six cases where disciplinary action was taken. Senator Donley wanted detail on how the commissioners voted on the issue of whether to make the sanctions public. He asserted that the Commission is comprised of three judges and three lawyers and only three members of the public. He compared this makeup to that of the Legislative Ethics Committee that has a majority of non-legislative members. He wanted to know if the other members voted down the public members of the Commission. Ms. Greenstein replied that she would provide vote sheets. She noted however that Senator Donley's concern did not seem to be the case because most votes are unanimous. DEPARTMENT OF ADMINISTRATION Leases - $891,200 general funds DAN SPENCER, Director, Division of Administrative Services, Department of Administration testified about this request for additional funds for the leasing program, which he stated has been historically short-funded. He referred to a memo he authored that identified the original reductions and the savings the department has realized. He noted that this request is less than the supplemental request of $1 million needed the previous fiscal year. Co-Chair Torgerson asked for identification of the savings in moving state offices from the Frontier Building to the Atwood Building in Anchorage. KEITH GERKIN, Architect, Facilities Section, Division of General Services, Department of Administration explained how most of the move from the Frontier building into the Atwood building occurred the previous year. He noted that the Department of Health and Social Services negotiated a reduced rent lease with the Frontier Building manager and would remain in that location. Senator Wilken noted there is a questionable $180,000 transfer that the Department of Administration Budget Subcommittee was currently examining. He said a report would be made to the full Committee. He added that beginning in FY 02, the savings of the renegotiations with the Frontier Building would appear. His figures show the cost per foot to be lowered from $3.30 to $1.80. Co-Chair Parnell noted that the claim was made that the legislature short-funded leases, yet the Department of Administration transferred approximately $184,000 appropriated for leases into administration areas. Office of Public Advocacy (OPA) - $508,800 general funds BRANT MCGEE, Director, Office of Public Advocacy, Department of Administration testified via teleconference from Anchorage that the need is caused by a dramatic increase in caseloads, particularly with children services issues. He noted that the legislature has consistently funded below the requested amount because of the inability to determine caseloads. Senator Phillips asked what was the cause of the increased caseload. Mr. McGee attributed it to the increase of children in need of aid situations. Senator Phillips then asked if the perpetrators' permanent fund dividends were withheld. Mr. McGee spoke of the Criminal Rule 39 that applies to dividend collections for indigent defendants noting there is no withholding allowance for civil cases. Senator Phillips asked if it was possible to garnish dividends to cover OPA costs. Mr. McGee said it was possible but that it would take legislative action. Senator Phillips commented that he was tired of the OPA supplemental requests year after year and suggested that the Legal Services Corporation pay. Senator P. Kelly questioned whether using the permanent fund dividends would be feasible, quoting the "robbing Peter to pay Paul" parable. He surmised that the dividends are already garnished from the parents at some point to cover other state services or to pay child support. Senator Donley asked if there was data showing the number of meritorious cases. Senator P. Kelly answered that public policy decisions were made by the legislature to change laws, which resulted in increased caseloads. Another factor, he stated were the additional frontline social workers hired to fill the need at that level. He stressed that there would always be some dispute over the merit of the charges made in these cases but did not know that there was an increase in the number of false charges. Senator Donley expressed a desire to look into the matter of false accusations. He stressed that while the legislature has made a major effort with child protection, he felt it is important to find out the percentages of cases where the court rules there are legitimate findings of child abuse. He felt this would be a measurement of the success of the child protection program. Senator P. Kelly agreed it would be a good performance measure. Senator Wilken added that the OPA budget had increased 30 percent over the last five years and was caseload driven. Senator Donley asked what was the average hourly rate paid to the attorneys contracted. Mr. McGee listed the amounts as $70-80 per hour in urban areas and $100 in rural areas where the agency has no bargaining power. He noted the lower than average costs were possible because the agency is able to pay the contractors on time, unlike other clients. He stressed that is the only advantage the agency has in the marketplace. Senator Donley commented that the agency does a good job at keeping the attorney's fees reasonable to protect the state's most valuable assets: the children. He pointed out the irony of the Supreme Court approval of $275 per hour to protect prisoners. He felt the court had its priorities backwards. Co-Chair Parnell referred to the appropriation to OPA for the Balloon Project to move children into permanent homes. He asked if the funds came through in FY 00. Mr. McGee explained the two-year program noting that the funding includes both contractual services and personal services. He stressed the agency's dual responsibility in that it is appointed guardian ad litum in every case, but also is responsible for obtaining contractual representation for some parents. He explained that some parent's interests often differ in abuse cases with one parent being the abuser and the other parent who may be innocent. He noted that the "innocent" parent is also entitled to representation under statute. Co-Chair Parnell noted Senator Donley's request for information to show how effective the additional representation has been. Co-Chair Parnell also noted that the intent of the Balloon Project is to reduce costs over the next several years because fewer state employees would be needed with the decreased caseloads. Co-Chair Parnell asked if the witness had data on the validity of the charges filed. Mr. McGee replied the best way to determine this would be to examine the number of cases where the state's petition is granted and the court finds probable cause that the child was subjected to abuse or neglect. Senator Leman did not quarrel with the hourly rates but wanted to know if the agency actively audited whether the claimed hours were actually worked. Mr. McGee affirmed and explained that he and two accounting technicians perform reviews on each bill received and that they investigate whenever there was question. While most of the charges are legitimate, part of the success in this procedure, he surmised is letting the contractors know that they will be reviewed. He added that the agency saves money and obtains better service by using a guardian ad litum rather than an attorney in most cases. Senator Leman suggested sharing that process with the Department of Law, commenting that the department has not been managing costs as well as he would like. Co-Chair Parnell commented that "the other edge of the sword" was that many talented private attorneys no longer do this type of work because the private fees are twice the amount paid by OPA. He stressed there is a reasonable balance. Mr. Spencer then addressed a $62,000 stale dated warrant for OPA explaining the reason for the claim was because the agency did not have the funds to pay the contractor in the previous fiscal year. Mr. McGee explained this was the first time this situation had arisen in the agency. He was concerned because of how old the bills were. He stressed that small firms are unable to carry great amounts of accounts receivables. He also noted that it would not be good for the agency to gain a reputation of not paying bills on time. Co-Chair Parnell asked if the contractor submitted the bills late. Mr. McGee affirmed that many of the bills were received after July 1 but that the agency is legally obligated to pay bills received by August. He stressed these were legitimate claims. Co-Chair Parnell then wanted to know about the $2,495 claim charged by the Department of Law. Mr. McGee answered this was for discovery charges that the agency was unable to pay last fiscal year due to lack of funds. He reminded the Committee that state agencies charge each other for services and that the OPA pays between $40,000 to $50,000 per year to the Department of Law for documents. Senator Phillips commented that this was one of the few areas were the legislature takes action retroactively for individual Alaskans. Public Defender - $250,000 general funds BARBARA BRINK, Director, Public Defender Agency, Department of Administration testified via teleconference from Anchorage and spoke about the FY 99 allocation versus the smaller FY 00 Budget. She stressed that the Public Defender Agency (PDA) has no discretion whether to take cases assigned by the court or whether to do certain kinds of work on a given case. This was due to both the constitution and Rules of Professional Responsibility. Ms. Brink told the Committee about a budget advisory group formed within the agency to review the budget and identify areas of savings. She stated that despite the group's efforts, the budget was still short. She told of one identified cost reduction to eliminate a vacant attorney position in the Kodiak Office. However, she said the remaining attorney was unable to meet all the obligations and the investigator position was eliminated instead. She listed other reductions, such as the elimination of statewide on-call services, computerized legal researching and distribution of legal opinions, reduced office hours, limitation of travel to only jury trials, withheld promotions, hiring new attorneys at lower pay ranges and maintained vacancies in most offices. As a result, she said the turnover rate was very high this year and she was concerned the agency was losing the ability to retain qualified attorneys. Ms. Brink stressed she did not consider these reductions to be long term solutions, only emergency measures. She gave examples of the impact of the budget cuts noting that changes to one area of the judicial system affect all areas. She told of a new phone system installed by the Department of Corrections to reduce that department's costs, which raised the long-distance rates from 15 cents a minute to 75 cents a minute. She added that because of cuts made to the Department of Law's budget, that department no longer allows witnesses to testify telephonically and the PDA must pay to transport witnesses. She continued the Alaska Court System is beginning to charge the PDA for interpreter costs. Ms. Brink told of mentally disturbed clients who have been creating serious safety issues in the Palmer office. She stressed that it is the state's responsibility to provide a safe work environment for PDA staff and that the office will need to be reconfigured to protect employees from clients. She stated "we are skating on thin ice" with regard to the reduction of services. She was concerned that a client could go through their entire case without ever meeting their attorney. She said judges, district attorneys and clients are complaining about the inability to reach the public defenders. Senator Donley said the Committee had heard the argument that the PDA has no control over the appointment of cases while the prosecutors did have that control. He thought that was an unfair argument noting that there was no supplemental request for the prosecutor's office and that the prosecutor must deal with every serious crime. Senator Phillips asked how much money in permanent fund dividends was collected by the PDA. Ms. Brink replied that the agency was awarded $190,000 but that the Civil Section of the Department of Law was responsible for collection and collected a significantly greater amount. Senator Phillips asked if the PDA was going to request the dividends from their clients. Ms. Brink responded that the Department of Law is doing a good job and that the PDA does not have the expertise or facilities to collect dividends. Senator Phillips challenged that if the agency required each client's dividend the workload would be dramatically reduced. Ms. Brink countered that no individual can walk into the office and request representation. She explained that the court appoints the cases and ensures that part of the client's dividend will be used to pay for the services. She noted that there are defendants who don't request services for that reason. Senator Adams stressed that reviewing the caseload should be a guideline the Committee should use to consider funding the request. He referred to the Legislative Budget and Audit report requested by Senator Donley and urged all members to read it. Senator Adams stated that the agency should be appropriated twice the requested amount and exclaimed, "If we're trying to ruin an agency, we are doing a great job of it by short funding this agency." He cited the high turnover of staff and poor representation for rural residents. Senator Wilken was surprised the supplemental request was so low as he had anticipated a higher amount. He spoke of the budget subcommittee's oversight of the agency and the agency's efforts to stay within the budget. He noted a court rule changed over the legislative interim that further restricted how an indigent is determined. He suggested the legislature could help by adopting legislation to define alternate dispute resolutions and by identifying certain crimes that can not be assigned to the PDA. He acknowledged the increased funding given to the agency saying, "The supply is more than what we can fund. We may want to look at the supply line as opposed to just continuing to increase the budget." Senator Wilken asked for confirmation that the agency did receive funding for the Balloon Project. Ms. Brink affirmed and explained the $231,000 interagency receipts were used to keep existing staff that would have been laid off, and reassigned them to this project. Mr. Spencer commented that even with the supplemental funds the agency's budget would still be $250,000 less than what was spent in FY 99 with no reduction in caseload. Ms. Brink then rebutted Senator Donley's earlier statement about the agency's control over the caseload. She stated that the agency's problem was particularly egregious because every other criminal justice agency received incremental requests the previous fiscal year to cope with increases while the PDA did not. Senior Services, Protection, Community Services and Administration (PCSA) - $118,600 general fund ALISON ELGEE, Deputy Commissioner, Department of Administration came to the table and explained the program that provides emergency shelter for vulnerable adults needing to be removed from an at-risk situation. She talked about the protected environments provided, which are normally assisted living homes but also hotels in some circumstances. She stated that every effort is made to determine whether family or friends could take the at-risk individual and only when no other resource is available are the adults moved into assisted living homes. She also noted that the program funds are used as a supplement to offset the individual's income. Assisted living homes are operating at a daily rate that is half of what recent studies have shown should be paid, according to Ms. Elgee. Because of this, she said it was becoming harder to find facilities willing to accept clients from this program. She qualified the supplemental request is the projected amount needed to cover costs for remainder of the fiscal year based on year-to-date expenditures. Senator Phillips asked if the program has an age limit. Ms. Elgee replied that the program covers anyone over age 21. Senator Phillips wanted to know if the problem of vulnerable adults in at-risk situations was increasing. Ms. Elgee replied that the majority of adults in the program are seniors. She stated that the program's caseload reflects the aging population and she predicted that as the senior population grows, the number of seniors in need would increase. Senator Phillips then asked if these individuals are seniors brought into the state and then abandoned or if they are Alaskans who have no family. Ms. Elgee replied that most are individuals who have lived alone but are now no longer able to care for themselves. She said the department had no evidence to suggest these seniors were brought to the state and then abandoned. She stressed that many seniors outlive their family. Senator Wilken asked if the vulnerable adult legislation adopted the previous year was responsible for the increased caseload. Ms. Elgee did not think it was noting that legislation disallowed the guardian from stopping an investigation if the guardian was the subject of the investigation. Senator Wilken asked if the increase was due to a specific event. Co-Chair Parnell asked how many people benefited from the general relief program. Ms. Elgee answered the number varies and added that the amount provided to each also varies since most participants have some personal resources to help cover the costs. Tape: SFC - 00 #35, Side B 9:50 AM Co-Chair Parnell clarified that almost none of the participants are completely indigent and that most are able to contribute a portion of their living expenses. He asked if those who have no resources are also eligible for General Relief Assistance from the Department of Health and Social Services. He thought the two programs seemed similar and wanted to avoid overlap. Ms. Elgee responded that those with no resources are assigned a caseworker to assist them in applying for aid from the various public assistance programs, which is then paid retroactively to reimburse the General Relief Program. Co-Chair Parnell wanted one program that could provide the same services as currently done by two. Senator Phillips asked if there was a particular area of the state that had an inordinate number of abandoned seniors. Ms. Elgee answered the issue is disproportionate to urban areas because rural communities are closer knit and provide care to their residents. Senator Green asked if there is any crossover with the Mental Health Trust Authority (MTHA) that might help cover the costs. Ms. Elgee told of a review done to identify the number of General Relief program participants who also qualify for mental health programs. She said the study found that 70 percent of the Adult Protective Services caseload were also trust beneficiaries at any given time. She said that the department has received funding from the MHTA in the past, but only for specific projects and not for on- going programs. Senator Green stated that discussions should be held with the MHTA regarding funding for emergency situations and offered her assistance. Ms. Elgee noted that SB 73, Assisted Living Facilities, deals with the same client group and that the MHTA has committed to that legislation and offered to help defray the cost. Senator Leman asked if any serious effort has been made to combine the emergency services with non-profit organizations that want to offer these services, such as churches. Ms. Elgee did not know of any formal arrangement but noted there is a strong network of providers and that the department looks first to family and friends. Senator Leman did not disagree with government funding as a last resort but did not want it to be a first resort. He commented about the, "I would have helped if only I knew" instances. Ms. Elgee said it depends on each situation. In some emergency cases, she said the individual is temporarily placed in an assisted living facility until the department can locate a suitable family member. Supervisor Training - $50,000 general funds Mr. Spencer spoke to this item saying the information required to include it in the regular operating budget was not ready by the end of session and that this is an on-going cost. Co-Chair Parnell asked when the training would be completed. Mr. Spencer explained it is an on-going program to provide training to supervisors and is overseen by a committee that decides what direction the program should take. Co-Chair Parnell asked how much has been spent on the program so far this year. Mr. Spencer did not know but said he would provide that information later. Group Health - $747,800 Benefit System Receipts Ms. Elgee noted this item is for the second year of a project to review and revise the long-term care insurance product offered to retirees. She stated this is fully funded by retirees served by the program and requires no state funds. The last time the policy was updated was in the 1980s, she said and the long-term care payouts were unrealistically low and ineffective. She explained that the retirees requested this revision to include retirees who did not chose long-term care insurance when they retired but now wish to participate. Ms. Elgee continued this portion of the project is to cover the cost of enrollment for new participants and upgrades for existing participants. Senator Green asked if the enrollment option was available to only former state employees or if those who worked for a school district as well. Ms. Elgee replied the program is offered to any retirees of the Public Employees Retirement System (PERS) or Teachers Retirement System (TRS) systems regardless of who their employer was. Senator Wilken asked what was the total budget for administering the retiree medical and long-term care plans. Ms. Elgee talked about Aetna and the increased costs due to the increased retiree population. She anticipated a need for approximately $14 million for administration in FY 01, which is charged on a per person-per month basis. Retirement and Benefits - $100,000 PERS Ms. Elgee explained this request is to cover the cost of electing a new PERS board member. She stated that Mary Notar resigned last year then died, leaving an unexpired vacant seat on the PERS board. Ms. Elgee told the Committee that the department budgets the election costs only for the years when a term expires. She added that successful candidates need at least 50 percent of the votes and that the current election is in the runoff phase. Co-Chair Parnell wanted to know why it costs $100,000 to run this election. Ms. Elgee explained most of the cost is in postage and that the ballots, which must comply with the Division of Election's Accu-Vote system, are another expense. She noted the Accu-Vote system is considerably less expensive than contracting with an outside firm to tabulate the ballots. Co-Chair Parnell asked how the cost of this election compared to previous elections. Ms. Elgee said she would provide that information. Senator Wilken asked when is the next normal election and if the seat couldn't be held open until then. Ms. Elgee replied the next scheduled election is 2002, but stressed that the board only has two elected retirees. She added that both terms expire in the same year and it was hoped that by holding this election, the terms could become staggered. Co-Chair Torgerson commented that when a vacancy arises in the legislature a new legislator is appointed and he determined that the PERS board could do the same. Ms. Elgee said that would require statutory change. Co-Chair Torgerson said he would support such a change. Capital Improvement Project Scope Change - language change Ms. Elgee explained this item is affects an existing capital project and does not require additional funds. It changes the language in the FY 00 budget bill, Ch. 2, FSSLA 99, Page 34, line 29 from "Satellite interconnection project equipment replacement and repair" to "Satellite interconnection project management, equipment replacement, and repair". Mr. Spencer added that this allows some of the funds appropriated for management costs to be used to manage the actual project. Co-Chair Parnell asked if this issue was anticipated when the original legislation passed. Ms. Elgee said it was not and explained that a state employee was handling those duties at the time. Since then, she continued, all responsibilities have been transferred to the organization that is handling all aspects of the public broadcasting system and this funding will reimburse the organization for those costs. Satellite Infrastructure - $100,000 general fund Ms. Elgee told the Committee this appropriation request is for the satellite transponder lease cost. She reminded of last year's legislative decision to amend the appropriation for the transponders to reflect $100,000 less in general funds and $100,000 more in interagency receipts with the intent was that the University of Alaska would double their contribution for participation in the program. She stated that the university did not have adequate funds available. She also noted that the lease cost for the transponder is fixed. Co-Chair Parnell asked if the University of Alaska was using the facility for distance education but not paying for the service. Ms. Elgee responded that they do pay $100,000. While Senator Wilken favored the university contributing to the cost, he was concerned about the claim that service would be interrupted for two months if the lease were not paid and Alaska One, Alaska Two (Gavel to Gavel), ARCS and Alaska Public Radio would be adversely affected. He asked if this was correct. Ms. Elgee affirmed and stressed that without sufficient funding the transponder lease would have to be cancelled. Senator Wilken requested further backup. Longevity Bonus Program Ms. Elgee estimated the program to be short funded between $4.5 million and $5 million. She stated that this was due to a number of circumstances despite the department attempt to accurately predict the needed funding. While the program is closed to new participants, she explained there is an increase in usage of the program. She spoke of suspension of benefits for those who leave the state and the difficulty in predicting the amount of participants who will be within or outside the state during a fiscal year. This year, she said more participants are meeting the qualifications and therefore collecting benefits. Another factor in the shortfall, according to Ms. Elgee was because the legislature took the low case estimate of participation and reduced the amount an additional $2.5 million. Senator Phillips wanted to know the average age of participants in the program. Mr. Spencer referenced a chart he had provided to the senator's office that shows the breakdown. Co-Chair Parnell referred to legislation offered by the governor that would change the program to an income based qualification and asked if the governor still supported the bill. Ms. Elgee affirmed that the governor did. Miscellaneous Items Mr. Spencer referred to Section 20 (a) and (b) of the SB 250 that would change tobacco receipts to general fund receipts. This change, he explained was due to a reduction of tobacco settlement funds. Co-Chair Parnell noted that other requests have been made by the Department of Health and Social Services to make the same funding source changes. Mr. Spencer then addressed stale dated warrants, saying more details would be provided later. The final item for the department was $2.4 thousand ratification for the Division of Personnel. He explained this involved an employee who moved and an accounting transaction is needed to balance the accounting system. DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT Child Care Assistance - $1,500,000 Interagency Receipts YVONNE CHASE, Director, Division of Early Development, Department of Education and Early Development referred to the original budget request to reflect the anticipated growth in the program due to parents moving from welfare to work. She stated that the amount funded was less and did not meet that demand. She described the process the division took to adjust to these reductions, noting that certain participants were placed on a waiting list. She spoke of the success of the welfare to work reforms and the subsequent need to offer support for those moving to work. She shared the average time needed for each child in the program is three to five years. She detailed the three phases of qualification into the childcare assistance program, titled Pass I, Pass II and Pass III. Co-Chair Parnell asked if the funds were to go only to those families entering the transition to work program. Ms. Chase responded that the childcare program was under funded and that only ten new families were admitted into the program who weren't on participants of the welfare to work program. She commented that, at the start of the fiscal year, some families were involved in the childcare program who were not part of the welfare to work program but who's income qualified them for childcare assistance. Senator Green recalled a temporary assistance provision in the welfare to work reforms that provides a lump sum to allow the participant to maintain their lifestyle. She wanted to know if this provision was used to provide childcare assistance to individuals to allow them to go directly to work rather than going on public assistance. Ms. Chase responded that individuals who are receiving public assistance are eligible for childcare resources under Pass I of the Department of Health and Social Services' welfare to work program. JANET CLARKE, Director, Division of Administrative Services, Department of Health and Social Services clarified that Senator Green referred to the Diversion Program that offers assistance to those only needing a short-term "fix". She was unsure whether participants of the diversion program are eligible for childcare assistance and said she would find out for the Committee. Senator Green asked if there is anything preventing the diversion program participants from using the diversion assistance for childcare expenses. Ms. Clarke said she would look into the matter. Senator Green wanted the state to be rewarded for helping to prevent people from entering the welfare system. She did not agree with the elimination of the Pass III phase, saying it forces people to go directly to welfare. She suggested this could be a federal issue. Ms. Clarke answered she would look into this as well. Co-Chair Parnell understood the original intent of the program is to bring people from welfare to work. He surmised that if the program gives funds to those who are not otherwise on assistance, this is still a form of welfare. He wanted to learn more about the program to see if his perception was correct. Ms. Chase replied that prior to the advent of welfare reform, the childcare subsidy program was operated under the Daycare Assistance program. She stressed that some of the individuals in the childcare assistance program were participants in the original program and were now classified as Pass III in the current program. Co-Chair Parnell asked if those Pass III families would drop off without the supplemental. Ms. Chase affirmed that Pass III participants would be dropped to accommodate those on pass II. Senator Green stressed that the bigger issue is that Pass II parents will always have priorities over Pass III, but with adequate funding, none would be left out. However because of the increase of Pass II participants, Pass III participants are getting left out, which was a "good thing", she stated. She continued, the bubble of Pass II participants caused by welfare to work reforms was expected to go down in the next 12 months. Co-Chair Parnell commented that the Pass system was set up to give priority to Pass II participants when funds are limited. Out-of-State Placements - $602,900 general fund Ms. Chase explained this request is for education costs for children in state custody who are placed in out of state treatment centers. She stated more children have come into foster care but that some children cannot be maintained in foster care because of their behavior. Co-Chair Parnell asked for the total cost for out-of-state education expenses and why it was not part of the original budget. Ms. Clarke replied total costs were about $600,000 and the reason it was not included was because the program had a great increase that required examination before funding. She detailed the process of determining the cost. She spoke about the question of appropriateness of the Department of Health and Social Services paying the education cost rather than the school districts the children originated from. She said efforts were being made to ensure whether these children were included in the school districts' foundation formula. She noted that while the treatment costs were almost entirely covered by Medicaid, education costs were not. Senator Phillips asked how many students were involved and where they originated from within Alaska. Ms. Clarke answered approximately 70 students and referred to backup in the members' binders that detailed what school districts they were part of. EDDY JEANS, Manager, School Finance and Facilities Section, Education Support Services, Department of Education and Early Development told the Committee about the electronic student data collection system the department was implementing. He explained the system tracks the location of students and the foundation formula funding claims made by each school district. For this program, he said the system would allow the department to determine which school districts are claiming the students and therefore responsible for the educational costs while the student is outside the state. Senator Phillips asked how the department would implement payment collection from school districts. Mr. Jeans replied if the school district claimed the student as part of the formula funding, that district would be responsible for the student's cost. Senator Green asked about payment of educational services for children who were in treatment centers within the state. Mr. Jeans replied there were a number of children in residential treatment inside the state and that their educational costs were covered by the "home" school district under the foundation funding formula. Mr. Jeans clarified for Senator Green how the supplemental request is only needed to those children outside of the state. Co-Chair Parnell asked when the department would have the accounting of the students' school districts formula funding data reconciled. Mr. Jeans was not sure but said he would find out for the Committee. Senator Phillips asked how the out-of-state schools were selected. Ms. Clarke explained that Regional Placement Committees existed within the Department of Health and Social Services to determine what facility would best serve the needs of each child. She gave details on the committee and how their decisions are made. She gave assurances of the oversight of the facilities. Senator Phillips asked if the witness knew the location of the various schools. Ms. Clarke said she would find out specifics noting that they were in many states including Texas and Colorado. Co-Chair Torgerson asked what was the underlining authority that required the State to pay the education costs: federal law, state statute, etc. He asked why the state that the child resides in doesn't pay the educational costs. He stressed that when a child relocates to Alaska, the state can't charge the child's previous home state. Mr. Jeans and Ms. Clarke clarified that these children are residents of Alaska and in the state's custody. Senator Green asked if there was a prevailing diagnosis. Ms. Clarke did not know but would find out. Senator Phillips wanted to find a way to charge the child's parents for the educational costs. Tape: SFC - 00 #36, Side A 10:37 AM Senator Phillips asked if the natural parents pay for any of the treatment or education of these students. Ms. Clarke replied that some receipts were collected through the Child Support Enforcement system. She said that if a child qualifies for Social Security Insurance benefits, those funds are applied to the cost of treatment as well. She qualified that she was not an expert in this area. Senator Phillips stated that the cases that could be prevented angered him the most. Foundation Program - $(11,811,200) general fund Mr. Jeans referred to a worksheet that detailed the foundation funding program and the October results of the foundation count. Senator Wilken noted that the foundation showed a saving of almost $20 million but that the supplemental budget bill only showed $11.8 million. He asked for a reconciliation of the difference. Mr. Jeans stated that the FY 00 authorized budget contained the school districts' estimation of 134,968 students of which, 8,122 were in correspondence programs. He detailed the foundation formula calculations that projected the basic need at $835,646,000 and the state contribution at $695,660,000. Mr. Jeans reminded the Committee of discussions held the previous year about the Alyeska Correspondence School entitlement's substantial increase. He shared that the department researched the situation and found the increase was mostly attributed to the expansion of the summer school program allowing students to take up to four courses. The research also found that the completion rate of summer courses was very low and therefore, he said, the department took corrective action to only allow students to take summer courses for those required for graduation. He stated that this change resulted in a reduction of $2.6 million. Mr. Jeans spoke of another adjustment for $3.9 million the legislature took after telephone surveys of some school districts. Mr. Jeans told the Committee that the student count came in lower than projected by approximately 3000 students with the majority in the regular schools rather than correspondence. Co-Chair Parnell asked about the slight increase in the correspondence and if the department's reclassification of alternative schools to correspondence schools was the reason. Mr. Jeans replied there was an actual increase in the number of students in the correspondence program, notably the Galena and Nenana school districts. Co-Chair Parnell next asked about the required local effort that had gone down. Mr. Jeans explained that when the department projects the next year's budget, estimates of the required local effort for the North Slope Borough, Valdez, Unalaska and Skagway are incorporated. He said the amount is calculated at 45 percent of the prior year basic need but that amount is not known in time to prepare the budget. Co-Chair Parnell asked if that amount was not a function of the assessed value of local property. Mr. Jeans answered that was correct. Mr. Jeans then pointed out an increase in impact aid of $9.6 million, bringing the total to $46 million, which reduced the state general fund need. Mr. Jeans qualified that the supplemental funding floor appeared to have gone up but actually did not. He explained that 1999 estimates were used to project the FY 00 budget and were not accurate. Mr. Jeans then noted that the Quality Schools grants were reduced $50,000 as a result of population changes and the Military Impact Aid and contract aids remained unchanged. Mr. Jeans summarized that the "difference" column of the spreadsheet showed $18 million compared to the actual student count. He stated that amount needed to be reduced to adjust for the Alyeska Central School and account for the $3.9 million adjustment made the previous session. The ending total was $11.8 million, according to Mr. Jeans Senator Wilken clarified that the $19.9 million figure was from the FY 01 budget. Pupil Transportation - $2,139,700 general fund Mr. Jeans spoke to the supplemental appropriation request to reimburse school districts for pupil transportation costs during FY 00. He explained that this budget component was underprojected and the department intended to reallocate the funds from the $11.8 million saved in the foundation-funding program. Senator Green wanted to know if statute contained a requirement for actual cost reimbursement or just a minimum percentage. Mr. Jeans answered there is no statutory requirement for a particular level of reimbursement. Senator Green then asked where the decision to fund the full amount was made. Co-Chair Parnell also asked if the allocation request was for the full amount of costs. Mr. Jeans affirmed the request was for 100 percent of entitlement. He said the program was historically reimbursed contracted pupil transportation at 100 percent of cost. However, he noted that SB 36 [1998] the district operated routes to be reimbursed at least 90 percent. He said regulations were proposed to the State Board of Education to address the 90 percent reimbursement but the Board retained the 100 percent rate. Senator Wilken pointed out that in the last six or seven years, the legislature had funded the program at 100 percent for all but two years, in which approximately 95 percent funding was appropriated. Mr. Jeans confirmed that statement and noted if funding was not appropriated, the department would have to prorate five percent. Senator Leman asked is there was a way to calculate the district costs versus contract costs using a "student miles" formula. Mr. Jeans replied that the department calculates the daily cost per bus-per route. He said statute gives the department the flexibility to either require districts provide pupil transportation directly or contract the service. He noted the department had not been aggressive in this area and that the Anchorage School District would be impacted the most because they have both contract and district provided routes. He said the more expensive routes are district-operated. Senator Leman wanted a consistent figure to calculate reimbursement and did not understand why the contracted routes are reimbursed at a higher percentage than district routes. Mr. Jeans said he would provide detailed information. He added that he would also provide historical data for the years the districts were only reimbursed 60 percent. ADJOURNED Senator Parnell adjourned the meeting at 10:54 AM. SFC-00 (20) 02/23/00