Legislature(2017 - 2018)HOUSE FINANCE 519

02/03/2017 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Pat Pitney, Director, Office of Management & TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 95                                                                                                             
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,   and   other  appropriations;   making                                                                    
     reappropriations;  amending  appropriations;  repealing                                                                    
     appropriations; and providing for an effective date."                                                                      
2:25:13 PM                                                                                                                    
Co-Chair Seaton invited Ms. Pitney to come to the table.                                                                        
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF  THE GOVERNOR,  would be reviewing  the components                                                                    
of  the supplemental  budget  request.  She would  highlight                                                                    
some of  the more significant items.  The information packet                                                                    
provided to members had a  list of every change presented in                                                                    
the "FY 2017 Supplemental Bill" (copy on file).                                                                                 
Ms. Pitney reviewed slide  2: "FY2017 Supplemental Summary."                                                                    
She reported  that the total supplemental  request was $51.7                                                                    
million unrestricted  general funds  (UGF) and  $113 million                                                                    
in total. The  supplemental request under review  was one of                                                                    
the smaller requests in the past several years.                                                                                 
Ms. Pitney continued to  slide 3: "UGF/DGF/Other/Fed Summary                                                                    
by Department  (1088)." She indicated that  the slide showed                                                                    
a  breakout   of  the  operating  supplemental   request  by                                                                    
department. The unrestricted  general fund operating request                                                                    
totaled $51.6 million and $95 million in total funds.                                                                           
Ms. Pitney  detailed slide 4: "Statewide  Department Summary                                                                    
-  Capital  Budget (1183)."  The  slide  showed the  capital                                                                    
appropriations which totaled $75,000  UGF and $18 million in                                                                    
total funds.                                                                                                                    
Ms. Pitney advanced to the  detail sheet on slide 5: "FY2017                                                                    
Supplemental  Bill -  Page 1  of 10."  She would  not review                                                                    
every item but  was happy to answer any  questions about any                                                                    
numbers  she did  not cover.  She  referred to  line 2.  The                                                                    
first  request was  an  increase which  included  UGF for  a                                                                    
health   insurance  rate   increase.  The   rate  would   be                                                                    
increasing from $1346  per month to $1555 per  month. In the                                                                    
previous year the administration  had requested an amendment                                                                    
for the  FY 17  budget once it  recognized that  the state's                                                                    
reserves were getting  low and that the state  would need to                                                                    
have a  rate increase for  FY 17. She continued  that rather                                                                    
than a rate  increase, there was a deposit  into the working                                                                    
reserve  in FY  16  that bolstered  the  reserve amount.  It                                                                    
allowed  the state  to receive  the same  rate from  July to                                                                    
January.  The  Department  of   Administration  had  put  in                                                                    
savings  measures   and  had  increased  the   cost  to  all                                                                    
employees for  their health care  premiums. All  the actions                                                                    
were not enough to keep  the reserve healthy. Therefore, the                                                                    
department had to impose a  mid-year rate increase which was                                                                    
out of  the ordinary. It was  the same rate that  was in the                                                                    
FY  18 budget  request. The  total came  to $6.0  million of                                                                    
which  $5.3  million  was  UGF.  She  relayed  that  in  the                                                                    
previous  year the  UGF was  not provided,  but many  of the                                                                    
non-general fund components were  provided for a health rate                                                                    
increase. It  was the reason  the general fund was  a larger                                                                    
part currently.                                                                                                                 
Ms. Pitney moved to the item  listed on line 3. She reported                                                                    
that  furlough  days  were negotiated  into  the  supervisor                                                                    
union contracts. The negotiation  ended after the budget was                                                                    
put  together the  previous year.  The result  was that  the                                                                    
budget was reduced in accordance  with the mandated furlough                                                                    
Vice-Chair  Gara  commented  that  the court  system  had  a                                                                    
budget  savings  measure  by offering  their  own  voluntary                                                                    
retirement  incentive plan.  If a  person was  3 years  past                                                                    
retirement age they were offered  3 months pay. As a result,                                                                    
several   folks  retired   generating  a   significant  cost                                                                    
savings. He  wondered if such a  plan was in place  in other                                                                    
departments.  Ms.  Pitney  thought  the  question  would  be                                                                    
better answered another day.                                                                                                    
2:31:41 PM                                                                                                                    
Ms.   Pitney  scrolled   to  slide   6  (Page   2):  "FY2017                                                                    
Supplemental Bill  - Page 2 of  10." She pointed to  line 6.                                                                    
She  explained  that  the Public  Defender  agency  received                                                                    
receipts  from collections  for representing  clients. Often                                                                    
those collections  came from  garnishing clients'  PFDs. The                                                                    
collections were  down because  of the lower  dividend rate.                                                                    
The supplemental  request would replace the  amount expected                                                                    
from collections not materialized.                                                                                              
Representative  Wilson   asked  when   the  last   time  the                                                                    
administration reviewed  the criteria  for qualifying  for a                                                                    
public defender.  She was aware  that a formula  was applied                                                                    
based on income. There were  some clients that would qualify                                                                    
even  though  they  did  not  have  money  immediately.  She                                                                    
thought that  was the reason  for the $455,000  request. She                                                                    
wondered  if  the  criteria   needed  updating.  Ms.  Pitney                                                                    
responded that  the amount a  defendant paid was based  on a                                                                    
court decision.  The issue concerning  the criteria  used by                                                                    
judges to  determine how much  should be paid  was currently                                                                    
being addressed. She commented  that conversations among the                                                                    
different affected  parties were  some of the  best outcomes                                                                    
of the justice reform effort in the previous year.                                                                              
Ms.  Pitney reviewed  item  7, a  federal  grant that  would                                                                    
allow the state  to address some audit  issues pertaining to                                                                    
commercial  driver's  license  examiners.  The  state  would                                                                    
incur  an ongoing  cost  of $36,000  for  the software  that                                                                    
would be implemented.                                                                                                           
Ms. Pitney  detailed that line  8 was  an increase due  to a                                                                    
classification   study  completed   in  December   of  2016.                                                                    
Occupational licensing examiners would  move from a range 13                                                                    
to a range 14. There was  also a corresponding amount in the                                                                    
FY 18 budget.                                                                                                                   
Representative  Pruitt  asked  for the  amount.  Ms.  Pitney                                                                    
responded that  it was  approximately $165,000  or $170,000.                                                                    
She would provide the exact number later.                                                                                       
Ms. Pitney  discussed slide 7:  "FY2017 Supplemental  Bill -                                                                    
Page  3 of  10."  The  two items  listed  were technical  in                                                                    
Ms. Pitney  spoke to  slide 8:  "FY2017 Supplemental  Bill -                                                                    
Page 4  of 10."  Lines 11,  12, 13,  and line  14 on  page 5                                                                    
[slide  8]  were  supplemental  requests  for  the  Medicaid                                                                    
program. She  recalled that  in the  prior summer  the state                                                                    
relayed payments  in FY 16  pushing them into FY  17 because                                                                    
the FY  16 budget  was insufficient  to cover  the payments.                                                                    
The state  essentially wrote 2  checks in FY 17.  The amount                                                                    
requested reflected  the 2  checks. The  amount of  money in                                                                    
Medicaid  was about  $580 million.  The total  would be  $27                                                                    
million higher  with the supplemental request.  She reported                                                                    
that the amount  was just over $60 million less  than it had                                                                    
been  in  FY  15.  In  FY 17,  not  counting  the  expansion                                                                    
population, there  had been a 9  percent enrollment increase                                                                    
and  a 12  percent increase  in utilization.  Therefore, all                                                                    
the  reform efforts  moving billing  from  state funding  to                                                                    
federal funding  has allowed the Medicaid  program to remain                                                                    
steady and below where the state was in FY 15.                                                                                  
2:37:33 PM                                                                                                                    
Vice-Chair Gara  asked her to  repeat her  previous comments                                                                    
about  the  increase  in   utilization  and  the  associated                                                                    
increase in  costs and the comparison  between fiscal years.                                                                    
Ms.  Pitney  reported that  in  2017  the number  of  people                                                                    
eligible for  Medicaid increased 9 percent.  The utilization                                                                    
was  up  a  total  of  12 percent.  She  clarified  she  was                                                                    
speaking of the regular  Medicaid program, the non-expansion                                                                    
program.  She reported  that there  were reform  efforts and                                                                    
several savings  initiatives occurring  prior to  the reform                                                                    
efforts. The state was about  $60 million below where it was                                                                    
in FY 16 on an annual basis. It was a recurring savings.                                                                        
Co-Chair  Seaton  asked  if  it  was  before  or  after  the                                                                    
supplemental  request.   Ms.  Pitney  responded   after  the                                                                    
Representative  Wilson   asked  for  an  actual   number  of                                                                    
participants. She wanted to know  how many participants made                                                                    
up the 9  percent she mentioned. She  thought the percentage                                                                    
was substantial.  She wondered what  the reason was  for the                                                                    
substantial increase.  Ms. Pitney could provide  the numbers                                                                    
after the  meeting. She thought the  increase was reflective                                                                    
of the  economy and  job losses and  the number  of Alaska's                                                                    
aging population.                                                                                                               
Representative Wilson was aware there  was not a cap for the                                                                    
regular Medicaid program. She  thought that for the optional                                                                    
portions of Medicaid  a limit could be set.  She thought the                                                                    
legislature  had  set  a  limit. She  wondered  if  she  was                                                                    
correct.  Ms.   Pitney  would  have  to   consult  with  the                                                                    
Department of Health and Social Services.                                                                                       
Representative Wilson wanted the  information. She was under                                                                    
the impression  that the optional programs  were capped. She                                                                    
knew the  medical portion cold  not be capped.  However, the                                                                    
dental and other programs could be capped.                                                                                      
Co-Chair Seaton  asked if Representative Wilson  was talking                                                                    
about   a  dollar   cap  or   a   limitation  of   services.                                                                    
Representative  Wilson thought  there was  a dollar  cap for                                                                    
the optional plans. Co-Chair Seaton suggested asking HSS.                                                                       
2:42:28 PM                                                                                                                    
Vice-Chair Gara was  confused. He referred to pages  4 and 5                                                                    
[slides  8 and  9] and  noted that  for each  line item  the                                                                    
descriptions reflected  FY 16 costs  that the  state delayed                                                                    
paying until  FY 17.  He indicated there  were 4  items with                                                                    
various  amounts including:  $2.9  million, $219,000,  $15.9                                                                    
million,  and $7.6  million. There  were also  unanticipated                                                                    
costs associated with  more people using Medicaid  in FY 17.                                                                    
He only saw delayed payments on the slides.                                                                                     
Ms.   Pitney  responded   that   the  savings   initiatives,                                                                    
memorandum  of  agreements  with providers  allowing  higher                                                                    
billing  on the  federal  side,  and utilization  management                                                                    
initiatives put  in place  by the  Department of  Health and                                                                    
Social  Services (DHSS)  would offset  unanticipated growth.                                                                    
The program was  being managed to keep  costs contained. She                                                                    
suggested  that, had  the department  not had  to write  the                                                                    
checks in  FY 17 from FY  16, it would have  met the overall                                                                    
budget  target. They  were doing  many things  and would  be                                                                    
very  tight  at   the  end  of  the  year   in  meeting  the                                                                    
department's  overall  costs.  She reported  the  department                                                                    
believed  it  would "Squeak  in  under  the wire"  with  the                                                                    
savings initiatives and the reforms put into place.                                                                             
Vice-Chair Gara  stated that in  terms of  the unanticipated                                                                    
increase in the number of  people applying for Medicaid, the                                                                    
state was not seeking  a supplemental request because enough                                                                    
savings  had been  generated. The  savings would  compensate                                                                    
for  the increase  in the  number of  people qualifying  for                                                                    
Medicaid and  who the state was  paying for. He asked  if he                                                                    
was accurate. Ms. Pitney made one correction - 17.                                                                              
Vice-Chair Gara  asked why  the line  items were  4 separate                                                                    
components.  Ms. Pitney  replied  that  each were  different                                                                    
allocations within the appropriation.                                                                                           
Ms. Pitney  addressed to slide 9:  "FY2017 Supplemental Bill                                                                    
- Page  5 of 10."  She noted that the  rest of the  items on                                                                    
page 5  and the first  few items on  page 6 [slide  10] were                                                                    
smaller grants or accounting technical changes.                                                                                 
Ms. Pitney explained to slide  10: "FY2017 Supplemental Bill                                                                    
- Page 6 of 10." She  referred to line 24, the first capital                                                                    
supplemental  request  for  the  Whale  Pass  organizational                                                                    
grant. She explained that when a  new city was formed it was                                                                    
entitled  to   a  $75,000  grant  from   the  Department  of                                                                    
Commerce,  Community  and  Economic  Development.  The  item                                                                    
satisfied statute.                                                                                                              
2:46:48 PM                                                                                                                    
Representative Guttenberg asked about  the money provided to                                                                    
new  municipalities.  He  asked  if  calculations  had  been                                                                    
created  for  second  class  cities.  He  mentioned  student                                                                    
enrollment  counts  and  municipal  assistance.  Ms.  Pitney                                                                    
would  have to  get back  to him.  She noted  that community                                                                    
revenue sharing would be a factor.                                                                                              
Vice-Chair   Gara  stated   that  the   previous  year   the                                                                    
department had come to the  legislature reporting they would                                                                    
be  getting more  aggressive with  leveraging extra  federal                                                                    
funds to try  to replace state funds. He  recalled that many                                                                    
initiatives  had  been presented  to  reduce  the FY  17  by                                                                    
generating extra  federal funds. Currently, more  people had                                                                    
applied  for Medicaid  than  anticipated  (12 percent  more)                                                                    
generating extra costs.  He wondered how the  costs would be                                                                    
offset  by  federal savings  which  he  thought was  already                                                                    
reflected in the  budget in the prior year. He  did not want                                                                    
to see  the department  absorb all the  extra costs.  He was                                                                    
unclear  about  the  real  costs   having  to  do  with  the                                                                    
increased Medicaid  recipients. He asked if  there was extra                                                                    
federal savings  that the department generated  that was not                                                                    
reflected in the FY 17 budget.                                                                                                  
Ms.   Pitney   relayed   that  9   percent   reflected   the                                                                    
additionally eligible, and 12  percent was the actual change                                                                    
year  over  year.  Some of  the  increase  was  anticipated,                                                                    
However, 12  percent was not anticipated.  She thought Vice-                                                                    
Chair Gara's  question was  complex. She  would be  happy to                                                                    
sit down  with DHSS  to discuss  the numbers.  She mentioned                                                                    
that  among  the  savings  initiatives,  some  were  working                                                                    
faster   than  others   generating  a   higher-than-expected                                                                    
savings. She  mentioned pharmacy and travel  agreements. She                                                                    
would be happy to have a stand-alone discussion.                                                                                
2:50:46 PM                                                                                                                    
Vice-Chair Gara  was concerned with  having a large  gap for                                                                    
the budget  in FY 17 for  Medicaid. The budget in  FY 18 for                                                                    
Medicaid would  reflect the extra  people. He  was concerned                                                                    
with the FY 17 budget absorbing  all the costs for the extra                                                                    
people. He was unsure if  the comparison of the budget years                                                                    
would be true.                                                                                                                  
Co-Chair  Seaton  thought  there   was  some  confusion.  He                                                                    
clarified  that Ms.  Pitney was  saying  that in  FY 17  the                                                                    
state had 9  percent more eligible people and  the state had                                                                    
12  percent   greater  Medicaid  utilization   overall.  The                                                                    
increases  were  offset  in  FY 17  with  savings  that  had                                                                    
occurred. The  costs from FY 16  that were being paid  in FY                                                                    
17 were  independent of  the number  of new  eligible people                                                                    
and the  utilization rate. He  asked if he was  correct. Ms.                                                                    
Pitney responded, "That is correct."                                                                                            
Co-Chair Seaton further commented  that the committee should                                                                    
have had  2 conversations  separately because the  number of                                                                    
people eligible  and the utilization rate  were not included                                                                    
in any of the figures. The  costs were being absorbed in the                                                                    
cost  savings  generated in  the  current  year. He  thought                                                                    
Vice-Chair Gara was asking if  the state had anticipated the                                                                    
questions  and  had reduced  the  budget  by the  amount  of                                                                    
savings, or was the savings  greater than anticipated for FY                                                                    
Ms. Pitney responded  the FY 17 budget was  reduced from the                                                                    
FY  16 budget  for  savings initiatives.  Many  of the  cost                                                                    
savings were going well and  others were not. Independently,                                                                    
the  Medicaid group  was managing  the program  and managing                                                                    
their care  utilization to limit  costs where  possible. The                                                                    
administration was asking the  department to manage as tight                                                                    
as possible.  The administration  believed the FY  17 budget                                                                    
would be  adequate to meet  FY 17  costs. There was  a small                                                                    
chance  the state  might have  to  check write  into FY  18.                                                                    
Early on,  it became apparent that  the administration would                                                                    
have to come back to the committee.                                                                                             
2:54:58 PM                                                                                                                    
Vice-Chair  Gara  thought  the  math  did  not  add  up.  He                                                                    
reported that  he had  heard from  the department  that they                                                                    
were trying  to achieve  the federal  savings in  the budget                                                                    
the prior year. The department  had not been able to achieve                                                                    
all the  savings. On  one hand, the  state had  less federal                                                                    
money  coming in  than was  expected. Also,  there was  some                                                                    
portion of  the 12 percent  of people seeking  Medicaid that                                                                    
the state  anticipated in the  previous year and put  in the                                                                    
budget. Additionally,  there were more people  that received                                                                    
Medicaid services. It appeared  that Alaska had less federal                                                                    
dollars  coming in  for federal  replacement money  than the                                                                    
state had  hoped for and  more Medicaid costs going  out. He                                                                    
did not  understand how  there could  be less  federal funds                                                                    
and   more  state   expenditures,  without   asking  for   a                                                                    
Ms. Pitney  responded that his  logic was fair.  The federal                                                                    
savings  did not  line up  program-by-program, but  lined up                                                                    
collectively.  The  state  would   receive  a  savings.  The                                                                    
administration was  watching the department  items including                                                                    
expenditures and  every check that was  written monthly. The                                                                    
administration  believed   that  through   the  department's                                                                    
efforts it  could get through  the current fiscal  year with                                                                    
the  amount of  money being  requested. There  was a  slight                                                                    
chance that  a small amount would  have to be written  in FY                                                                    
Vice-Chair Gara was frustrated because  the costs were FY 17                                                                    
expenses.  He anticipated  that there  would be  real FY  17                                                                    
costs. He argued that more  people could not be treated with                                                                    
Medicaid services for free with  annual increases to medical                                                                    
care costs. He  opined that there would be an  FY 18 amended                                                                    
budget that  would add  costs to the  budget when  they were                                                                    
really  FY 17  costs that  should  be paid.  He thought  the                                                                    
budget comparison  between years  would be skewed  making it                                                                    
appear that the budget was increasing.                                                                                          
Ms.  Pitney  acknowledged  Vice-Chair Gara'S  concerns.  The                                                                    
administration was  confident enough  that the FY  17 budget                                                                    
would meet the FY 17 needs.  There was a chance that all the                                                                    
management efforts  would fall a  little short. If  that was                                                                    
the  case,  the  administration   would  come  back  to  the                                                                    
legislature.  The administration  felt confident  enough. It                                                                    
wanted to  keep the supplemental requests  low while leaving                                                                    
the pressure to manage  the program high. The administration                                                                    
thought  it could  get  through the  current  year with  the                                                                    
amount requested.                                                                                                               
Representative  Guttenberg reported  that  the expansion  of                                                                    
Medicaid  brought  in  a  new group  of  people,  more  than                                                                    
anticipated. Some  of the projected savings  was intangible.                                                                    
He spoke  of fewer  emergency rooms  and better  handling of                                                                    
chronic  illnesses.  He asked  if  there  was an  aspect  of                                                                    
measuring the changes.  He wondered about the  effect of the                                                                    
new group  on intangible items.  He asked if  the department                                                                    
was  trying  to  measure  the   changes  with  the  expanded                                                                    
Medicare    [Medicaid]   group.    Ms.   Pitney    responded                                                                    
2:59:46 PM                                                                                                                    
Representative  Ortiz  returned  to   the  $60  million.  He                                                                    
understood  that  the  state  spent  $60  million  less  for                                                                    
Medicaid than it  did in 2015. He asked if  he was accurate.                                                                    
Ms.  Pitney answered,  "Yes." Representative  Ortiz replied,                                                                    
"I feel good about that. Thanks."                                                                                               
Ms. Pitney  advanced to slide 11:  "FY2017 Supplemental Bill                                                                    
- Page  7 of 10."  She explained that  items 25 and  26 were                                                                    
the  Department   of  Fish   and  Game   (DFG)  supplemental                                                                    
requests. The first  was for a continuation  of studies that                                                                    
began  in  2013.  There  were   2  groups,  Pacific  Seafood                                                                    
Processors  and  Northern   Southeast  Regional  Aquaculture                                                                    
Association    Incorporated,   that    were   funding    the                                                                    
continuation of the studies. The  second request fulfilled a                                                                    
necessary  match  and  the  federal  funds  to  receive  the                                                                    
Pittman Robertson funds that were  available for Alaska. The                                                                    
match  source would  come from  DFG  funding. She  expounded                                                                    
that the  money was designated for  several capital projects                                                                    
that were part of a prioritized list.                                                                                           
Co-Chair  Seaton asked  whether the  funding match  would be                                                                    
ongoing  or   if  additional  federal  funding   had  become                                                                    
available  that   had  not  been  anticipated.   Ms.  Pitney                                                                    
reported  there  had  been  periodic  capital  requests  for                                                                    
Pittman Robertson  funding. The current item  was a periodic                                                                    
request. In  the past, the  request had been submitted  on a                                                                    
regular basis  as part of  the supplemental bill,  which she                                                                    
had not  been aware  of. However,  she believed  the request                                                                    
should have been part of the FY 17 or FY 19 budget.                                                                             
Ms. Pitney  highlighted line  30 on page  7 [slide  11]. The                                                                    
request was technical in nature.  She explained that 2 years                                                                    
prior, capital project funding had  been inserted because of                                                                    
several ongoing  negotiations. The  request would  allow the                                                                    
Department of  Administration to  continue to use  the funds                                                                    
in labor negotiations as necessary.                                                                                             
Ms.  Pitney continued  to line  31  on the  same slide.  She                                                                    
detailed  the request  for an  appropriation for  the Alaska                                                                    
Land Mobile Radio (ALMAR) system.  The amount of the request                                                                    
was $3 million. The amount  would come from money originally                                                                    
appropriated for  a car  driving range  at the  Sitka Police                                                                    
Academy.  The Department  of Public  Safety  felt the  money                                                                    
would  be better  spent maintaining  the  ALMAR system.  The                                                                    
administration was  $1.5 million  short of the  needed funds                                                                    
outside  of the  $3 million  and was  currently looking  for                                                                    
another source for the additional monies.                                                                                       
3:04:51 PM                                                                                                                    
Representative Pruitt  asked if the  money would be  used to                                                                    
maintain or  upgrade the system.  Ms. Pitney  responded that                                                                    
the money would  be used for both  the equipment maintenance                                                                    
and a refresh of the system.                                                                                                    
Representative  Pruitt  asked  about  what  the  legislature                                                                    
should expect  in the future  in terms of  funding requests.                                                                    
Ms. Pitney  indicated that the  amount would  be consistent.                                                                    
State records  showed $5 million  to $7 million  being spent                                                                    
on the  system each  year. It was  an expensive  system used                                                                    
throughout the state by public  safety employees. It was the                                                                    
state's statewide emergency communications system.                                                                              
Representative  Pruitt  asked  if  the  state  upgraded  the                                                                    
system  each year.  He asked  for clarification.  Ms. Pitney                                                                    
used the example  of software upgrades. They  did not happen                                                                    
every  year.  However,  the equipment  maintenance  happened                                                                    
every year. It  depended on what maintenance  was being done                                                                    
each year. It was cyclical.                                                                                                     
Ms. Pitney  advanced to slide 12:  "FY2017 Supplemental Bill                                                                    
- Page  8 of 10."  She spoke to  line 32, which  would allow                                                                    
the  state  to  receive  a  federal grant.  Line  33  was  a                                                                    
significant item. The  amount of the request  was $8 million                                                                    
for  the  Department  of  Corrections   (DOC).  One  of  the                                                                    
Medicaid  expansion   savings  came  in  the   form  of  the                                                                    
department  being  able  to   bill  Medicaid  for  prisoners                                                                    
hospitalized  for  more  than   24  hours.  She  noted  that                                                                    
although  the provision  was working,  the total  healthcare                                                                    
costs for  inmates did not  materially change by  being able                                                                    
to  bill for  extended  hospital stays.  The department  was                                                                    
seeing  increased costs  because of  nursing staff  turnover                                                                    
resulting  in overtime  and temporary  hiring costs.  Higher                                                                    
drug  costs and  higher  than  anticipated utilization  also                                                                    
contributed  to  increased  costs.  She  reported  that  the                                                                    
department had  asked for  $11 million  to cover  the costs.                                                                    
The  administration worked  with the  department to  look at                                                                    
management action that could be  taken to contain costs. The                                                                    
funding of $11  million included the $8  million request and                                                                    
cost savings  resulting from  tighter management  within the                                                                    
healthcare area. Hiring nurses  to provide adequate coverage                                                                    
would be the most effective  method of reducing costs within                                                                    
the  department.   She  asked   the  commissioner   and  his                                                                    
management team to scrutinize every  cost to find $3 million                                                                    
in savings.  She reiterated that  only $8 million  was being                                                                    
requested from the general fund.                                                                                                
3:10:22 PM                                                                                                                    
Representative  Wilson  understood if  an  inmate  was at  a                                                                    
halfway  house or  on electronic  monitoring  they would  be                                                                    
able  to  take advantage  of  Medicaid  expansion. Yet,  the                                                                    
Department of Corrections had reduced  the number of halfway                                                                    
houses  by  about  $8  million.  The  electronic  monitoring                                                                    
program (EMP) had also been cut  in half from 400 to 200. In                                                                    
terms of  high medical  costs, halfway  houses and  EMP were                                                                    
two  avenues the  state  was not  utilizing.  She had  heard                                                                    
stories of  people walking away  from halfway  houses, which                                                                    
she considered to  be a contract issue. She  believed it was                                                                    
up  to the  contractor to  make  sure [people  did not  walk                                                                    
away]. She  thought it was  unreasonable to hope to  see the                                                                    
savings by  prisoners only being hospitalized  for 24 hours.                                                                    
She imagined  hospitals would want  to them  [prisoners] out                                                                    
as  soon as  possible to  avoid paperwork.  She thought  the                                                                    
high costs were  due to prisoners not being  able to utilize                                                                    
options such as halfway houses  and the EMP. She argued that                                                                    
further  savings  could  not   only  be  found  in  Medicaid                                                                    
expansion but  within the prison  system itself.  Ms. Pitney                                                                    
would investigate the issue.                                                                                                    
Vice-Chair Gara  was concerned  with the  corrections issue.                                                                    
The commissioner  of DOC  had said  that the  department had                                                                    
$11   million  in   unanticipated   costs.  The   department                                                                    
requested  an  $11  million  increment   to  deal  with  the                                                                    
shortfall.   In  turn,   the  administration   directed  the                                                                    
department to  find $3.7 million  in savings that  was never                                                                    
identified in  the budget in  the previous year  and limited                                                                    
its supplemental request  to $8 million. He asked  if he was                                                                    
right in his interpretation. Ms. Pitney replied, "Yes."                                                                         
Co-Chair Seaton  stated that DOC  had identified one  of the                                                                    
problems   having  to   do  with   medical  facilities   not                                                                    
identifying  the  times   people  were  out  [hospitalized],                                                                    
hence, the 24-hour period was  not tracked. Therefore, there                                                                    
was  no  mechanism  to  bill Medicaid  for  the  95  percent                                                                    
federal reimbursement. He asked if  the issue had been taken                                                                    
care  of.  Ms.  Pitney  responded  that  the  staff  of  the                                                                    
commissioner's  office looked  at the  bills to  confirm the                                                                    
timeframe. The  office was actively  managing the  issue. In                                                                    
the case  where someone had  stayed over 24-hours  they sent                                                                    
it back.  The office  was managing the  issue on  a case-by-                                                                    
case basis.                                                                                                                     
Co-Chair  Seaton  asked if  things  were  now being  tracked                                                                    
properly.   Ms.   Pitney   responded  that   there   was   a                                                                    
disincentive for  the provider:  It was  easier to  bill DOC                                                                    
than  to  bill  Medicaid. Also,  providers  received  higher                                                                    
reimbursements if they billed  DOC rather than Medicaid. She                                                                    
relayed  that  there  were   some  built-in  incentives  and                                                                    
disincentives  that she  hoped  to manage.  She thought  the                                                                    
issues were longer-term contract management issues.                                                                             
3:15:09 PM                                                                                                                    
Representative  Guttenberg suggested  that  if the  provider                                                                    
billed DOC  they received a  higher reimbursement  rate than                                                                    
if they  billed Medicaid.  He wondered  what rate  the state                                                                    
received when  it returned to  Medicaid for billing  for the                                                                    
same service  - the higher  or lower rate. Ms.  Pitney asked                                                                    
Representative Guttenberg to repeat his question.                                                                               
Representative Guttenberg  heard Ms.  Pitney state  that the                                                                    
provider  would  rather bill  DOC  because  they received  a                                                                    
higher  reimbursement  rate  than if  they  billed  Medicaid                                                                    
directly.  He  wondered  if  the   state  got  reimbursed  a                                                                    
comparable  amount.  He  wondered  which  number  the  state                                                                    
received.  Ms. Pitney  answered that  the provider  received                                                                    
the Medicaid rate if they  were billed on Medicaid which was                                                                    
lower than if  they billed DOC directly. She  added that the                                                                    
rate could be adjusted after the transition.                                                                                    
Vice-Chair Gara asked  if the $11 million  shortfall for DOC                                                                    
had  anything  to do  with  withheld  felon PFD  funds.  Ms.                                                                    
Pitney responded  in the negative. The  current year's felon                                                                    
funds  were based  on  the prior  year's  check amount.  The                                                                    
amount in the budget was lagging a year.                                                                                        
Ms. Pitney  advanced to slide 13:  "FY2017 Supplemental Bill                                                                    
- Page 9  of 10." She spoke  to line 37 which  was a special                                                                    
appropriation for  a class V injection  well consent decree.                                                                    
The agreement  between the Department of  Transportation and                                                                    
Public  Facilities and  the Environmental  Protection Agency                                                                    
had to do with the clean-up  of how oil was collected in the                                                                    
maintenance  stations. She  addressed line  38 having  to do                                                                    
with refinancing.  There was  a savings  of $655  million by                                                                    
refinancing the Goose Creek debt.                                                                                               
Representative  Pruitt  asked  what  terms  changed  in  the                                                                    
refinancing agreement.  He wondered if the  state obtained a                                                                    
better  financing  rate  or extended  the  financing  for  a                                                                    
longer time. Ms.  Pitney was happy to  provide more details.                                                                    
However,  the  change  was  made  primarily  because  of  an                                                                    
interest rate reduction.  Representative Pruitt confirmed he                                                                    
wanted to see the refinancing details.                                                                                          
3:19:11 PM                                                                                                                    
Ms. Pitney  advanced to slide 14:  "FY2017 Supplemental Bill                                                                    
- Page 10  of 10." Ms. Pitney spoke about  line 39 regarding                                                                    
a $3 million request for  the disaster relief fund. The fund                                                                    
balance  was currently  about $2  million. The  amount would                                                                    
replenish the fund to the  normal level of about $5 million.                                                                    
She thought that  in the years before her  tenor she thought                                                                    
the amount might have been significantly higher.                                                                                
Representative Wilson  noted that wildfire relief  was not a                                                                    
part of the current  supplemental request. Typically, relief                                                                    
funding associated with wildfires  in Fairbanks would appear                                                                    
in the supplemental request each  year. She asked if, in the                                                                    
current year, relief  funding for wildfires was  paid for by                                                                    
the federal government. Ms. Pitney  would have to check into                                                                    
the issue. She thought plenty of funds were available.                                                                          
Representative  Wilson wondered  how much  was in  the fund.                                                                    
She  indicated there  had been  discussion about  putting an                                                                    
actual amount in the fund.                                                                                                      
Co-Chair Seaton asked if it  was different than the disaster                                                                    
relief fund. Ms. Pitney would get back to the committee.                                                                        
Representative  Pruitt  would  love  to  see  if  the  state                                                                    
returned money to  the general fund for  wildfire relief. He                                                                    
commented that  the state issued  its "make  whole" payments                                                                    
to welfare  recipients in October  because of  the Permanent                                                                    
Fund. He  asked if  the PF  was reduced to  a point  where a                                                                    
supplemental request was necessary.  Ms. Pitney would follow                                                                    
up with an answer.                                                                                                              
Vice-Chair  Gara  was   told  by  a  few   people  that  the                                                                    
legislature would  see a  supplemental for  fire suppression                                                                    
expenses  in the  current year.  He asked  if the  state was                                                                    
using up more  of the fund than normal. In  other words, was                                                                    
the state  changing its policy  about the amount  of reserve                                                                    
funds  to have  available for  fire suppression.  Ms. Pitney                                                                    
reported  that  the  administration  was  not  changing  the                                                                    
policy.  She had  not received  a supplemental  request from                                                                    
the Department of Natural Resources. She would find out.                                                                        
HB  95  was   HEARD  and  HELD  in   committee  for  further                                                                    
Co-Chair Seaton  thanked Ms. Pitney and  reviewed the agenda                                                                    
for the following meeting.