SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE March 19, 1997 9:05 a.m. MEMBERS PRESENT Senator Gary Wilken, Chairman Senator Loren Leman, Vice Chairman Senator Lyda Green Senator Jerry Ward Senator Johnny Ellis MEMBERS ABSENT All members present. COMMITTEE CALENDAR SENATE CONCURRENT RESOLUTION NO. 6 Relating to the Alaska Telemedicine Project. - MOVED SCR 6 am OUT OF COMMITTEE SENATE BILL NO. 36 "An Act relating to transportation of public school students; relating to school construction grants; relating to the public school foundation program and to local aid for education; and providing for an effective date." - HEARD AND HELD SENATE BILL NO. 85 "An Act relating to the public school funding program; repealing the public school foundation program; relating to the definition of school district, to the transportation of students, to school district layoff plans, to the special education service agency, to the child care grant program, and to compulsory attendance in public schools; and providing for an effective date." - HEARD AND HELD SENATE BILL NO. 97 "An Act giving notice of and approving a lease-purchase agreement with the City of Seward for the construction and operation of an addition to the Spring Creek Correctional Center, and setting conditions and limitations on the facility's construction and operation." - MOVED SB 97 OUT OF COMMITTEE SENATE BILL NO. 48 "An Act making appropriations for the operating expenses of the state's integrated comprehensive mental health program; and providing for an effective date." - MOVED SB 48 OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SCR 6 - No previous Senate action to record. SB 36 - See Senate Health, Education & Social Services Committee minutes dated 2/12/97, 3/14/97 and 3/17/97. SB 85 - See Senate Health, Education & Social Services Committee minutes dated 2/19/97, 3/14/97 and 3/17/97. SB 97 - See Senate Health, Education & Social Services minutes dated 3/12/97. SB 48 - No previous Senate action to record. WITNESS REGISTER Kathy Boucha Roberts Alaska Telemedicine Project Washington, D.C. POSITION STATEMENT: Discussed the purpose behind SCR 6. Jordan Koko, Intern Senator Pearce State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Discussed the purpose behind SCR 6 and the amendment included in the packet. John Williams, Mayor City of Kenai 210 Fidalgo Street Kenai, Alaska 99611 POSITION STATEMENT: Discussed concern with SCR 6. Shirley Holloway, Commissioner Department of Education 801 W. 10th Street, Suite 200 Juneau, Alaska 99801-1894 POSITION STATEMENT: Rick Cross, Deputy Commissioner Department of Education 801 W. 10th Street, Suite 200 Juneau, Alaska 99801-1894 POSITION STATEMENT: Discussed the four factors leading to a shift of money from rural and poor districts to provide funding for districts with the ability to provide funding. Robert Herron, President Lower Kuskokwim School Board PO Box 602 Bethel, Alaska 995599 POSITION STATEMENT: Stated that the concept of no new dollars is flawed. Patrick Doyle, Superintendent Copper River School District PO Box 108 Glennallen, Alaska 99588 POSITION STATEMENT: Discussed problems with CSSB 36(HES). Robert McClory, Parent & Counselor 102 Shoup Street Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the situation in Ketchikan. Tammy Morris, Parent 390 Forest Park Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the differences between Ketchikan and Fairbanks schools. Diane Gubatayao, Parent Member, Ketchikan Gateway School Board 867 Monroe Street Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the inequitable funding. Mike Murphy, Chairman Nome School Board PO Box 1062 Nome, Alaska 99762 POSITION STATEMENT: Suggested that a two tier system be applied. David Stone Rural Education PO Box 44 Point Hope, Alaska 99766 POSITION STATEMENT: Supported the current foundation funding formula. Kim Frankson, Member School Advisory Council PO Box 216 Point Hope, Alaska 99766 POSITION STATEMENT: Discussed the impacts of the proposals. Oliver Leavitt, Member North Slope Borough Assembly PO Box 124 Barrow, Alaska POSITION STATEMENT: Discussed the proposals as unconstitutional and discriminatory. Caroline Cannon, Mayor City of Point Hope PO Box 34 Point Hope, Alaska 99766 POSITION STATEMENT: Opposed changes to the current foundation formula. Jeff Jessee, Executive Director Alaska Mental Health Trust Authority Department of Revenue 3601 C Street, Suite 742 Anchorage, Alaska 99503 POSITION STATEMENT: Reviewed the AMHTA budget recommendations. ACTION NARRATIVE TAPE 97-28, SIDE A SCR 6 ALASKA TELEMEDICINE PROJECT  Number 001 CHAIRMAN WILKEN called the Senate Health, Education & Social Services Committee (HES) to order at 9:05 a.m. and introduced SCR 6 as the first order of business before the committee. KATHY BOUCHA ROBERTS , representing the Alaska Telemedicine Project, explained that the main reason for SCR 6 is to provide recognition for the telecommunications and health care partners who have worked on this project for a number of years. This project has collected data regarding health care needs statewide, demonstrated particular applications, and will be evaluating telemedical activity. Ms. Boucha Roberts informed the committee that she spent time with Alaska's Congressional staff who expressed the need for a consortium to form within Alaska. The staff was pleased to be informed that such a consortium had already been formed. JORDAN KOKO , intern for Senator Pearce, said that Senator Pearce introduced this legislation in order to recognize the achievements of the Alaska Telemedicine Project. This legislation would further recognize the project's achievements in providing accessibility to health care to rural areas of Alaska. The project has done much to demonstrate the needs for health care in rural Alaska. Mr. Koko pointed out the amendment in the packet which is merely a housekeeping measure clarifing that AT&T and Alascom are a single unit. Number 102 SENATOR LEMAN believed that this project provides information and is available statewide, but the benefits are especially important for rural Alaska. Senator Leman asked if this electronic information was available in Anchorage. JORDAN KOKO said that the information is available statewide, but is of particular importance in rural Alaska. CHAIRMAN WILKEN said that he would entertain a motion to adopt the following amendment: Page 1, line 4: Following "and": Insert "AT&T" Following "Alascom,": Delete "Inc.," Without objection, the amendment was adopted. JOHN WILLIAMS , Mayor of the City of Kenai, noted that his testimony was neither in support or opposition to SCR 6. Mayor Williams was concerned that the Alaska Telemedicine Project would be recognized as the officially sanctioned telemedicine and telehealth project in Alaska. Currently in Kenai, construction on a $10.5 million training center intended to provide distance learning is scheduled. This training project includes statewide education in the EMT field which could be construed as telemedicine. Mayor Williams expressed concern that if one group is designated as the officially sanctioned telemedicine and telehealth group, that group could interfere with other groups' ability to obtain grants. Number 162 KATHY BOUCHA ROBERTS explained that the purpose of the formation of the organization was to support the independent rural communities granting opportunities. The granting agencies would like collaborative efforts within a state. The Alaska Telemedicine Project would not impose on anyone's independence regarding granting. If other projects need evaluators in order to comply with proposal requirements, the Alaska Telemedicine Project has those available now. The project would like to collect statewide data regarding third party payers and DHSF in order to provide accurate data for the development of policy. The Alaska Telemedicine Project would provide services to enhance other independent projects. Ms. Boucha Roberts noted that in the future the telecommunications network being developed will partner with the education system, particularly distance delivery education. MAYOR WILLIAMS believed it worthwhile to add language regarding Ms. Boucha Roberts' comments about partnering. KATHY BOUCHA ROBERTS interjected that there is also the opportunity for groups such as the one in Kenai to join the Alaska Telemedicine Project as a member in order to have easy access to the services. CHAIRMAN WILKEN requested that Mayor Williams fax his suggestions to Senator Pearce's office. SENATOR LEMAN applauded the efforts of Mayor Williams. Senator Leman moved to report SCR 6 am out of committee with individual recommendations and accompanying zero fiscal note. Without objection, it was so ordered. SB 36 PUBLIC SCHOOL FUNDING SB 85 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS  Number 225 CHAIRMAN WILKEN introduced SB 36 and SB 85 as the next order of business before the committee. COMMISSIONER SHIRLEY HOLLOWAY , Department of Education, noted that many present have been part of the numerous efforts to rewrite the formula. Commissioner Holloway said that Deputy Commissioner Cross would inform the committee of what the department views as strengths and areas of concern with the CS. RICK CROSS , Deputy Commissioner of the Department of Education, identified the following areas as strengths of the bill: Allocating money on a per student basis. The 20 percent indicator for funding special needs students. Separating the funding for intensive needs students. The minimum school size at 10 students. Addressing single site schools within the formula. The expansion of the area cost differential study. Assigning area cost differentials to funding communities. The elimination of considering impact aid. Mr. Cross said that there are four areas of significant difference between SB 85 and CSSB 36(HES). Each of these four areas will shift money from districts with little or no ability to provide funding to those districts with the ability to provide funding. The first area of difference is the required local effort. Under SB 85 the required local effort is maintained at the current 4 mills. Under CSSB 36(HES), the required local effort is dropped to 3 mills. This drop decreases the size of funding school districts that are allowed from the required local sources. If the pie remains the same as Mr. Cross believed to be the intent of CSSB 36(HES), then the local portion is smaller and therefore the state's share is larger. If the state's share is kept constant, then money will be shifted from those districts without the ability to pay, REAAs, to those districts with the ability to pay. Secondly, SB 85 contains a supplemental equalization factor. Supplemental equalization is the ratio of a district's wealth to a statewide average which is inversely proportional to the amount of money the district receives from the state. The wealthier a district is, the less that district receives from the state. This factor would compensate poor districts. The third area of difference is transportation. CSSB 36(HES) keeps the transportation factor outside the formula as under the current formula. Transportation is the only area in education which has been compensated for inflation. As written, the transportation regulations and statutes provide that as the cost of providing education increases the compensation to districts that have transportation programs increases. Mr. Cross said that was not true for the foundation formula. Those districts with transportation programs have received an inflationary increase, but those districts without a significant transportation program have not which would be continued under CSSB 36(HES). Mr. Cross noted that those districts with transportation programs tend to be the wealthier districts with the ability to pay. Therefore, this is a third mechanism which would shift funding from poorer districts to wealthier districts. Number 341 The fourth difference is the taxation. Mr. Cross said that he would be discussing the impact of taxing REAAs. Currently, the REAA pie has only one piece, state aid. Federal aid is ignored under SB 85 and CSSB 36(HES). Under CSSB 36(HES), there would be a method of taxation requiring the REAA to provide the equivalent of a minimum local effort. Therefore the REAA's pie has a state and a local piece. Mr. Cross understood that CSSB 36(HES) would leave the state funding constant which would mean that the REAA local piece would be placed in the pot and be redistributed. This is the fourth manner in which dollars would be shifted from poorer districts to those districts with the capacity to pay. Mr. Cross did not believe there had been any discussion allowing REAAs to have excess capacity. The purpose of the taxation is to provide for the REAA's local effort and supplant state effort. The REAA would not be able to generate additional funds beyond the required minimum local effort as all organized boroughs are allowed and under CSSB 36(HES) without limit. Currently, the minimum required local effort is 4 mills. On a statewide basis, the organized boroughs are contributing to education on average over 7 mills. There is significant additional effort provided in areas where people have the capacity to pay which the method of taxation under CSSB 36(HES) would not provide to REAAs. In conclusion, Mr. Cross emphasized that the impact of the four mechanisms he discussed is excessive and would not fairly distribute dollars to districts. Number 387 COMMISSIONER HOLLOWAY discussed the incentive level of additional funds for those schools who try to achieve the Quality School Initiatives under SB 85. The Quality School Initiatives has the following four components: high academic standards for students as well as a mechanism to assess those standards, high professional standards from an evaluation and licensure perspective, networking between the school, the community and other agencies, and school excellence standards driving the new accreditation system. Commissioner Holloway emphasized the need to stop giving dollars to districts without the expectation of an increase in student learning. Across the nation, struggles to improve the quality of schools are occurring. Commissioner Holloway informed the committee that she had just returned from the Chiefs States School Officers meetings where one of the major topics was regarding improving schools and fixing the failing schools. No matter the political affiliation, those at the meeting agreed that high learning standards and assessing those standards must happen. Commissioner Holloway urged the committee to include in any foundation formula, core learnings and a mechanism to assess that learning. Everyone has an obligation to ensure that every student leaves the system with the skill and knowledge to make choices about their lives. Commissioner Holloway quoted statute that supported this obligation. Unless the expectation is tied to the funding, that expectation will not be achieved. Number 433 SENATOR WARD said that he had not heard from anyone that supported SB 85. COMMISSIONER HOLLOWAY did not believe that anyone would support a bill in which his/her school district is not perceived as a winner. Historically, that has been the problem with any foundation formula. Many would like to maintain the current formula and request more dollars. Commissioner Holloway was frustrated that no support could be garnered even for a proposal that adds money to the foundation formula. SENATOR WARD understood Mr. Cross' comments to mean that CSSB 36(HES) attacks the rural or poor in favor of the rich portions of the state. Does the current formula treat everyone fairly? RICK CROSS explained that currently, there are areas that do not have the capacity to generate revenue while other areas have that capacity. Until that is changed, that must be accepted when developing a foundation formula. CSSB 36(HES) has four powerful mechanisms which shift money from those areas without the ability to generate revenue under the current laws to areas that do. The compounding of those four mechanisms will have a marked and dramatic effect. With regards to the lack of support for SB 85, Mr. Cross said that some had stated support of SB 85 to him. He credited the Governor and the committee with accepting that the current formula cannot continue. Mr. Cross offered to work with the committee. SENATOR WARD reiterated that he had not found anyone that supported SB 85. If there is something out of balance, why was it not fixed before. Senator Ward suggested that the department submit recommended changes to the CS. Number 501 CHAIRMAN WILKEN believed that the initiative was Level III. If this type of initiative is necessary, why imbed such an initiative in a yearly entitlement where it would be lost. Chairman Wilken asked if it would be better to take the concept of the Quality Schools Initiative outside the foundation, review how it works on a test basis. If it improves some schools, then the initiative could be brought back. COMMISSIONER HOLLOWAY stated that the connection between the money provided and the expectations of the school should be reviewed. Commissioner Holloway looked forward to future conversations with the committee regarding that issue. CHAIRMAN WILKEN believed that Level III was a variable that did not add to the current goal. Chairman Wilken requested that Mr. Cross explain the transportation mechanism sometime. Chairman Wilken asked Mr. Cross if he meant that if the four components are left untouched, there is concern that the educational opportunity would be diminished for some in different regions of the state. RICK CROSS agreed that was his concern. When there are multiple factors that do the same thing within a complicated system, compounding occurs and a greater impact results. Mr. Cross believed that to be the case. COMMISSIONER HOLLOWAY mentioned that during the shift to unorganized boroughs, the Legislature committed to being the REAA's borough assembly. That commitment has not been upheld. SENATOR LEMAN noted that Mr. Cross said that the current formula is inequitable, yet the attempts to create greater equity as Mr. Cross says creates shifts in the same direction. Senator Leman said that Mr. Cross may be right that the correction may be occurring in one direction, but suggested that review of the current situation and the end result is necessary. The corrections are fairly small. For example, Hydaburg receives $8,400 per student per year, Anchorage receives $4,000 and Ketchikan receives $2,900. Those numbers still illustrate the inequity in distribution, but not by taking from the poor and giving to the rich. If a correction is applied, whoever wins supports the correction while whoever losses complains. For that reason, there has been no significant change in the formula in the past. RICK CROSS realized the need to correct, however there may be a greater level of correction occurring than anticipated due to multiple factors with the same effect. As the formula ages, the correction may be more than anticipated. SENATOR LEMAN agreed that Mr. Cross may be correct and said that he wanted to review that. TAPE 97-28, SIDE B Number 586 ROBERT HERRON , President of the Lower Kuskokwim School Board, believed that all testimony has echoed the same basic message voters last Fall supported: take care of education. Mr. Herron said that the ground rules of simplicity, equity, and timing encompassed in CSSB 36(HES) are sound. However, the fourth ground rule of no new dollars is flawed. Mr. Herron stated that no new dollars will not work. PATRICK DOYLE , Superintendent of the Copper River School District, informed the committee of the seven communities with schools in the district which serve a total of 600 students. Two of the schools are one room schools. Additionally, a correspondence school is operated with approximately 170 students of which over 100 are from outside the borders of the Copper River district. Mr. Doyle stated that over the past 15 years, the Copper River district has undertaken every possible conservation measure to reduce the costs of operation without affecting the educational opportunities of its students. Staff was asked to do more and accept less. The staff has given up many of the things that most teachers take for granted. The Copper River district operates its extra-curricular activities with volunteers. In spite of all the obstacles, the students in the Copper River School District perform among the best in the state and continue on to high levels of success. The latest reverse "Robin Hood" strategies of the Legislature may deliver the proverbial straw that breaks the back of the Copper River School District. The school districts of Alaska have been reduced to competing with one another for a pool of dollars that is too small to meet the educational needs of the students of Alaska. Mr. Doyle indicated opposition to the concepts of CSSB 36(HES). What is the equity in shifting inadequate financial support from one group to another? Where is the accountability from those who provide the funding to produce quality education? Mr. Doyle noted that he would forward his comments to the committee. Number 513 ROBERT MCCLORY , parent and counselor in Ketchikan, did not believe that his testimony was significantly different than others, but he felt compelled to share his thoughts with the committee. He discussed the impacts of the pulp mill's closure, particularly the sizable cuts to the schools. Mr. McClory mentioned the hold harmless clause and urged the committee to make the Educational Endowment Fund a reality. Mr. McClory informed the committee of the following statistics found in the Educational Background & Economic Status of the Spring of 1990. Those with a degree beyond high school on average earn $2,231 per month as compared to $1,077 for those with a high school diploma. High school dropouts on average earn $492 per month. Doctoral degrees boost earnings to $3,855 per month and those with special degrees earn about $5,000 per month. Mr. McClory urged the committee to show students that just as politics can negatively impact the job market, so too can the leaders positively shape the future. TAMMY MORRIS , parent in Ketchikan, informed the committee that she and her family had moved to Ketchikan from Fairbanks one and-a-half years ago. Ms. Morris noted that she had visited the schools in Ketchikan to determine whether the move would be good for her children. However there was a flaw in the planning, Ms. Morris did not consider inquiring about the funding status of Ketchikan schools. Only after relocating, when Ms. Morris' children began attending the Ketchikan schools did she realize there was a problem. The schools in Ketchikan were not equal to those in Fairbanks. Ms. Morris informed the committee that Ketchikan schools do not have a nurse while Fairbanks schools do. Ketchikan students only receive one half hour of music each week. Ms. Morris noted the lack of physical education and current learning materials in Ketchikan. Ketchikan elementary schools do not receive any counseling services while Fairbanks schools do. One librarian in Ketchikan divides her time among four elementary schools while each Fairbanks school has a librarian. If funding continues in the same manner, the list will be longer. Ms. Morris was ashamed that there is adequate money in Alaska, but not all Alaskan children have equal funding for education. The Ketchikan district has been supporting the school district with as much as allowed, the difference can only be made by the state. DIANE GUBATAYAO , parent and Ketchikan Gateway School Board Member, informed the committee of the January 1997 Education Week which grades Alaska with a D+ in equity and an F on allocation. With regards to the ties between quality education and teacher funding and higher standards, Ms. Gubatayao asked if there have been studies that show flat funding in education lead to a decline in education. She mentioned the increase in oil prices and permanent fund dividends. In conclusion, Ms. Gubatayao said that she was looking for someone to realize that funding is inequitable. Number 415 MIKE MURPHY , Chairman of the Nome School Board, stated that none of the proposals solve the issues of accountability, equity, fairness, and simplicity. Mr. Murphy suggested that schools be funded in a two tier system. The operations and maintenance of the schools should be funded first and then education. Depending upon a schools location in Alaska, the cost of operation is different. For example, if $5,000 per student is received for school A and it costs $1,000 per student to maintain school A while school B only needs $500 to operate and maintain school B, then school B is able to spend $500 more on education. That is not fair or equitable. If costs for operation and maintenance are taken care of statewide, that would be fair because those are fixed costs. Mr. Murphy proposed that an average of operations and maintenance costs be taken from the past five years in order to establish the state's share. However, the state must be willing to fund increases or decreases as they occur. Also incentives should be offered to those school districts that work to lower costs. If a district saves $50,000 by reducing energy costs, the state could give the district a percentage of the savings. Now that operations and maintenance costs have been funded, education can be funded. Mr. Murphy pointed out that several problems in the current proposals will disappear once the cost of operations and maintenance are dealt with. First, the dollars for education become more equitable and fair because education is being funded alone. Second, the area cost differential battle becomes smaller. The figures are no longer skewed for the high cost of operation and maintenance in rural Alaska. The cost of education is fairly average statewide when comparing teacher's salaries. Mr. Murphy did acknowledge differences in the cost of freight. Mr. Murphy stressed that education becomes more accountable when funded alone. Mr. Murphy also mentioned that the foundation formula has not kept up with inflation. DAVID STONE , testifying from Point Hope, informed the committee of Resolution 97-13 which requests $10 million for annual educational support for the North Slope Borough School District. This amount would not even pay for operating two of the larger schools in the district. Mr. Stone opposed any reduction to the already inadequate educational funding from the State of Alaska. He also opposed any legislation changing the foundation formula such that the North Slope Borough would be required to provide financial support to the rest of the state. The City Council of Point Hope is opposed to any action by the Legislature that would reduce or redistribute the current foundation funding of the North Slope Borough. The City Council of Point Hope supported the current foundation funding formula. Mr. Stone said that any decrease in funds would be devastating, especially in the Point Hope area. Mr. Stone noted the air travel necessary in the North Slope. CHAIRMAN WILKEN commented that the students from the North Slope did a great job testifying before the committee last week. Number 325 KIM FRANKSON , Parent and School Advisory Council member from Point Hope, discussed the impacts that would result with the loss of funding to the North Slope. The loss in funding would result in the loss of services, such as access to libraries, to the students and residents of the North Slope. Ms. Frankson indicated that the loss of funding could result in an increase in the welfare, social service, and unemployment rolls. Ms. Frankson pointed out that people can lose their jobs as a result of the proposals before the committee. CHAIRMAN WILKEN inquired as to the number of people wanting to testify in Point Hope. After discovering that four or five more desired to testify, Chairman Wilken invited those folks to fax their testimony or have one person speak for those remaining. OLIVER LEAVITT , North Slope Borough Assembly member, noted that the committee had the full text of his testimony. The North Slope has been painted into a corner. The people of the North Slope are opposed to being zeroed out. Mr. Leavitt noted that the Mayor and the Assembly members believed that the foundation funding proposals are unlawful under the Alaska State Constitution as well as federal laws. Mr. Leavitt quoted Article VII, Section 1 of the Alaska State Constitution, the public school provision, which does not permit the Legislature or the state to arbitrarily deny the school children of the North Slope any and all state aid for education. Most of the state education budget is produced by taxes and royalty on the North Slope oil. Although the Inupiat Eskimo people opposed the North Slope oil development in the 1960s, an informal accommodation was reached between the residents of the North Slope, the oil industry and the state. Mr. Leavitt stressed that now a major effort to deny any state education benefits to the residents of the North Slope is underway. This is mean spirited, short sighted, harmful to our children, and contrary to the state's long term economic interests. Mr Leavitt contended that this foundation formula effort is diverting the borough's scarce resources from projects that could generate revenue for the state, the borough, and for the children. In conclusion, Mr. Leavitt emphasized that the quality of education of the children of the North Slope will be protected. Other local funding sources for North Slope schools will have to be found if K-12 education funds are eliminated. Mr. Leavitt identified the following options if state aid is lost: raising the millage rate from 18.5 to 20 mills, imposing annual regulatory and license fees on new energy projects, and increasing other tax and license fees on the oil industry. Mr. Leavitt requested that the committee work with the borough on this issue. CHAIRMAN WILKEN noted that Barrow had just joined the meeting via teleconference. He asked that those wishing to testify fax their testimony because there would not be time today to hear from Barrow. Chairman Wilken asked if Point Hope had chosen a speaker. Number 195 CAROLINE CANNON , Mayor of Point Hope, opposed any changes to the current foundation formula in the North Slope School District. Mayor Cannon discussed the community uses of the school facilities and the high cost of living in the North Slope. Mayor Cannon identified adequate funding by the state as the problem. Alaska has a constitutional responsibility to provide adequate funding for all. Mayor Cannon also pointed out that this proposal may be unconstitutional because it may discriminate against a community that is 95 percent minority. SB 97 LEASE-PURCHASE SPRING CREEK CORRECTIONAL  CHAIRMAN WILKEN announced that SB 97 would be the next order of business before the committee and he intended to move it out of committee today. SENATOR GREEN moved to report SB 97 out of committee with individual recommendations and accompanying fiscal notes. Without objection, it was so ordered. SB 48 APPROPRIATION: MENTAL HEALTH PROGRAM  CHAIRMAN WILKEN introduced SB 48 as the final order of business before the committee. JEFF JESSEE , Executive Director of the Alaska Mental Health Trust Authority (AMHTA), informed the committee that the primary mission of the Trust Authority is to manage the trust in perpetuity to enhance the lives of its beneficiaries. Mr. Jessee began his review of the FY98 Mental Health Budget Overview document. (See Attachment A) Mr. Jessee identified the beneficiaries of the Trust, which represent a broad group not limited to mental illness. The comprehensive mental health program is broader than the beneficiaries. Mr. Jessee emphasized that prevention is essential for a long term strategy which is evident in the Trust's budget recommendations. Mr. Jessee explained that the AMHTA income account consists of three percent of the Trust fund balance at the Alaska Permanent Fund Corporation plus 100 percent of Trust land income. The Trust land office is $300,000 over the projected income for FY97 which totals $1.3 million. Mr. Jessee reviewed the sheet in Attachment A which specifies where the funds go. The colored sheet in Attachment A clarifies how the Trust develops budget recommendations per the existing structure of planning. Recommendations from various groups are made to the Trust who then develops a strategic funding plan. TAPE 97-29, SIDE A Number 008 Mr. Jessee explained that the separate appropriation bill for mental health is basically program budgeting. Separate programs for each beneficiary group was created which allowed focus on the specific technology and funding mechanisms to meet that group's needs. However the negative impact of that separation was the loss of the ability to integrate the services between populations. For example, dual diagnosis such as a person with alcoholism and a mental illness could lead to that persons exclusion from one portion of the treatment. A program budget attempts to obtain a comprehensive view of the services and then integrate the services which result in budget recommendations. Mr. Jesse reviewed the funding priorities listed in Attachment A. The closure of the Harborview Developmental Center is a high priority. The difficulty in transitioning out of institutional care is that the end result is apparent, but that transition requires double funding. The institution must be run at full capacity while building up the community alternatives. With Harborview, the Trust used Trust income to facilitate the transition to the community based delivery system. Therefore, general fund monies were freed to be placed into community programs. Now that the population of Harborview decreases so does the Trust's income support. In FY98, everyone should be transitioned from Harborview. Mr. Jessee believed that a similar strategy should be utilized with the downsizing of API. Number 091 Mr. Jessee also mentioned the consumer outcome funding priority. The trustees want to quantify the effect of the funding. For example if there is an employment program, how many people were placed into jobs. Therefore some of the projects attempt to obtain that outcome information. Once that information is available, the Trust and the Legislature has the basis to make rational funding decisions based on the outcomes. Mr. Jessee continued with the AMHTA budget recommendations included in Attachment A. Mr. Jessee stated that the AMHTA Authorized Receipts column are for important areas not extras as some believe. The General Fund/Mental Health column illustrates the focus on building the infrastructure which the state needs to provide for a comprehensive program. Mr. Jessee pointed out that Alaska has a huge aging population which can be illustrated in the money requested for case management and increased respite care for seniors. This is an attempt to avoid the more costly institutions. The suggestions for the general fund are focused on strategic improvements in the manner in which services are delivered. Mr. Jessee turned to the Capital Budget recommendations included in Attachment A. Again the Trust has tried to partner with the state; to use the Trust's funds as often as possible to match general funds. Mr. Jessee believed the match process worked well because it ensures that there is a consistent direction. Number 159 SENATOR WARD asked if the $50,000 for the UN Conference would be utilized for providers to come or for people from Native communities to come. JEFF JESSEE clarified that the money will attempt to get people from rural areas, primarily consumers, to participate in that conference. Mr. Jessee stressed that the intent is not to subsidize providers. SENATOR WARD asked if any of the appropriations went out to RFPs. JEFF JESSEE explained that virtually all of the money flowing from the Trust goes to administrative agencies, either the DHSS or the Commission on Aging. The majority of those dollars are placed on a RFP for competitive grants. In further response to Senator Ward, Mr. Jessee clarified that under the settlement AMHTA could freely spend funds without legislative appropriation. Mr. Jessee did not want to create a set of grant administrators that would duplicate the grant administrators that already exist within state government. Therefore, AMHTA is working with those agencies as surrogate administrators. Mr. Jessee pointed out that grants under $10,000 that are awarded three times a year are decided upon by the staff, off budget. Mr. Jessee discussed the outcomes measures area which are done off budget in order to ensure that the trustees have control. SENATOR ELLIS requested that Mr. Jessee explain the $1 million offer to Medicaid services and comment regarding the cuts proposed by the House to Medicaid services. JEFF JESSEE explained that the trustees have tried to assist the state in turning on Medicaid options such as vision and dental. AMHTA is offering $1.5 million Trust income to match a similar amount from the state to access a similar amount from the federal government. With regards to the proposed Medicaid reductions, Mr. Jessee expressed concern that would eliminate the possibility for the state and the Trust to work together to turn on those options. CHAIRMAN WILKEN said that he would entertain a motion. SENATOR GREEN moved to report SB 48 out of committee with individual recommendations. Without objection, it was so ordered. There being no further business before the committee, the meeting was adjourned at 10:55 a.m.