SENATE FINANCE COMMITTEE January 26, 2017 9:02 a.m. 9:02:35 AM CALL TO ORDER Co-Chair MacKinnon called the Senate Finance Committee meeting to order at 9:02 a.m. MEMBERS PRESENT Senator Lyman Hoffman, Co-Chair Senator Anna MacKinnon, Co-Chair Senator Click Bishop, Vice-Chair Senator Mike Dunleavy Senator Peter Micciche Senator Donny Olson Senator Natasha von Imhof MEMBERS ABSENT None ALSO PRESENT Russ Webb, Chair, Alaska Mental Health Trust; Greg Jones, Interim CEO, Alaska Mental Health Trust; Senator Gary Stevens; Jeff Jesse, Legislative Liaison, Alaska Mental Health Trust; John Morrison, Executive Director, Alaska Mental Health Land Office. SUMMARY ^PRESENTATION: OVERVIEW FY 18 BUDGET - ALASKA MENTAL HEALTH TRUST 9:03:09 AM RUSS WEBB, CHAIR, ALASKA MENTAL HEALTH TRUST, felt honored to represent the Alaska Mental Health Trust Authority (AMHTA) before the committee. He discussed the presentation "Legislative Presentation - Senate Finance Committee," (copy on file). Mr. Webb turned to slide 2, "Mission: Improve the lives of beneficiaries": Trust Duties  Enhance and protect the trust  Provide leadership in advocacy, planning, implementing, and funding of a Comprehensive Integrated Mental Health Program  Propose a budget for the Comprehensive Integrated Mental Health Program  Coordinate with state agencies on programs and services that affect beneficiaries  Report to the Legislature, the governor and the public about the Trust's activities 9:05:38 AM Mr. Webb displayed slide 3, "Trustees":  Russ Webb, chair  Mary Jane Michael, vice chair  Larry Norene, secretary  Laraine Derr  Paula Easley  Jerome Selby  Carlton Smith Mr. Webb introduced trustees and employees of AMHTA. He noted that Larry Norene was not present due to illness. He listed names of the executive directors of AMHTA's statutory advisory boards. Mr. Webb indicated that he had a realization that the meeting was likely the last time he would address the committee in a public service capacity, as his term as chair of the board would end within the year. His term as a trustee would end in a year. He reflected that he had worked nearly half a century in public service. He remarked on the extraordinary changes he had observed in the lives of AMHTA's beneficiaries. He mentioned the development of systems of care. He commented that change was constant and that the trust would work in perpetuity for the beneficiaries and for the state. 9:09:16 AM Co-Chair MacKinnon expressed thanks on behalf of the committee and the legislature. Mr. Webb added expressed appreciation for Larry Norene, who had served as AMHTA's Resource Management Committee chair for 8 years. Due to his background and expertise in resources, he had a vision for the development of the trust's land office. He thought Mr. Norene had done an extraordinary job. Co-Chair MacKinnon informed that Mr. Norene was her constituent and expressed her thanks for his service. She hoped the decision to leave the trust was a personal choice, rather than just the expiration of his term. 9:12:47 AM GREG JONES, INTERIM CEO, ALASKA MENTAL HEALTH TRUST, discussed slide 4, "Recent Updates": ? Leadership Change Greg Jones, Interim CEO ? Legislative Audit Mr. Jones relayed that there was a leadership change at AMHTA, and that he was working as Interim CEO. He discussed a scheduled legislative audit, and recounted that for the past several years the land office had worked towards diversifying and strengthening the trust's source of income. He qualified that the trust's income could be spent directly on programs to the benefit of the beneficiaries. He mentioned a strategy of shoring up income with investments in high-quality real estate in select markets. He reported great success with the strategy, but pointed out that questions had been raised in the current year that had resulted in an audit. He expressed that the trust took the inquiry very seriously. He informed that AMHTA had paused its real estate program and was not making any new investments. Mr. Jones continued, and informed that the trust had engaged with the attorney general's office to define what legal issues might exist. He hoped the audit would include an open and transparent discussion of the issues with the goal of clarity and a way to continue to generate income safely. 9:15:28 AM Co-Chair MacKinnon commented that the legislature had asked almost all state agencies and units that received undesignated general funds (UGF) to develop a plan to use less UGF. She continued that the trust was doing exactly as the legislature had asked. She expressed her support for AMHTA to move forward with changing state statute to allow for the flexibility to create additional revenue for the beneficiaries of the trust. She referred to individuals with disabilities, who experienced adversity on a regular basis. She appreciated the resources that had been deployed on behalf of the beneficiaries. She offered her assistance towards providing clarity for the trust in its endeavor to generate income. Mr. Jones thanked Co-Chair MacKinnon, and stated that AMHTA would continue to stay in touch. Co-Chair MacKinnon commented that change was difficult, and emphasized that there were multiple viewpoints on the use of funds. She expressed appreciation for the foresight of members that had pointed the trust in the right direction in managing its assets. Mr. Jones read slide 5, "FY18 BUDGET," and stated that he would discuss revenue sources available to the trust. Mr. Jones moved to slide 6, "Permanent Fund Payout History," which showed a bar graph. He informed that the trust had approximately $460 million invested with the Permanent Fund, in an undivided portion of the fund through which the trust achieved the same earnings as the fund on a pro-rata basis. Because the earnings fluctuated to a certain degree, the trust had developed a system whereby it used a percentage of market value (POMV) of its portion of the fund to average a four-year trailing average. The trust then took 4.25 percent of the market value. Mr. Jones continued discussing slide 6, and pointed out the green line on the chart, which indicated what the payout percentage was in 2018. He relayed that the fund had grown through a combination of organized growth, combined with contributions made by the trust. He pointed out years in which there was a significant decrease in permanent fund earnings (such as 2010), and noted that averaging had allowed the trust to take out funds to continue its programs. He shared that the trust had been able to take approximately $20 million from its Permanent Fund endowment for the three previous years. 9:19:24 AM Co-Chair MacKinnon noted that Senator Gary Stevens was present. Senator Micciche asked about slide 6, and referred to recent discussions regarding a POMV philosophy. He inquired about the running average of endowment fund draws by the trust. JEFF JESSE, LEGISLATIVE LIAISON, ALASKA MENTAL HEALTH TRUST, explained that at the inception of the trust, the trustees realized that if the endowment earnings were spent each year it would result in volatile income due to the earnings fluctuation. He discussed the challenge of being a perpetual trust and therefore not being able to use the principal. As a remedy, the trust had realized it needed a budget reserve/endowment model. The trust had commissioned Callan and Associates (which also advised the Permanent Fund Corporation), and it was advised that the reserve should equate to four times the annual payout. Mr. Jesse continued, explaining that the trust had started with a relatively small payout, with the idea that income above the payout would begin to fund the income reserve. He recounted that the trust had been fortunate within the first few years, when the permanent fund had very high returns and the 400 percent reserve became fully funded. He continued that the original $200 million corpus was inflation-proofed once the reserve was fully funded, after which the payout percentage was incrementally increased. He explicated that for every quarter percent the payout was increased, the reserve would have to be increased by 1 percent. He noted that during the period in which the payout was 3.5 percent, income had gone down. He explained that the downturn in the market between 2001 and 2005 was to blame, and the trust had used the income reserve to continue to make the payout during the lean years. 9:23:41 AM Mr. Jesse continued, summarizing that the trust had "stair- stepped" up the payout while fully funding the reserve and fully inflation proofing. He stated that the model was an extremely resilient funding mechanism. He considered that the ultimate sustainable payout was a question that had never been answered. He informed that the Internal Revenue Service required that private foundations take 5 percent of net asset value. Senator Olson observed the graph on slide 6, and referred to the economic downturn in 2008. He wondered if the trust was optimistic as to whether the payout amount would continue to swing up under different national leadership. Mr. Jesse thought the trustees would pursue policies that it had in the past; and would make sure the reserve was fully funded, as well as fully inflation-proofing the fund. He suggested the trustees would have to consider the prospects for future returns and growth. He thought it was possible that the trustees would choose to revise the payout as they felt appropriate. Senator Olson referred to the graph and asked if the trust's draw on the General Fund (GF) would be minimized. Mr. Jesse reminded that the trust authority itself did not draw any GF. He stated that the trust was concerned about the fiscal status of the state, and the availability of GF for the mental health program. He echoed the earlier comments of Mr. Jones that indicated the trust was looking at how to generate more revenue in order to have more resources available to support the state in funding mental health programs when GF prospects were challenging. Vice-Chair Bishop thought that the trust board had been very realistic with the payout model it had used. Mr. Jesse concurred. 9:27:09 AM JOHN MORRISON, EXECUTIVE DIRECTOR, ALASKA MENTAL HEALTH LAND OFFICE, discussed slide 7, "Trust Land Office Annual Revenue," which showed a graph depicting a snapshot of the million-acre land base that was managed by the office. He commented that the land office was a "mini DNR" in that it was involved in all the same industries as the state, and the office was also exposed to volatility in commodities as was the state. He informed that in managing the land base, there were five principles that were found in regulation: maximize revenue, protect the corpus/land base, enhance the long-term productivity of the land base, diversify revenue, and to do so prudently and with accountability to the trust. Mr. Morrison continued that the purpose of the slide was to illustrate the need for the diversity and the foresight of the trustees to anticipate coming troubles in the commodity market. He pointed out the green and purple lines, depicting dominant sources of income in lands and timber, respectively. He noted that the purple line had all but disappeared in the most recent year on the graph, because no timber had been cut in FY 16. The blue line represented principal income the trust had taken and reinvested in real estate; which then produced income to spend on beneficiaries. He referred to significant initiatives that the trust was working on in aid of increasing timber revenues. Mr. Jones commented on the substantial volatility of the assets represented on slide 7. He explained that the land base produced commodities, which were by nature volatile. He directed attention to the blue line depicting real estate on the graph, which was more predictable and had served as a floor for the other revenue that was generated. Senator Dunleavy asked if Mr. Morrison could briefly describe the challenges involved in monetizing the land through sales lease, timber, or mineral commodities. He wondered if the trust had dealt with lawsuits from groups that wanted to stop the trust from monetizing the land. Mr. Morrison relayed that the trust faced the same issues as any other land owner within the state, and was subject to the National Environmental Policy Act (NEPA) and other environmental requirements. He reported that one issue of developing a raw land base was the infusion of capital. Over time the trust had been subject to the whims of the commodity markets and the desire of outside parties to invest in the land to delineate and extract resources. He noted that the trust had made the decision over time to use the money from the resources to reinvest back into the land base to delineate and proceed with extraction of other resources for future income. Senator Dunleavy asked if the trust had had any monetization concepts halted by lawsuits. Mr. Morrison answered in the negative. 9:32:11 AM AT EASE 9:32:57 AM RECONVENED Mr. Jones clarified that the trust had been challenged many times, just like any other land owner, but had not been to court recently. He remarked on the expertise of the staff in the land office. Mr. Jones displayed slide 8, "Funding History," which displayed a graph depicting the conversion of trust revenue into income. He stated that the bulk of revenue shown on the previous slide was principal revenue that had to be reinvested at the Permanent Fund or in other investments in the trust's land. He clarified that the green bar on the graph represented the income from the trust land office, which had steadily grown over the last 5 to 6 years. Mr. Jones showed slide 9, "FY18 Anticipated Available Funding": Distributable Funds Payout $21,067,000 Prior Years Average Lapse $3,042,000 Land Office Average Spendable Income $4,534,000 Interest Average $283,000 Total $28,926,000 Mr. Jones noted that the first three figures on the slide were four-year trailing averages, which the trust used for its anticipated funding. Mr. Jones moved to slide 10, "FY18 Budget," which showed a pie chart that indicated where funds were spent. He referred to earlier remarks by Senator Olson and noted that the trust was fully self-funded. He stated that almost three quarterss of the funds went to Mental Health Trust Authority Authorized Receipts (MHTAAR) grants which went through state departments; or to AMHTA grants, which were given to program providers. He relayed that approximately 17 percent of the funds went toward managing the trust land office and the trust authority administration. 9:36:01 AM Mr. Jones discussed slide 11, "Trust Beneficiaries": Approximate Number of Trust Beneficiaries Mental Illness 34,000 Developmental Disabilities 13,000 Chronic Alcoholism/Substance-Related Disorders 20,000 Alzheimer's Disease and Related Dementias 6,000 Traumatic Brain Injury 12,000 Mr. Jones noted that the beneficiaries the trust served represented five categories, and the numbers totaled approximately 85,000. He clarified that the figures on the slide were not from an actual census, but rather were based on national prevalence data. He furthered that the trust beneficiaries dealt with a broad range of conditions, and the population did not seem to be diminishing. Mr. Jones turned to slide 12, "Mental Health Budget Bill": 1. General Fund/Mental Health 2. Capital Budget 3. Mental Health Trust Authority Authorized Receipts (MHTAAR) Mr. Jones remarked that the GF portion of the mental health budget bill was the amount established by identifying health services, most of which was through Department of Health and Social Services. Mr. Jones showed slide 13, "General Fund/Mental Health Base": ? Amount is established by identifying the mental health services funded within the state's GF budget ? These funds are designated as GF/MH Final budget from the previous fiscal year establishes the base 9:37:20 AM AT EASE 9:37:51 AM RECONVENED Co-Chair Hoffman asked to return to slide 11, and wondered what percentage of trust beneficiaries listed on the slide under the category of 'Chronic Alcoholism/Substance-Related Disorders' were inmates in the correctional system. Mr. Jones did not have an exact figure, but believed that approximately 40 to 60 percent of incarcerated individuals in the state were beneficiaries or potential beneficiaries of the trust. Co-Chair Hoffman recounted that the previous year the committee had worked on SB 91 [legislation pertaining to criminal justice reform that passed in 2016] in order to address problems with alcohol and substance abuse in the correctional system. He wondered if the trustees had looked at the issue and were spending any resources to aid the state in reversing the trend in the correctional system. Mr. Jones answered in the affirmative, and stated that the "revolving door" issue was a significant driver of the efforts of the trust. He continued that the trust had a number of programs that were designed to provide services to individuals entering or exiting the correctional system. Co-Chair Hoffman asked if the board had concentrated on the particular problem and spent additional resources since the passage of SB 91. Mr. Jesse answered in the affirmative, and continued that not only had disability justice been a focus area of the trust for the last few years, but one its two major priority areas was criminal justice reform. He specified that the trust was investing about $4 million in FY 18 to assist the state in the criminal justice reform effort. Co-Chair Hoffman asked what percentage of the funds were viewed as an increase due to the passage of SB 91. Mr. Jesse estimated that approximately half of the funds were directly related to SB 91 or associated reform efforts. 9:41:29 AM Senator Micciche surmised that 12 percent of people in Alaska were beneficiaries of the trust's programs. He asked if there was overlap in the categories listed on slide 11. Mr. Jones stated that there was overlap between the categories. Senator von Imhof referred to Co-Chair Hoffman's comments and noted that Title IV was an area that the trust had been working on. She hoped there had been efforts to analyze the landscape of substance abuse programs across the state, such as how the programs worked together, and the measurement of program effectiveness. She wondered if the trust was examining tweaking the programs to improve outcomes. Mr. Jesse answered in the affirmative, and noted there was a subsequent slide that would address the matter. He furthered that one of the two increments that the trust was proposing involved the topic of identifying the effectiveness of programs and how to improve programs over time. 9:43:28 AM Co-Chair MacKinnon referred to the voter initiative that had resulted in legalization of marijuana, and wondered if there had been observable adverse effects on beneficiaries of the trust. Mr. Jesse thought it was too early to be able to observe impacts of marijuana legalization. He commented that many dispensaries had not been able to open due to lack of supply. He discussed the ratio of licensed grow operations as compared to those which were awaiting licensing. He thought the impacts would be felt in coming years, and noted that the trust had been looking at the experience of other states such as Colorado and Oregon. He thought the other states had been seeing some impacts from legalization. Co-Chair MacKinnon asked about potential future implications in Alaska, based on what was observed in other states. Mr. Jesse considered that states that had pursued legalization had found poly-substance use. He thought the increased use caused a problem in the public safety arena, as there was no method for testing for consumption of marijuana. He referred to recent research showing heavy marijuana use in young adulthood as a trigger factor for schizophrenia. He noted that there had been a dearth of research on the effects of marijuana. He thought it was safe to assume that legalization would not reduce the impacts of substance abuse in the state budget. 9:46:46 AM Mr. Jones moved to slide 14, "Capital Budget": ? Separate MH appropriation bill includes portion of the state's capital budget that funds mental health projects ? Includes funds for both operating and construction to provide housing for Trust beneficiaries Mr. Jones discussed slide 15, "Mental Health Trust Authority Authorized Receipts - MHTAAR": ? Trustees authorize state agencies to spend Trust funds for specific operating and capital projects ? State agencies must have legislative approval to receive and expend Trust funds Co-Chair MacKinnon asked if there were state matching funds, or was AMHTA asking for only trust funds. She thought that there was an opportunity to provide the committee with an understanding of what the trust was requesting. She discussed the financial challenges of the state. Mr. Jones indicated that an ensuing slide would address the matter in detail. Mr. Jones turned to slide 16, "Established Focus Areas": 1. Disability Justice 2. Substance Abuse Prevention & Treatment 3. Beneficiary Employment & Engagement 4. Housing and Long-term Services & Supports Mr. Jones shared that the focus areas listed on the slide dictated how AMHTA staff would spend their time, how the trustees prioritized funding, and how it evaluated partnership requests submitted throughout the year. Through the model, the trust actively managed multiple long- standing investment strategies. He specified that further slides would address the land trade in Southeast Alaska, as well as budget details. 9:49:12 AM Mr. Jesse returned to slide 16, noting that the focus areas listed were recurring themes that would appear throughout discussion of other program issues. He emphasized that items 2 through 5 on the slide were essential in aiding beneficiaries to be fully functioning in the community and need less services and supports. He discussed the need for treatment of addictions or mental health issues, productive employment and engagement, and housing. Mr. Jesse showed slide 17, "Current Priorities," which depicted a flow chart listing Medicaid re-design and justice reinvestment as top priorities. He stated that the goal of the slide was to demonstrate how integrated the two efforts were. He posited that for justice reinvestment to work, the state needed to develop a sustainable Medicaid program. He referenced Medicaid reform legislation from the previous year. He referenced justice reinvestment research that indicated that individuals needed support for recovery, employment, and safe housing to be diverted from the cycle of criminal justice involvement. Mr. Jesse continued speaking to slide 17, relating that one thing behind the Medicaid re-design was to provide more flexibility as to how the state could use Medicaid funds. He used the example of providing support to individuals within their housing. 9:53:01 AM Mr. Jesse moved to slide 18, "Legislative Priorities": ? Criminal Justice Reform + Reinvestment ? Medicaid Reform Efforts ? Alcohol Excise Tax ? Title 4 Revisions ? Forest Service Land Exchange Trust Land Office Mr. Jesse noted that the trust would be bringing the legislature additional information regarding alcohol taxes based on questions it had received from members. He referred to a current economic study by the McDowell Group considering the impact of potential tax increases. The trust would be looking at the level of taxation and how Alaska compared to other states. Additionally, the trust would be bringing data and research on health and public safety impacts of increased taxes. In some categories such as underage drinkers, increased taxes we shown to reduce consumption and the subsequent draw on GF-funded public services. He revealed that increased taxes had a reductive effect on underage drinking, as the group was price- sensitive. Mr. Jesse continued discussing slide 18, and referred to Senator Micciche's comprehensive Title 4 revision bill from the previous session. He referred to issues with the bill around minor consuming and the composition of the Alcohol Beverage Control Board, and work with the bill sponsor. He believed the trust would be coming forward with a Title 4 bill in the current session, and believed it would have the support of a large portion of the industry as well as the Division of Public Health and the Department of Public Safety. He complimented Senator Micciche for working with stakeholders to build consensus on the issue. 9:56:57 AM Senator Micciche asked Mr. Jesse to discuss substance abuse problems in the state, and to give the committee an idea of the ratio of substance abuse associated with alcohol versus other drugs. Mr. Jesse emphasized that the state had an opioid addiction problem, but without a doubt alcohol continued to be the most impactful drug use and abuse problem for the state. 9:58:21 AM Mr. Morrison showed slide 23, "Forest Service Land Exchange": ? Equal value land exchange that better positions Trust's timber assets in locations that support a viable Southeast timber industry ? Exchanges approximately 18,000 acres of Trust land for 20,000 acres of USFS land ? Prevents timber asset devaluation and provides increased future revenues ? Federal legislation (S.131 & H.R.513) ? State legislation to be introduced this year Mr. Morrison discussed the original land acquisition of the trust. He explained that the trust land being exchanged was in a variety of locations, including Douglas island, Sitka, Wrangell, Petersburg, Ketchikan, and Meyers Chuck. The trust was seeking to acquire more contiguous lands in areas economically viable and suitable for logging in Shelter Cove, Hollis, and Naukati. He continued that there had been new legislation introduced at the federal level (SB 131 and HB 513) to facilitate the land trade, and that corresponding state legislation would be necessary. He stated that the land exchange was a top priority of the trust, and reiterated that timber revenues had declined after not having viable timber to cut. He stated that the land exchange would generate $50 million to $60 million in revenue for the trust through timber over the next 10 to 15 years. Additionally, the trade would provide important material for the timber industry in Southeast Alaska while the United States Forest Service (USFS) moved to a young- growth timber model. 10:01:04 AM Co-Chair MacKinnon asked if the legislation was somewhat in response to Senator Dunleavy's question regarding community acceptance of harvesting. Mr. Morrison stated that the trust had a sensitivity to the desires of the community. He furthered that even though the land exchange was value-for-value, there was a difference between timber value and land value. The trust felt strongly that the lands and timber it would receive were worth more to the trust than the lands it would be divesting. Co-Chair MacKinnon asked if such land was typically made available for multiple uses, or if the land was more often locked up for a specific use. Mr. Morrison understood that the legislation that had been introduced and the intent of the USFS was to take the land into the Tongass National Forest, and manage it according to the Tongass plan. He thought the plan did not necessarily encourage use of the land. Vice-Chair Bishop asked Mr. Morrison about his conversations with USFS, and wondered if he had discussed the young timber plan under review. He asked if the USFS was going down a path of encouraging logging of second- growth timber in the future. Mr. Morrison relayed that the USFS plan as stated was to preserve old-growth stands of trees and facilitate a change in the industry to a young-growth or second-growth model. He relayed that the USFS believed it had young-growth trees to offer, although it had publicly stated there were none that could be offered in the next five years. Co-Chair MacKinnon spoke in support of the land exchange. She thought there was an opportunity for beneficiaries of the trust to benefit from the land exchange. She asserted that the trust was attempting to honor the requests of communities that were close to its properties, including those that might prefer to see the land exist as a forest rather than being monetized for timber sales. She asked the committee to direct any questions to the land trust expeditiously. Mr. Morrison added that the land trade was an example of an important project for preservation of the land base, as well as future income. 10:05:38 AM Mr. Jesse discussed slide 19, "Criminal Justice Reform and Reinvestment": ? Continue efforts to ensure the successful diversion and re-entry of beneficiaries ? Committed nearly $4 million in FY18 for community prevention, diversion and reentry programs ? Support Criminal Justice Commission recommendations Mr. Jesse referred to SB 91, and thought that resultant issues could be put in two categories: those that clearly needed to be addressed to fine-tune the legislation, and misinterpretations of the effects of the bill on the criminal justice system. He affirmed that the trust was working with the sponsor on changes necessary to fulfill the goals of the legislation. He thought that when there were multiple changes to a system at one time, it was hard to discern which change had caused a particular impact. He discussed an impact pertaining to jail time that had drawn concerns, which was attributable to bail schedule changes rather than the bill. He knew presiding judges in the court system had heard the concerns and were considering the matter. He relayed that the trust would be looking further into the topic of Class C felonies and theft offenses. Mr. Jesse continued discussing slide 19. He emphasized that SB 91 would not achieve its anticipated savings and goals if there was not investment in necessary services once individuals in the criminal justice system were identified. He thought one problem with such reform was that potential savings happened downstream rather than being available for immediate investment. The previous year, the trust had received initial investment by using prospective marijuana tax funds. He spoke to research on recidivism that suggested treatment, employment, and housing were mitigating; as opposed to incarceration, which could lead to further criminal activity. Mr. Jesse asserted that without an upfront investment in necessary services, many of the strategies being employed would not be effective. He could not see a way to achieve the desired outcomes of the criminal justice reform legislation other than prospective revenues from marijuana tax, increased alcohol taxes, or a policy decision. 10:11:14 AM Senator Micciche thanked Mr. Jesse for the description of how the trust was approaching SB 91. He commented that crime rates were not at an all-time high but were increasing. He recognized issues such as the changed bail schedule. He noted that a priority of the Senate was to identify what needed to be amended, revised, and improved to make changes to give law enforcement the tools it needed to deal with crime. He agreed that incarceration had not been effective, and had in many cases turned lower-level criminals into serious offenders. He emphasized that it was important to put public safety first. Vice-Chair Bishop asked if it was true that when an individual desired treatment, it was important to start treatment immediately to optimize success. He wondered how much more capacity the state needed to meet the demand for treatment and recovery. Mr. Jesse was not able to provide an exact number, but thought that pre-trial assessments would provide more information. He discussed data collection by the Office of Children's Services as another source of information. He emphasized that Vice-Chair Bishop was correct in the assumption that it was important to begin treatment when individuals were open to making life changes. If treatment was delayed, individuals returning to the same environment were more likely to relapse, as well as re-offend if there was a criminal justice issue. 10:15:22 AM Senator Dunleavy thought that many of the issues the trust dealt with leant themselves to management and mitigation, rather than eradication. He used the example of smallpox to illustrate the concept of eradication. He referred to a report from the United States Department of Education that indicated $7 billion spent on education under the administration of President Barack Obama had yielded no results. He asked how AHMTA programs were measured for effectiveness. He wondered if the trust could show progress made on issues that were being addressed. Mr. Jesse commented on the encompassing nature of the question, and first addressed eradication. He commented that prohibition had not been effective as a means of stopping alcohol use. He discussed opioid abuse, and thought there was action that could be taken to mitigate the problem. He discussed individuals with intellectual disabilities, who may need a certain level of lifetime support and services. He emphasized the importance of finding the most economic and effective of assisting people over time. He used individuals experiencing dementia as an example of those who needed a growing level of support. He discussed maximizing the ability of family and communities to help individuals so reliance on government support was minimized. 10:19:51 AM Mr. Jesse continued addressing Senator Dunleavy's question. He shared that he was a recovering alcoholic. He thought it was not accurate to say that there could be eradication of alcoholism. He thought the trust could provide some information to elucidate the matter. He shared that a future slide would provide information on the Justice Information Center, which could answer some of Senator Dunleavy's questions. Senator Dunleavy wanted to see a detailed accounting of where funds would be spent, and the value of the funds towards the goals of the program. He questioned the goals of the programs, and thought it was important to examine the efficacy of a program and its goals. He thought his constituents would better understand state spending if the goals of programs were more clearly communicated regarding mitigation, sustainment, or eradication of issues. Mr. Jesse said he would work with Senator Dunleavy to provide more of the requested information. 10:22:07 AM Senator von Imhof supported the request of Senator Dunleavy and imagined that the trust was already measuring program efficacy and outcomes. She discussed methods of evaluation, and expressed a desire to see evidence that the trust was measuring and adapting to achieve the best outcomes. Mr. Jesse relayed that every authority grant or MHTAAR project that went through state government had a set of performance measures that were established with those providing the service. He used the example of the Bring the Kids Home program, which had been extremely data-driven and had a large work group of providers, state representatives, advocates, and family members; that had continuously crunched outcome data on strategies. He recalled that all the strategies had been adjusted over time through using data as a feedback loop to seek better outcomes. He emphasized that the trust would be focused on outcomes and data collection. 10:24:49 AM Co-Chair MacKinnon commented on how to discuss bills that had passed in previous sessions. Co-Chair MacKinnon followed up to say the responsibility of the committee was to examine the numbers. She stated that the committee had seen cost savings in many ways when working on criminal justice reform and reinvestment. She thought that the media had focused on the cost-saving angle, when the real intention of the bill sponsor was to save lives. She discussed incarceration, lack of rehabilitation, and the resultant costs to the state. She commented on the level of interest in the bill and the prevalence of misconceptions by the public. She emphasized that although the committee was tasked with examining the financial implications of the bill; the intent of SB 91 had been to save lives, and to provide the right services to allow for people to have a second chance. 10:28:39 AM Mr. Jesse displayed slide 20, "Medicaid Reform efforts": ? Approved nearly $10 million on reform efforts over three years ? Advocating for maintaining same optional services that the state currently provides which allows beneficiaries to remain in their community and often at a lower cost of care ? Build flexibility into programs to accommodate potential federal funding changes Mr. Jesse remarked that he had never seen a department work harder on such a complex issue as the Department of Health and Social Services (DHSS) had on the issue of Medicaid reform. He specified that there were 16 distinct strategy threads in the reform effort, 14 of which involved behavioral health. He informed that the trustees had invested nearly $10 million over three years to help provide the department the resources it needed to be successful in the reform effort. He described that some things were on track and on budget, but there were also unforeseen issues to consider. He emphasized that the trust was committed to the major reform effort to keep it sustainable and provide the level of healthcare that Alaskans needed. Co-Chair Hoffman referred to slide 19, and asked for more details about the $4 million that was committed for FY 18. He referred to slide 20, which listed $10 million of towards reform over three years. He asked if the three years were FY 18 through FY 20, or were the three years prior to the current budget. He thought it was not clear where and when the $10 million was placed in the budget. Mr. Jesse relayed that the funds were placed in the budget FY 17 through FY 19. Co-Chair Hoffman referenced slide 26, and asked if Mr. Jesse could explain where the funds were in FY 18. Mr. Jesse expressed that he might need assistance from other staff to provide any details beyond an overview. 10:31:40 AM Co-Chair MacKinnon asked Mr. Jesse if he had observed substantive change happening at DHSS, or if the change was only on the surface. Mr. Jesse shared that his and his staff's experience had perceived that DHSS leadership was clearly committed to major system change and reform. He thought that like any large bureaucracy, making sizable changes was challenging. He considered that it would be unrealistic to assume that there were not individuals in the agency that were resistant to change. He believed that the department was committed to structural change, and recounted that it had regularly addressed issues that arisen. Mr. Jesse continued, and discussed the department's funding of national-level consultants in substance abuse (who had worked with many other states on reform). He was sure that there would be some in the legislature that had hoped for more progress and more immediate savings from the reform efforts, but thought that the department was working hard to accomplish its goals. He mentioned personal sacrifices by department leadership as a demonstration of the level of commitment. 10:35:40 AM Co-Chair MacKinnon asked Mr. Jesse to inform the committee if AMHTA experienced any turf wars. She discussed change and hoped that the department would be able to adapt and sustain. Senator Micciche remarked on the new administration in the federal government, and the impending loss of the Affordable Care Act. He wondered if the trust had a position on point to react to what could come from the new administration, and how the state might deal with it. Mr. Jesse relayed that the trust was closely watching developments at the federal level. He relayed that AMHTA was part of AK Reform, which was a group comprised of a variety of stakeholders in the health industry. The group was also monitoring developments at the federal level. He expected there would be less funding, but also less federal control over how states chose to address problems. He thought the latter presented opportunities in the Medicaid reform arena. 10:39:11 AM Mr. Jesse displayed slide 24, "FY18 Operating Increments": Alaska Justice Information Center Trustees Proposed 225.0 MHTAAR 150.0 GF/MH Governor Proposed 225.0 MHTAAR 150.0 GF/MH IT Application/Telehealth Service System Improvements Trustees Proposed 100.0 MHTAAR 100.0 GF/MH Governor Proposed 100.0 MHTAAR 100.0 GF/MH Mr. Jesse asserted that the trust understood the state's fiscal situation, and had brought only two increments it felt were essential. He discussed the request for funding the Alaska Justice Information Center (AJIC). He recalled that the trust had partnered with the project before. The first project of the center was to analyze the trust's current programs to address criminal justice issues and identify how many matched evidence-based standards. The endeavor was part of the results-first effort that the trust had committed to. Mr. Jesse continued discussing AJIC, and noted that there were 52 different projects that addressed criminal justice issues around re-entry and recidivism, 65 percent of which were state funded. He continued that 57 percent of the programs matched an evidenced-based practice that had research in the field. The state contributed $23 million to the programs. He thought the committee would be pleased to know that 89 percent of the programs that the state money went to matched evidence-based programs. Mr. Jesse shared that the information center was currently working on determining the total cost of a journey through the criminal justice system. Additionally, evidenced-based programs were being analyzed for fidelity; and a cost- benefit analysis was being developed. He referenced similar work completed in the State of Washington. He discussed the idea of cost-benefit analysis and the number of individuals programs could reach. Mr. Jesse continued discussing slide 24, and thought that some of the information being discussed would serve to inform Senator Dunleavy's inquiries about program efficacy. He continued that the increment for the information center would provide an integrated data platform for the criminal justice system and criminal justice reform. The system improvements would create a central location and allow combination of information and provide iterative data feedback to the entire criminal justice reform system. He emphasized that the trust considered the project to be mission critical to getting criminal justice reform completed. Mr. Jesse noted that AJIC was working in complement with the Judicial Council, which was staffing the Alaska Criminal Justice Commission. He added that AJIC was located at the University of Alaska Anchorage, and was a great opportunity for the state to harness the resources of the university. 10:44:34 AM Mr. Jesse discussed the second operating increment listed on slide 24, for 'IT Application/Telehealth Service System Improvements,' which was for the Division of Senior and Disability Services. He spoke to the effectiveness and efficiency of maximizing the use of telehealth systems. He shared that the trust had learned that the systems had to be tested and used. He used the example of a recent meeting in which the technology had been problematic and caused delay. He referred to a backlog of assessments in the division. He questioned how telehealth could be used to reduce the backlog and continue to complete assessments in a more cost-effective way. Mr. Jesse discussed expanded use of telehealth beyond assessments. He thought it was possible to use telemedicine further and avoid costly transportation. The trust felt the increment was well worth the investment. He thought it was important to support agencies that were maximizing resources; with recognition that funding was limited, and the trust was willing to share a portion. Senator Dunleavy asked Mr. Jesse to inform the public exactly how much the request was for. Mr. Jesse specified that the request was for $200,000; with $100,000 of AMHTA receipts, and with a matching $100,000 of GF/MH. 10:47:47 AM Mr. Jesse turned to slide 25, "FY18 Capital." He commented that the areas of 'Homeless Assistance' and 'Special Needs Housing' were in the capital budget primarily because the major partner was the Alaska Housing Finance Corporation (AHFC). He specified that many of the dollars were operating dollars that went towards grants to provide service assistance to people in the facilities that had been funded in the past. He pointed out the 'Home modifications and Upgrades to Retain Housing' item, noting that it was a program for which the governor had changed fund codes, but had supported. Mr. Jesse continued discussing slide 25, noting that there were reductions in the 'Homeless Assistance Project' and 'Special Needs Housing Grants,' and most of the funding would go to support existing services. He noted that 'Coordinated Transportation' did not get support in the governor's budget, nor did 'Medical Appliances Assistive Technology' or 'Deferred Maintenance.' Senator Dunleavy asked Mr. Jesse to specify the amount of the funding request. Mr. Jesse read the FY 18 Capital request figures from slide 25. 10:51:10 AM Co-Chair MacKinnon suggested that if the programs were important to the trust, Mr. Jesse might want to contact her office to see if the trust was willing to use some of its reserve accounts for funding. She was not sure the Senate would agree with what the governor had proposed for the use of GF or dividends from AHFC. She discussed spending authority for the trust to put toward priority programs. Mr. Jesse thanked Co-Chair MacKinnon. Mr. Jesse mentioned a question by Co-Chair Hoffman and asked if he could provide the details at a later time. Co-Chair Hoffman answered in the affirmative. Mr. Jesse discussed slide 26, "FY18 Mental Health Budget Bill Increments," which showed a table listing increments under the headings, 'Operating Totals,' 'Capital Project Totals,' and 'Administrative Costs.' He read the figures from the slide, and noted that the governors proposed budget had reduced two items. He explained that the governor had made a slight reduction to the trust's administrative costs category. He noted that the trust had made the argument that it was self-funded, and denying its annual increments would not affect the state GF, but would impair the trust's ability to fund the administrative expenses of the trust. He relayed that the land and authority offices were under pressure from trustees to make the increments extremely small. He asserted that the trust would be approaching the finance subcommittees and asking that the funds be restored. Co-Chair MacKinnon asked if the trust was in the Public Employees' Retirement System (PERS) or maintained its own health and retirement system. Mr. Jesse relayed that trust employees were all exempt employees and in PERS. Co-Chair MacKinnon made note of the effect on the retirement system as employee salaries went up. She understood that the trust was paying into the PERS system. 10:54:38 AM Mr. Jones thanked the committee, and expressed willingness to answer any questions about the trust. Co-Chair MacKinnon thanked the testifiers. She acknowledged the AMHTA board members who worked on behalf of the people of Alaska, specifically on behalf of the beneficiaries of the trust. Co-Chair MacKinnon discussed the schedule for the following week. ADJOURNMENT 10:56:31 AM The meeting was adjourned at 10:56 a.m.