Legislature(2019 - 2020)ADAMS ROOM 519

04/29/2019 01:30 PM FINANCE

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Audio Topic
01:30:11 PM Start
01:30:48 PM HB20
01:31:12 PM Presentation: a Look-back in Criminal Justice Reform
02:57:32 PM HB96
03:40:32 PM HB31
04:18:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Crime by John Skidmore, Director, TELECONFERENCED
Criminal Div., Dept. of Law
+ HB 31 APPROP: EARNINGS RESERVE TO PERM FUND TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 96 PIONEERS' HOME AND VETERANS' HOME RATES TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 49 CRIMES; SENTENCING;MENT. ILLNESS;EVIDENCE TELECONFERENCED
<Pending Referral>
+= HB 145 PROPERTY CRIME; MOTOR VEHICLE THEFT TOOLS TELECONFERENCED
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 20 SEXUAL ASSAULT EXAMINATION KITS TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 29, 2019                                                                                            
                         1:30 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:30:11 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Wilson  called the House Finance  Committee meeting                                                                    
to order at 1:30 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
John  Skidmore, Director,  Criminal Division,  Department of                                                                    
Law;  Representative   Zack  Fields,  Bill   Sponsor;  Janet                                                                    
Henderson,    Self,    Juneau;   Representative    Johnathan                                                                    
Kreiss-Tompkins,   Bill  Sponsor;   Kevin  McGowan,   Staff,                                                                    
Representative   Jonathan   Kreiss-Tompkins;   David   Teal,                                                                    
Director,   Legislative  Finance   Division;  Representative                                                                    
Laddie Shaw, Bill Sponsor; Representative Steve Thompson.                                                                       
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Margie Beedle, Self, Juneau; Brad  Rider, Self, Juneau; Fred                                                                    
Koken, Self, Juneau; Aves  Thompson, Self, Anchorage; Sharon                                                                    
Long, Self, Anchorage;  William Harrington, Self, Anchorage;                                                                    
Rocky   Plotnick,  Self,   Anchorage;  George   Paul,  Self,                                                                    
Wasilla;   Angela   Rodell,   Executive   Director,   Alaska                                                                    
Permanent Fund Corporation.                                                                                                     
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 20     SEXUAL ASSAULT EXAMINATION KITS                                                                                       
                                                                                                                                
          HB 20 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 31     APPROP: EARNINGS RESERVE TO PERM FUND                                                                                 
                                                                                                                                
          HB 31 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 96     PIONEERS' HOME AND VETERANS' HOME RATES                                                                               
                                                                                                                                
          HB 96 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
PRESENTATION: A LOOK-BACK IN CRIMINAL JUSTICE REFORM                                                                            
                                                                                                                                
HOUSE BILL NO. 20                                                                                                             
                                                                                                                                
     "An  Act requiring  law  enforcement  agencies to  send                                                                    
     sexual assault examination kits  for testing within six                                                                    
     months   after  collection;   and   providing  for   an                                                                    
     effective date."                                                                                                           
                                                                                                                                
1:30:48 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilson  asked if  anyone  had  a question  on  the                                                                    
fiscal note regarding 9 new  employees within the Department                                                                    
of Law. There were no questions from members.                                                                                   
                                                                                                                                
^PRESENTATION: A LOOK-BACK IN CRIMINAL JUSTICE REFORM                                                                         
                                                                                                                                
1:31:12 PM                                                                                                                    
                                                                                                                                
JOHN  SKIDMORE, DIRECTOR,  CRIMINAL DIVISION,  DEPARTMENT OF                                                                    
LAW,  introduced the  PowerPoint presentation:  "A Look-back                                                                    
in Criminal Justice Reform." He  had been asked to provide a                                                                    
review of  criminal justice reform.  He began with  slide 2:                                                                    
Goals of  Reform." He  relayed that the  quote on  the slide                                                                    
was  from  the  Alaska  Criminal  Justice  Committee's  2015                                                                    
annual  report, dated  February 1,  2016. He  read from  the                                                                    
slide:                                                                                                                          
                                                                                                                                
     "Local  legislative  interest  in  these  efforts  were                                                                    
     heightened   by   reports   that  the   Alaska   prison                                                                    
     population  was up  27 percent  over  the last  decade,                                                                    
     growing  at  a rate  of  3  percent  a year,  and  that                                                                    
     recidivism remained  high with nearly two  out of three                                                                    
     offenders  returning to  prison  or  jail within  three                                                                    
     years. Absent  further reforms,  it was  projected that                                                                    
     the number  of persons  incarcerated would  soon exceed                                                                    
     current hard-bed capacity."                                                                                                
                                                                                                                                
Mr. Skidmore indicated that the  two goals of reform were to                                                                    
reduce  Alaska's  prison  population and  recidivism.  There                                                                    
might have been some additional  goals, but he mentioned the                                                                    
primary goals  of the Criminal  Justice Committee  when they                                                                    
began.  He wanted  to  take  a look  at  the state's  prison                                                                    
population  to recall  what the  committee was  reviewing at                                                                    
the time.                                                                                                                       
                                                                                                                                
Mr.  Skidmore   continued  to  slide  3:   Projected  Prison                                                                    
Population."  He  drew  attention  to  the  lower  left-hand                                                                    
corner  which was  dated  2016 and  copyrighted  by The  Pew                                                                    
Charitable  Trusts.  It was  a  slide  the organization  put                                                                    
together during the  time SB 91 [Legislation  passed in 2016                                                                    
regarding criminal  law and  procedure and  corrections) was                                                                    
being  debated.  The  slide was  frequently  displayed  that                                                                    
discussed   Alaska's  prison   populations.  He   noted  the                                                                    
historical  line  moving  from  actual to  projected  as  of                                                                    
July 1, 2016. The trend line  continued up during the period                                                                    
between July  1, 2014 through  July 1, 2016.  He highlighted                                                                    
the  projected area  and the  line [in  grey] which  went up                                                                    
absent further  reform. He suggested  that with  reform, the                                                                    
dotted  blue line  indicating  the  prison population  would                                                                    
decline dramatically  over the  following 2 years  from July                                                                    
1, 2017 [2016]  through July 1, 2018. He  clarified that the                                                                    
state had  been told  that absent  prison reform  the prison                                                                    
population would  increase. The  following slide  showed the                                                                    
actual prison population during the same period.                                                                                
                                                                                                                                
1:34:36 PM                                                                                                                    
                                                                                                                                
Mr. Skidmore discussed slide  4: "Actual Prison Population."                                                                    
The slide  reflected the actual  prison population  in 2018.                                                                    
He relayed that the source of  the data came from the Alaska                                                                    
Criminal  Justice   Commission's  2018  annual   report.  In                                                                    
general, there was a rise  in prison population from 2010 to                                                                    
2014.  He highlighted  that as  of 2014  up to  the time  of                                                                    
implementation of  SB 91  in mid 2016  there was  a downward                                                                    
rather  than  an  upward trend  as  projected.  He  reminded                                                                    
members that the previous slide  was copywritten in 2016. He                                                                    
did not know why there was  a difference in the numbers. One                                                                    
of the  slides was  from The Pew  Charitable Trusts  and the                                                                    
other was from the Alaska  Justice Commission. He was merely                                                                    
pointing  out   what  each  reflected.  The   Department  of                                                                    
Corrections   provided   the   information  for   slide   4.                                                                    
Supposedly,  according  to  The Pew  Charitable  Trust,  the                                                                    
Department  of  Corrections  provided  the  information  for                                                                    
slide 3  as well. He  concluded that the  slide dramatically                                                                    
showed  that the  prison population  was  going down  rather                                                                    
than up before the state had criminal justice reform.                                                                           
                                                                                                                                
Mr. Skidmore  drew attention to  when SB 91  was implemented                                                                    
in the  middle of 2016.  He referred  back to slide  3 which                                                                    
reflected the  implementation of  SB 91.  He noted  the drop                                                                    
which would  take about a year  to kick in. One  year later,                                                                    
the  drop  that  was  predicted   did  not  materialize.  He                                                                    
indicated  there  was  a slight  decrease  before  the  line                                                                    
trended up and swept back  down slightly. He made a personal                                                                    
comment about him  and his wife making  lasagna together. He                                                                    
compared the  layers of  lasagna to  the reform  details. He                                                                    
would  discuss  what some  of  the  reforms were  that  were                                                                    
supposed to bring the numbers down.                                                                                             
                                                                                                                                
Mr.  Skidmore continued  that after  SB  91 was  implemented                                                                    
there  should  have   been  a  decrease  in   the  line  for                                                                    
sentencing,  not property  and  drug  offenses. He  reported                                                                    
that every  sentence was reduced,  aside from  those related                                                                    
to sex offences.  The state had decriminalized  the crime of                                                                    
driving with  a suspended  license which equaled  17 percent                                                                    
of the  state's misdemeanor case load  and carried mandatory                                                                    
minimums. Previously,  the state had filed  about 2500 cases                                                                    
which  dropped to  less than  500  cases per  year with  the                                                                    
implementation  of SB  91. The  legislation stipulated  that                                                                    
for  anyone awaiting  sentencing,  their  sentence would  be                                                                    
reduced.  Drug crimes  were dramatically  changed in  SB 91.                                                                    
Possession  went  from  a  Class  C  felony  to  a  Class  A                                                                    
misdemeanor.  Not  only did  a  drug  possession move  to  a                                                                    
Class A  misdemeanor, the  first 2  offences came  with zero                                                                    
jail  time. Felony  drug prosecutions  had dropped  prior to                                                                    
and after SB  91 resulting in a drop of  filed cases by over                                                                    
700  per year.  Misdemeanors also  went down.  In 2017,  the                                                                    
reforms  related to  probation and  parole took  effect. The                                                                    
legislation  expanded  the  people that  were  eligible  for                                                                    
discretionary  parole. It  was mandated  that everyone  that                                                                    
became  eligible  had  a   hearing.  The  presumptions  were                                                                    
changed  making it  easier to  be released  on discretionary                                                                    
parole.  In  addition, a  cap  was  placed  on the  type  of                                                                    
sentences that were imposed for  a violation of probation or                                                                    
parole.  For example,  a technical  violation was  currently                                                                    
capped  at 3,5,  or 10  days. All  of the  different reforms                                                                    
were  supposed to  make the  prison population  decrease. He                                                                    
indicated that  slide 4 showed the  actual prison population                                                                    
trend.                                                                                                                          
                                                                                                                                
1:41:04 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Johnston asked  about  the  misdemeanor drop  in                                                                    
numbers and the timeframe  relating to the implementation of                                                                    
SB  91. Mr.  Skidmore responded  that SB  91 passed  in July                                                                    
2016.  He believed  an immediate  effective date  applied to                                                                    
the sentencing.  He reported  that the  other phases  of the                                                                    
bill  (probation and  parole and  pretrial) applied  in 2017                                                                    
and  2018.  The   sentencing  and  classifications  happened                                                                    
almost  immediately  after the  passage  of  SB 91  with  an                                                                    
effective date of July 1, 2016.                                                                                                 
                                                                                                                                
Vice-Chair Johnston  noted the prison  population increasing                                                                    
in 2013 and 2014 and  decreasing slightly in 2015. She asked                                                                    
if it  was accurate  to say that  the state's  recession and                                                                    
drug crisis started in 2015.  Mr. Skidmore responded that he                                                                    
could not  speak to a  recession. However, he  reported that                                                                    
the opioid crisis started in 2014 or 2015.                                                                                      
                                                                                                                                
Vice-Chair  Johnston  suggested  that with  the  passage  of                                                                    
SB 91, the state  began treating some aspects  of the opioid                                                                    
problem differently  - the state  lowered the  penalties for                                                                    
drug possession. Mr. Skidmore  responded that the sentencing                                                                    
was  reduced and  that no  jail  time was  required for  the                                                                    
first 2 offences. Vice-Chair Johnston was correct.                                                                              
                                                                                                                                
Vice-Chair Johnston wondered,  taking into consideration the                                                                    
recession  and  the  opioid   problem,  whether  the  prison                                                                    
population  numbers would  have looked  different had  SB 91                                                                    
not passed. Mr.  Skidmore responded that he  could not speak                                                                    
to her scenario. He was  before the committee to report what                                                                    
had been projected to happen  and what actually happened. He                                                                    
only knew  that prior to  SB 91 the prisoner  population was                                                                    
going down. He could not answer her question.                                                                                   
                                                                                                                                
Representative  Knopp thought  it  would  be interesting  to                                                                    
have  a  comparison  graph from  the  Department  of  Public                                                                    
Safety (DPS) regarding arrests within the same timeframe.                                                                       
                                                                                                                                
Co-Chair Wilson  indicated she would request  the comparison                                                                    
from DPS. She queried  whether something else was occurring,                                                                    
such  as  additional   treatment  availability,  that  would                                                                    
explain the  downturn. She  wondered if there  was a  way to                                                                    
look  at the  years from  2014-2016 to  see if  anything had                                                                    
changed that would account for the decrease.                                                                                    
                                                                                                                                
1:46:38 PM                                                                                                                    
                                                                                                                                
Mr.  Skidmore did  not have  a  precise answer.  He told  of                                                                    
having a  number of conversations during  the timeframe with                                                                    
the Commissioner  for Department  of Corrections  (DOC), Ron                                                                    
Taylor, who  was trying to implement  several changes within                                                                    
the department at the time. However,  he did not know if the                                                                    
changes  were  the  cause  for the  drop.  He  offered  that                                                                    
because of what  the committee was currently  looking at, it                                                                    
would be  appropriate to  look to DOC  for some  answers. He                                                                    
could not  recall any other  major legislation having  to do                                                                    
with  the criminal  justice  system from  2014  to 2016.  He                                                                    
mentioned  SB 64  [Legislation passed  in 2014  Short Title:                                                                    
Omnibus  Crime/Corrections/Recidivism]  that  had  passed  a                                                                    
year  prior  that  proposed   significant  changes,  but  no                                                                    
significant changes  were made  until the  implementation of                                                                    
SB 91.                                                                                                                          
                                                                                                                                
Co-Chair  Wilson commented  that she  had heard  many people                                                                    
had been arrested but charges had not been brought forward.                                                                     
                                                                                                                                
Representative Knopp  suggested that  the numbers  be broken                                                                    
down by crime type when  Co-Chair Wilson made her request to                                                                    
DOC. He asked Mr. Skidmore  whether the changes and fixes in                                                                    
SB 54  and SB 55 were  reflected in the chart.  Mr. Skidmore                                                                    
replied that  SB 54 was reflected  on the chart in  the last                                                                    
quarter of  2017. He recalled  that SB 54 was  enacted after                                                                    
the  special  session that  occurred  in  October 2017.  The                                                                    
count  provided by  the Criminal  Justice Commission  in the                                                                    
2018 report ended about the time 2018 began.                                                                                    
                                                                                                                                
Representative   Carpenter  suggested   Mr.  Skidmore   jump                                                                    
forward  several slides  to  address Representative  Knopp's                                                                    
question. Mr.  Skidmore indicated that crime  rates would be                                                                    
addressed further  later in the  presentation. He  wanted to                                                                    
cover  a couple  of  additional items  prior  to looking  at                                                                    
crime rates.                                                                                                                    
                                                                                                                                
Mr. Skidmore scrolled to slide  5: Goal: Reduce Recidivism."                                                                    
The second  goal of the  Alaska Criminal  Justice Commission                                                                    
was  to  reduce  the  recidivism rate  in  Alaska.  He  read                                                                    
directly from the slide:                                                                                                        
                                                                                                                                
     "The  state's growing  prison population  and increased                                                                    
     corrections   spending,  however,   had  not   produced                                                                    
     commensurate  improvements in  public safety  outcomes:                                                                    
     nearly  two out  of  every three  people released  from                                                                    
     Alaska prisons returned within three years."                                                                               
                                                                                                                                
Mr.  Skidmore  summarized that  Alaska  had  a problem  with                                                                    
recidivism, and  it was not  getting any better.  During the                                                                    
criminal   justice  reform   debate  for   SB  91   Alaska's                                                                    
recidivism rate was  one of the worst rates  in the country.                                                                    
It  was  suggested  that  the state  could  do  better  with                                                                    
criminal  justice  reform.  The  recidivism  rate  had  gone                                                                    
unchanged for  decades, and without enacting  reforms it was                                                                    
thought the recidivism rate could not go down.                                                                                  
                                                                                                                                
1:51:26 PM                                                                                                                    
                                                                                                                                
Mr.  Skidmore  advanced  to slide  6:  Recidivism:  National                                                                    
Perspective." The  special report  referred to on  the slide                                                                    
came from the U.S. Department  of Justice, Office of Justice                                                                    
Programs, Bureau  of Justice Statistics. He  relayed that it                                                                    
was  a  special  report  that  followed  up  on  a  look  at                                                                    
recidivism nationwide  that had  been conducted for  about 9                                                                    
years. He  indicated that  2014 was the  last year  in which                                                                    
people were tracked,  but the report was  not released until                                                                    
May 2018.                                                                                                                       
                                                                                                                                
Mr. Skidmore continued  to slide 7: "States  included in the                                                                    
BJS  recidivism study  of prisoners  released in  2005." The                                                                    
report  looked at  30 different  states  in which  prisoners                                                                    
were released in  2005 and followed for 9  years. Alaska was                                                                    
one of the  30 states that were followed. He  wanted to draw                                                                    
the  members  attention  to  Alaska,  Utah,  Oregon,  Texas,                                                                    
Georgia, North  Carolina, and  South Dakota.  He highlighted                                                                    
these  states  because in  looking  at  the Alaska  Criminal                                                                    
Justice    Commission's   report    (Justice   Reinvestment,                                                                    
published  in December  2015) on  page 5  it indicated  that                                                                    
there were  many other states  that had adopted  policies to                                                                    
reign in  the size  and cost  of their  corrections spending                                                                    
through justice  reinvestment strategy. They named  a number                                                                    
of states that Alaska should  look at and model itself after                                                                    
including  Georgia,   Mississippi,  North   Carolina,  South                                                                    
Dakota, Texas,  and Utah. He  noted that many of  the states                                                                    
mentioned  were also  involved  in  the national  recidivism                                                                    
study. It was  a significant point which he  would return to                                                                    
later in his presentation.                                                                                                      
                                                                                                                                
Mr.  Skidmore explained  slide 8:  "What is  Recidivism." He                                                                    
mentioned the  importance of having  a common  definition of                                                                    
recidivism so  that the  same thing  was being  measured. He                                                                    
read the list:                                                                                                                  
                                                                                                                                
     Measuring recidivism                                                                                                       
                                                                                                                                
    Recidivism measures require three characteristics:                                                                          
                                                                                                                                
         a starting event, such as a release from prison;                                                                    
         a measure of failure following the starting                                                                         
          event, such as a subsequent arrest, conviction,                                                                       
          or return to prison;                                                                                                  
         an observation or follow-up period that generally                                                                   
          extends from the date of the starting event to a                                                                      
          predefined end date (e.g., 6 months, 1 year, 3                                                                        
          years, 5 years, or 9 years).                                                                                          
                                                                                                                                
1:54:30 PM                                                                                                                    
                                                                                                                                
Mr. Skidmore continued to slide 9: "National Recidivism":                                                                       
                                                                                                                                
    The 401,288 state prisoners released in 2005 had an                                                                      
     estimated 1,994,000 arrests during the 9-year period -                                                                     
     an average of 5 arrests per released prisoner.                                                                             
    An estimated 68% of released prisoners were arrested                                                                     
     within 3 years, 79% within 6 years, and 83% within 9                                                                       
     years.                                                                                                                     
    More than three-quarters (77%) of released drug                                                                          
     offenders were arrested for a non-drug crime within 9                                                                      
     years.                                                                                                                     
                                                                                                                                
Mr. Skidmore  concluded that recidivism was  associated with                                                                    
certain  individuals. Alaska's  recidivism  rate was  around                                                                    
two-thirds which was  not good but on par  with the national                                                                    
average.  He  also  noted  that   the  further  out  in  the                                                                    
timeline,  the  more  people   were  recidivating.  He  also                                                                    
pointed out  that within the  study of about  400,000 people                                                                    
more  than three-quarters  or 77  percent  of released  drug                                                                    
offenders  were  rearrested  within   a  9-year  period  for                                                                    
non-drug crimes. He believed the  legislature had heard from                                                                    
prosecutors and  law enforcement that  individuals suffering                                                                    
from  substance abuse  ended up  being the  same people  who                                                                    
contributed to  other crimes in  the state such  as property                                                                    
crimes to support their habit.                                                                                                  
                                                                                                                                
Mr. Skidmore moved  to the next portion  of his presentation                                                                    
looking  at   Alaska's  Recidivism   and  Reentry.   He  was                                                                    
presenting  slides the  committee  had already  seen from  a                                                                    
meeting  on February  5, 2019  by  DOC. He  took the  slides                                                                    
directly from that presentation.                                                                                                
                                                                                                                                
Mr.  Skidmore  turned to  the  definition  of recidivism  on                                                                    
slide 11: "Recidivism":                                                                                                         
                                                                                                                                
     An offender who is re-incarcerated within three years                                                                      
     of release as a result of:                                                                                                 
                                                                                                                                
         Parole or probation violations                                                                                      
         New felony crime                                                                                                    
         New misdemeanor crime                                                                                               
                                                                                                                                
Mr. Skidmore talked about the  findings on slide 12: "Alaska                                                                    
Recidivism  Rates."  In  2011  there  was  a  67.47  percent                                                                    
recidivism  rate,  just under  the  national  average of  68                                                                    
percent. Alaska was told, as  it engaged in criminal justice                                                                    
reform, that  with its reform  efforts it would not  be able                                                                    
to bring  down its recidivism  rates. It was  suggested that                                                                    
reform efforts  were needed to bring  down recidivism rates.                                                                    
In 2012,  recidivism rates dropped  slightly but  crept back                                                                    
up in 2013.  He continued that in 2014 it  dropped again and                                                                    
in  2015  it dropped  all  the  way  down  to just  over  61                                                                    
percent. He  reminded members that SB 91  was implemented in                                                                    
2016. He concluded that Alaska's  recidivism rate and prison                                                                    
population were declining prior to SB 91.                                                                                       
                                                                                                                                
1:59:16 PM                                                                                                                    
                                                                                                                                
Mr. Skidmore  detailed slide 13: "Recidivism  - By Offense."                                                                    
He  reported  that  within the  first  6  months,  offenders                                                                    
returned to  incarceration because  of probation  and parole                                                                    
violations. He  suggested focusing on the  area of probation                                                                    
and parole  violations to reduce recidivism.  Offenders also                                                                    
committed  felonies  and  misdemeanors within  the  first  6                                                                    
months of  release. At  the 3-year  mark of  being released,                                                                    
about  50   percent  of  offenders  committed   new  crimes.                                                                    
Probation and Parole also played a significant role.                                                                            
                                                                                                                                
Mr.  Skidmore  scrolled  to  slide  14:  "Recidivism  -  New                                                                    
Crimes." In  2011, the  recidivism rate  for new  crimes was                                                                    
about 40  percent. By 2015,  prior to the  implementation of                                                                    
criminal justice reform, the rate  had dropped to 32 percent                                                                    
for new crimes.                                                                                                                 
                                                                                                                                
Co-Chair  Wilson asked  Mr. Skidmore  to review  a technical                                                                    
violation of  probation and  parole. Mr.  Skidmore responded                                                                    
by giving  examples of violations  of probation  and parole.                                                                    
If a  person violated any  of their conditions  of probation                                                                    
or  parole,  other than  committing  another  crime, it  was                                                                    
considered a technical violation.                                                                                               
                                                                                                                                
Vice-Chair  Ortiz noted  Mr. Skidmore  had mentioned  the 58                                                                    
percent   figure  resulting   from   probation  and   parole                                                                    
violations. He asked  how the state could  focus on reducing                                                                    
probation  and  parole  violations. Mr.  Skidmore  responded                                                                    
that if the state wanted  to bring down its recidivism rate,                                                                    
it  should  focus  on  what happened  to  people  when  they                                                                    
committed  probation  or  parole  violations.  He  suggested                                                                    
looking at  what other sanctions  could be taken  other than                                                                    
returning a  person to prison.  Perhaps certain  programs or                                                                    
other reentry  plans could be  considered that  might reduce                                                                    
the recidivism rate. He did not have a specific example.                                                                        
                                                                                                                                
2:03:08 PM                                                                                                                    
                                                                                                                                
Mr.  Skidmore  explained   slide  15:  "Alaska's  Recidivism                                                                    
Before  SB  91." He  suggested  that  between 2011  to  2015                                                                    
Alaska's  recidivism rate  declined 6  percent. He  believed                                                                    
the state  could do better.  Although the state  had hovered                                                                    
around the same  place for over 2 decades and  had been told                                                                    
it could not do anything  without reforms, it had managed to                                                                    
drop  its number  anyway. Alaska  had also  been told  there                                                                    
were  other  states  in  the country  that  were  doing  far                                                                    
better.  Yet,  by  2015,  Alaska was  7  percent  below  the                                                                    
national  average  of  2005 (the  most  recent  average  Mr.                                                                    
Skidmore had found).                                                                                                            
                                                                                                                                
Mr. Skidmore advanced  to slide 16: "All  Violent Crime: All                                                                    
Property Crime." He thought the  slide would address some of                                                                    
Representative  Knopp's question  regarding crime  rates. He                                                                    
reminded  members of  the states  he had  listed previously:                                                                    
Georgia, Mississippi, North  Carolina, Oregon, South Dakota,                                                                    
Texas, and Utah. The slide  contained information taken from                                                                    
the  FBI's  uniform crime  report  data  for various  states                                                                    
including   Alaska,  Georgia,   Kentucky,  North   Carolina,                                                                    
Oregon,  South Dakota,  Texas, and  Utah. The  U.S. national                                                                    
average  was also  included. Every  state  listed, with  the                                                                    
exception of  Kentucky, was a  state that came from  the FBI                                                                    
report of  who Alaska  should compare itself  with. Kentucky                                                                    
was added because of some  of Alaska's pretrial reforms. The                                                                    
pretrial  reforms that  Alaska implemented  were similar  to                                                                    
those made by  Kentucky. He noted on the  topic of successes                                                                    
that  most  of  what  he   had  seen  the  Criminal  Justice                                                                    
Commission report  about was the  prison population  and the                                                                    
recidivism  rate.  The commission  did  not  talk about  the                                                                    
crime  rate. He  had heard  some people  say that  the crime                                                                    
rate could  be driven by many  things not all of  which were                                                                    
connected to  reform. He  understood the  argument. However,                                                                    
he pointed  out the paragraph  below the one  that highlight                                                                    
the 5 states on page 5  of the report from December 2015. He                                                                    
read from the page:                                                                                                             
                                                                                                                                
     "In 2011,  for example, policy makers  in Georgia faced                                                                    
     a   projected  8   percent  increase   in  the   prison                                                                    
     population  over the  next 5  years at  a cost  of $264                                                                    
     million. Rather  than spend  additional tax  dollars on                                                                    
     prisons,  Georgia's  leaders   looked  for  more  cost-                                                                    
     effective solutions. The  state legislature unanimously                                                                    
     passed a  set of reforms that  controlled prison growth                                                                    
     through changes  to drug and property  offence statutes                                                                    
     and  improved public  safety by  investing in  drug and                                                                    
     mental health  courts and  treatment. Between  2012 and                                                                    
     2014, the  most recent year with  available crime data,                                                                    
     the state crime rate had fallen 3 percent."                                                                                
                                                                                                                                
Mr. Skidmore commented  that when he looked  at crime rates,                                                                    
he did  not look at  them simply  because he thought  it was                                                                    
the  right thing  to do.  He thought  crime rates  reflected                                                                    
what was  going on  in the state.  He highlighted  that when                                                                    
the  Alaska Criminal  Justice Commission  members considered                                                                    
enacting  the reforms,  they took  into account  crime rates                                                                    
declining in other states that  had enacted criminal justice                                                                    
reform. It was  the measure that other states  had chosen to                                                                    
use.  He noted  that there  was a  different color  line for                                                                    
each state  with an  index at  the bottom  of the  slide. He                                                                    
mentioned  that there  was a  star on  each line.  Each star                                                                    
denoted  when  a  particular state  began  participating  in                                                                    
criminal  justice reform.  Violent crime  rates were  on the                                                                    
top of the page and property  crime rates were on the bottom                                                                    
of the  page. In  looking at the  violent crime  rates, they                                                                    
seemed to go down with  a couple of exceptions. South Dakota                                                                    
[represented  in  brown]  went  up  following  its  criminal                                                                    
justice reform  in 2013.  It was true  that there  were many                                                                    
factors that  influenced crime rates. In  South Dakota there                                                                    
was  a significant  population increase  at  the time  which                                                                    
partially explained the increase.  Oregon held steady. Every                                                                    
other  state appeared  to be  going down  except for  Alaska                                                                    
shown in red.                                                                                                                   
                                                                                                                                
Mr. Skidmore drew attention to  the property crime chart. He                                                                    
highlighted  that   property  crimes  went  down   with  the                                                                    
exception   of   Alaska.    He   highlighted   Georgia.   He                                                                    
reemphasized that  in both charts  Alaska's crime  rate went                                                                    
up.                                                                                                                             
                                                                                                                                
Mr.  Skidmore  commented  that  there  were  several  things                                                                    
Alaska had done  well over the previous 20 to  30 years; the                                                                    
crime  rates  had gone  down.  The  Alaska Criminal  Justice                                                                    
Commission stated in its 2018 report on page 40:                                                                                
                                                                                                                                
     "Research into  the nationwide  decline in  crime rates                                                                    
     over the  last 30 years  shows that between  10 percent                                                                    
     and   25  percent   of  the   decline   in  crime   was                                                                    
     attributable to  the effect of  increased incarceration                                                                    
     rates."                                                                                                                    
                                                                                                                                
Mr.  Skidmore  restated  that the  Alaska  Criminal  Justice                                                                    
Commission  reported  that  the nationwide  data  and  study                                                                    
indicated  that  crime went  down  over  the 30-year  period                                                                    
because of getting-tough-on-crime  policies. The report went                                                                    
on  to say  that the  policies had  diminishing returns.  In                                                                    
other words,  doubling down by increasing  sentences further                                                                    
would not  work. However,  throwing out  what had  been done                                                                    
for  the  previous  30  years was  not  the  right  approach                                                                    
either.                                                                                                                         
                                                                                                                                
2:11:07 PM                                                                                                                    
                                                                                                                                
Representative  Carpenter   asked  what  might   explain  an                                                                    
increase in violent  crimes and property crimes  at the same                                                                    
time the  state was seeing  a decline in  prison population.                                                                    
Mr.  Skidmore  indicated he  would  be  able to  answer  the                                                                    
representative's question in one of the following slides.                                                                       
                                                                                                                                
Mr. Skidmore  reviewed slide 17:  "Comparison of  PEW Reform                                                                    
States." The  Pew Charitable Trusts' chart  reflected all of                                                                    
the states  they had  worked with. He  pointed out  that the                                                                    
top  of the  chart  showed  the years  in  which the  states                                                                    
participated  in criminal  justice reform.  On the  far left                                                                    
the  reforms   were  broken  down  into   several  different                                                                    
categories. The checkmarks showed  which reforms the various                                                                    
states engaged  in. He opined  that the chart was  a helpful                                                                    
tool   to   compare   the  different   reforms   the   state                                                                    
participated in. He added the  colors to the chart to mirror                                                                    
the  colors  in  the  crime rate  charts.  He  reviewed  the                                                                    
different colors  and the  corresponding states.  Alaska was                                                                    
represented in red.                                                                                                             
                                                                                                                                
Co-Chair  Wilson   asked  about   the  timeframe   for  each                                                                    
checkmark.  She wondered  if the  Pew Charitable  Trusts had                                                                    
further detail.  Mr. Skidmore did  not know how  the reforms                                                                    
were implemented in other states.                                                                                               
                                                                                                                                
Co-Chair  Wilson commented  that  SB 91  was implemented  in                                                                    
phases  and did  not think  it was  phased in  properly. She                                                                    
thought treatment  had been slated  further into  the future                                                                    
than anticipated.  She asked Mr. Skidmore  his opinion about                                                                    
the way SB 91 was phased in.                                                                                                    
                                                                                                                                
Mr. Skidmore  clarified that  he had not  in any  way stated                                                                    
that  SB  91  had  caused   the  state's  problems.  In  his                                                                    
presentation,  he had  highlighted the  goals of  reform and                                                                    
reported that  they were already  being achieved  before the                                                                    
implementation  of SB  91. It  was  too early  to report  on                                                                    
recidivism, as no statistics were  available yet. He did not                                                                    
have information regarding prison  population but thought it                                                                    
could be provided by DOC. His  main point was that the goals                                                                    
that  were  highlighted were  being  achieved  prior to  the                                                                    
implementation  of SB  91. He  added that  after reform  was                                                                    
implemented, Alaska's  crime rates  continued to  climb. The                                                                    
reforms  were intended  to be  implemented without  having a                                                                    
negative impact  on Alaska's crime rates.  He indicated that                                                                    
crime  rates were  starting to  go  up prior  to reform.  He                                                                    
would discuss the  reason for the upward  trend shortly. The                                                                    
reforms  did  not result  in  crime  rates leveling  out  or                                                                    
declining  which was  what was  promised through  the reform                                                                    
process.                                                                                                                        
                                                                                                                                
2:15:04 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  returned to  the two  goals brought  up at                                                                    
the  beginning  of  the  presentation.  He  queried  if  Mr.                                                                    
Skidmore  had  done  any analysis  to  explain  the  state's                                                                    
progress prior to  SB 91. He thought the stats  had not been                                                                    
available  when  SB  91  was   under  consideration  by  the                                                                    
legislature. He asked if he was correct.                                                                                        
                                                                                                                                
Mr.  Skidmore  agreed  that  the  information  necessary  to                                                                    
understand   how  recidivism   worked   at   the  time   was                                                                    
incomplete.  Some information  was  available  for 2011  and                                                                    
2012.  However,  the  third   year  was  not  available  but                                                                    
necessary for  a proper  analysis. He  believed that  if the                                                                    
representative were  to ask DOC about  the prison population                                                                    
presently, the department could  provide the information. He                                                                    
was uncertain why  the legislature was told  that the prison                                                                    
population  was  continuing  to increase  through  2015  and                                                                    
2016. He did  not know why The Pew  Charitable Trusts' slide                                                                    
showed the prison population going  up despite the fact that                                                                    
it was going down.                                                                                                              
                                                                                                                                
Vice-Chair Ortiz  asked about the  gains made  in recidivism                                                                    
prior to  SB 91. He  queried if it  was true that  the state                                                                    
was putting more resources into  funding for substance abuse                                                                    
treatment in  certain years. He  asked if it was  the reason                                                                    
for the  state's gains in  recidivism. Mr. Skidmore  did not                                                                    
have an answer.  He thought it would be  significant for any                                                                    
policy maker  to know  what was  going on  at the  time that                                                                    
allowed  the  state  to  make  changes.  He  encouraged  the                                                                    
legislature  to reach  out to  DOC  to talk  about what  was                                                                    
going on at the time.                                                                                                           
                                                                                                                                
Co-Chair Wilson reported  that she was reaching  out to some                                                                    
of the  state's past commissioners. She  hoped the committee                                                                    
would get to talk to them the following day.                                                                                    
                                                                                                                                
Representative Josephson asked about slides  6 and 7. He had                                                                    
been told the 2015 cohort  would reflect later years - years                                                                    
closer to the present. He suggested  that if it was true, he                                                                    
thought  SB  91 could  be  a  part  of  the reason  for  the                                                                    
decline.                                                                                                                        
                                                                                                                                
Mr.  Skidmore responded  that  Representative Josephson  was                                                                    
partially correct.  He reiterated  that in a  previous slide                                                                    
it showed  people reoffending,  typically for  probation and                                                                    
parole violations, within the first  6 months of release. It                                                                    
seemed  to be  supported, as  SB 91  was not  in effect  the                                                                    
first  6 months  of 2015.  He was  speaking of  the calendar                                                                    
year  for 2015.  Senate Bill  91 was  not implemented  until                                                                    
about a year  following the period. There were  2 years that                                                                    
were impacted  by SB  91. However,  the recidivism  rate was                                                                    
dropping previously  to that  time. His  point was  that the                                                                    
state was bringing down recidivism  prior to SB 91. Although                                                                    
the legislation might have had  an influence, it was unclear                                                                    
how much influence it had.                                                                                                      
                                                                                                                                
2:20:09 PM                                                                                                                    
                                                                                                                                
Representative  Josephson  asked if  it  would  have made  a                                                                    
difference  if   the  stakeholders  supporting  SB   91  had                                                                    
received  the  money  they were  anticipating  for  reentry,                                                                    
reform,  and   rehabilitation.  He  wondered  if   they  had                                                                    
received  the money.  He was  trying to  figure out  whether                                                                    
there was a worthy argument.                                                                                                    
                                                                                                                                
Mr. Skidmore was  not sure about money  disbursement. He was                                                                    
aware  that money  was  disbursed through  SB  91 and  other                                                                    
budget measures.  He did not  have any details.  He reminded                                                                    
everyone that  SB 91  was phased in  beginning in  2016 with                                                                    
Phase 1. Phase  2 began in 2017, and Phase  3 began in 2018.                                                                    
He advised members to keep  the phasing in mind when looking                                                                    
at the impacts on recidivism.                                                                                                   
                                                                                                                                
Representative  Josephson  was  trying  to  figure  out  why                                                                    
Alaskans had a  red line so remarkably  different than other                                                                    
states.  He  wondered what  was  going  on. He  thought  Mr.                                                                    
Skidmore  was  saying  there  was  anecdotal  evidence  that                                                                    
people knew  they could get  off. He  was trying to  get Mr.                                                                    
Skidmore's thesis as to why the red lines were different.                                                                       
                                                                                                                                
2:23:49 PM                                                                                                                    
                                                                                                                                
Mr.  Skidmore commented  that the  differences on  the slide                                                                    
comparing  state  reforms,  helped  to  understand.  He  was                                                                    
trying to focus  his presentation on HB 20  relating to drug                                                                    
crimes.  He used  food as  a metaphor  for Criminal  Justice                                                                    
Reform. One  of the goals  of reforms  was for the  state to                                                                    
reduce the  period of time  people were on  probation. There                                                                    
were a  few option. First,  the maximum period  of probation                                                                    
could be  reduced. Second,  earned compliance  credits could                                                                    
be  implemented,  allowing for  a  reduction  in a  person's                                                                    
probation  period  based  on  good  behavior.  Third,  early                                                                    
termination of  probation and  parole could  be recommended.                                                                    
He   compared  the   state's  reform   system  to   ordering                                                                    
everything  off  the  menu  giving  the  state  indigestion.                                                                    
Although  there  were  sound   concepts  throughout  SB  91,                                                                    
implementing  them all  was like  ordering everything  off a                                                                    
menu. He drew  members' attention back to  the provisions of                                                                    
HB 20.                                                                                                                          
                                                                                                                                
Co-Chair  Wilson  explained  that Mr.  Skidmore  was  likely                                                                    
hearing  the  frustration   of  members.  While  legislators                                                                    
wanted to ensure  punishment at the proper  level, they were                                                                    
unsure  of the  correct levels.  She wondered  how to  write                                                                    
treatment programs  into statute for those  people who truly                                                                    
want to change  their lives. She was looking  for a balance.                                                                    
She did not  think anyone should be surprised  that a person                                                                    
getting  out of  prison  without any  reform  was likely  to                                                                    
reoffend.                                                                                                                       
                                                                                                                                
Mr.  Skidmore replied  that Co-Chair  Wilson's question  was                                                                    
the right question  to ask. He would answer  her question as                                                                    
he continued the presentation.                                                                                                  
                                                                                                                                
2:27:58 PM                                                                                                                    
                                                                                                                                
Mr.  Skidmore  returned to  his  presentation  on slide  18:                                                                    
"Violent  v. Non-violent  Offenses." He  wanted to  make the                                                                    
distinction between  a violent  crime and a  property crime.                                                                    
Currently   in  Alaska,   violent   crimes  were   generally                                                                    
considered something under Alaska  Statute 11.41. The crimes                                                                    
included  homicide,  assault,  stalking,  kidnapping,  human                                                                    
trafficking, sexual  assault, and  sexual abuse of  a minor.                                                                    
The list was  not complete but provided a sense  of what was                                                                    
a violent  crime. He continued that  non-violent crimes were                                                                    
considered  all  other  crimes  for  the  purpose  of  crime                                                                    
statistics.  He   read  the   list  of   non-violent  crimes                                                                    
including  theft,   criminal  mischief   (property  damage),                                                                    
forgery,  bribery,  gambling,   hindering  prosecution,  and                                                                    
impersonating a public servant.                                                                                                 
                                                                                                                                
Mr.  Skidmore turned  to slide  19 and  clarified that  when                                                                    
talking about crime statistics  and referring to non-violent                                                                    
crimes, there  were other  crimes listed.  He read  the list                                                                    
which   included   misconduct    involving   weapons,   drug                                                                    
trafficking,   arson,    burglary,   promoting   contraband,                                                                    
rioting, sending  an explicit image  of a  minor, misconduct                                                                    
involving   a   corpse,   cruelty  to   animals,   and   sex                                                                    
trafficking. He noted that  misconduct involving weapons and                                                                    
drug  trafficking  were  substantially  related  to  violent                                                                    
crimes.   He  encouraged   the   legislature   to  ask   the                                                                    
appropriate questions so that  members knew what people were                                                                    
referring to when they mentioned non-violent crimes.                                                                            
                                                                                                                                
Mr.  Skidmore returned  to the  violent crimes  and property                                                                    
crimes  slide [Note:  reinserted as  slide 20].  He asserted                                                                    
that it  was not  possible to claim  that the  reform caused                                                                    
the increase in crime. However,  when the state adjusted its                                                                    
criminal  justice  system  with   SB  91,  it  significantly                                                                    
impacted law  enforcement and  the prosecution's  ability to                                                                    
respond to increases in crime.                                                                                                  
                                                                                                                                
2:30:54 PM                                                                                                                    
                                                                                                                                
Mr. Skidmore concluded his presentation  with slide 21: "Why                                                                    
did Crime Rise  Before SB 91?" He explained  there were many                                                                    
factors that  influenced Alaska's crime rates.  However, the                                                                    
opioid  crisis  was  one  of   the  largest  influences.  He                                                                    
reported that overdose deaths  from opioids had dramatically                                                                    
increased from 2013  to 2017. The chart on the  right of the                                                                    
slide  showed  hospital  care associated  with  opioids.  He                                                                    
highlighted that  inpatient treatment between 2016  and 2017                                                                    
decreased.  The   number  of  people   receiving  in-patient                                                                    
treatment for  substance abuse, specifically,  opioids, went                                                                    
down. He spoke to  Representative Josephson's comment, money                                                                    
was spent for additional treatment.  As a prosecutor, he did                                                                    
not want  to put someone with  a drug addiction in  jail. He                                                                    
would rather  see them  get into  treatment. He  agreed that                                                                    
treatment  was   the  proper  place  for   someone  with  an                                                                    
addiction,  but  treatment   numbers  declined.  Conversely,                                                                    
emergency  care skyrocketed.  House  Bill  20 returned  drug                                                                    
provisions to where they were  prior to SB 91. He elaborated                                                                    
that  possession  of  a controlled  substance  went  from  a                                                                    
misdemeanor with no jail time for  the first 2 offences to a                                                                    
felony crime.                                                                                                                   
                                                                                                                                
Mr. Skidmore conveyed  that there were many  good aspects of                                                                    
SB 91  including a  Suspended Entry  of Judgment  (SEJ). The                                                                    
Suspended Entry of Judgement was  a new tool. There had been                                                                    
something   on  the   state's  books   called  a   Suspended                                                                    
Imposition  of Sentence  (SIS) that  was  supposed to  allow                                                                    
prosecutors  to   address  those  first-time   offenders  or                                                                    
individuals that they did not think  needed to end up with a                                                                    
conviction on  their record. It suspended  the imposition of                                                                    
sentence,  but  it still  left  the  person saddled  with  a                                                                    
felony conviction.  There were collateral consequences  to a                                                                    
felony conviction. The  state needed to find a  way to avoid                                                                    
the  felony conviction,  which the  SEJ  does. He  explained                                                                    
that  when someone  was  charged  with a  crime,  such as  a                                                                    
possessory   drug  crime,   and  the   prosecution  believed                                                                    
treatment was  a better option  than jail, the  person would                                                                    
be advised  to plead guilty  to the  crime but would  not be                                                                    
found  guilty.  The  judgement would  not  be  entered.  The                                                                    
person would  be placed under conditions  including going to                                                                    
treatment.  If  a person  met  the  conditions by  going  to                                                                    
treatment,  their case  would be  dismissed. The  conviction                                                                    
would not  be entered, and  the person would  not experience                                                                    
the  collateral consequences  associated with  a conviction.                                                                    
The  Suspended Entry  of Judgement  was a  new and  positive                                                                    
tool.  It could  be very  helpful for  people. He  commented                                                                    
that there  had to be an  incentive to get people  to attend                                                                    
residential  treatment from  30  to 180  days. He  suggested                                                                    
that without an appropriate  incentive, treatment was not an                                                                    
attractive  option. House  Bill  20 incentivized  in-patient                                                                    
treatment.  It would  allow the  criminal justice  system to                                                                    
play  a role  in helping  combat the  drug crisis.  The bill                                                                    
would  also  return the  ability  to  aggressively go  after                                                                    
individuals  dealing  poison  to  Alaska's  citizens.  Under                                                                    
current law,  the Class  A felony  for drug  trafficking was                                                                    
eliminated  and  the  penalties for  drug  trafficking  were                                                                    
reduced  from  A  to  B  and  B to  C.  House  Bill  20  had                                                                    
provisions  that  changed the  drug  laws.  He implored  the                                                                    
legislature   to  return   tools   to   attorneys  and   law                                                                    
enforcement.                                                                                                                    
                                                                                                                                
2:38:16 PM                                                                                                                    
                                                                                                                                
Vice-Chair Johnston  asked about the final  slide. She asked                                                                    
if the emergency numbers applied  to the total population of                                                                    
the state. Mr.  Skidmore responded that figure  36 came from                                                                    
the Department  of Health and  Social Services,  Division of                                                                    
Public  Health.   Epidemiology  indicated  that   the  slide                                                                    
reflected   the   rate   of  hospital   care,   specifically                                                                    
in-patient treatment, associated with opioids.                                                                                  
                                                                                                                                
Vice-Chair Johnston  wanted to find out  what was considered                                                                    
in-patient treatment.  It would  be interesting to  know the                                                                    
wait  time  statistics in  getting  into  treatment and  the                                                                    
number of  positions available in  the state  for treatment.                                                                    
She  was  not referring  to  a  3-day in-patient  treatment.                                                                    
Co-Chair Wilson  thought she  had requested  the information                                                                    
from DOC. She would get back to the committee.                                                                                  
                                                                                                                                
Representative  Josephson  relayed that  an  SEJ  had to  be                                                                    
agreed to by all parties.  He wondered how all parties could                                                                    
be  assured that  prosecutors would  follow through  with an                                                                    
SEJ agreement.  He queried  whether additional  language was                                                                    
needed  regarding treatment  if  a person  was charged  with                                                                    
misconduct involving  a controlled  substance in  the fourth                                                                    
degree.  Mr. Skidmore  thought Representative  Josephson was                                                                    
asking  what   sort  of   guarantees  were   available  that                                                                    
prosecutors  would  want  to   use  an  SEJ.  Representative                                                                    
Josephson responded, "Yes."                                                                                                     
                                                                                                                                
Mr. Skidmore  responded that the prosecutors  that worked in                                                                    
Alaska wanted  to see the  state improve. Folks  that worked                                                                    
for him across the state did  it because they wanted to make                                                                    
Alaska a better place -  they did not get paid proportionate                                                                    
to  their  efforts.  Prosecutors  understood  the  need  for                                                                    
treatment  in order  to properly  address the  opioid crisis                                                                    
and drug  abuse. He  relayed he  would aggressively  use the                                                                    
SEJ for  drug possession  if it  was returned  to a  Class C                                                                    
felony. He  wanted to  see people in  treatment. He  had the                                                                    
ability  to direct  the  people working  for  him that  SEJs                                                                    
would be  used. The tool  would be applied to  a significant                                                                    
portion of related cases.                                                                                                       
                                                                                                                                
2:43:26 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  referred to slide  16. He wondered  if the                                                                    
comparable states  were also involved with  criminal justice                                                                    
reform. He thought  the difference was the  level of reform,                                                                    
which  he  suspected was  less  than  the reform  in  Alaska                                                                    
through SB 91.                                                                                                                  
                                                                                                                                
Mr.  Skidmore replied  that the  states were  chosen because                                                                    
they  were specifically  called out  by the  Alaska Criminal                                                                    
Justice  Commission's   report,  Justice   Reinvestment,  in                                                                    
December 2015. Every state, with  the exception of Kentucky,                                                                    
was listed  on page 5 of  the report and were  states Alaska                                                                    
could  look to  for comparison.  Alaska's pre-trial  reforms                                                                    
were modeled  after Kentucky, which  was the reason  for its                                                                    
inclusion. The included states were  chosen because they had                                                                    
engaged in reforms that Alaska  was considering. He included                                                                    
the chart  from Pew  because the  reform categories  and the                                                                    
states that had engaged in  reform were listed. He could not                                                                    
provide  specifics but  would  be  undertaking an  intensive                                                                    
research project at a later time.                                                                                               
                                                                                                                                
Vice-Chair  Ortiz asked  if  it  was safe  to  say that  the                                                                    
reforms made  in the states  Alaska was comparing  itself to                                                                    
were   less  broad-based.   He   suggested  Alaska   ordered                                                                    
everything  off  the  menu  unlike  the  other  states.  Mr.                                                                    
Skidmore responded,  "That's correct." He elaborated  that a                                                                    
person from  Texas that  told him  Alaska should  be putting                                                                    
people in jail that it was  afraid of rather than mad at. He                                                                    
drew attention to the blue box on slide 16.                                                                                     
                                                                                                                                
2:45:44 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  queried whether  Mr. Skidmore  had studied                                                                    
economics. He  suggested that a certain  result would happen                                                                    
to the demand  when the price increased for  a certain item.                                                                    
However,   he  suggested   many   things   changed  in   the                                                                    
marketplace.  He   wondered  if  Mr.   Skidmore  experienced                                                                    
frustration  with  determining   what  direction  the  state                                                                    
should take  when looking at  available data in the  area of                                                                    
criminal reform.                                                                                                                
                                                                                                                                
Mr.  Skidmore had  not studied  economics  but was  familiar                                                                    
with  the  principle   Representative  Ortiz  described.  He                                                                    
agreed  with the  representative  100  percent. He  reported                                                                    
that  it was  very  difficult, when  conducting  a study  or                                                                    
experiment,  to hold  everything equal  other than  what was                                                                    
being  studied. In  other words,  it was  very difficult  to                                                                    
isolate one change. He agreed  that it played havoc with the                                                                    
state's  ability  to understand  what  has  happened in  the                                                                    
state's  criminal justice  system. However,  simultaneously,                                                                    
science was not his forte'. He  indicated that SB 91 made 96                                                                    
changes  that went  into effect  simultaneously. It  made it                                                                    
difficult  to  discuss  the  impacts of  any  one  of  those                                                                    
changes.                                                                                                                        
                                                                                                                                
Representative Carpenter recalled that  there was a national                                                                    
discussion  about the  opioid crisis  beginning  in 2013  or                                                                    
2014.  He  suggested  it  was   not  just  Alaska  that  was                                                                    
affected. Mr. Skidmore replied, "That's correct."                                                                               
                                                                                                                                
Representative Carpenter  returned to the crime  rate slide.                                                                    
He pointed  out that from 2013  to 2017 there was  an opioid                                                                    
epidemic  not just  in Alaska  but in  the nation.  However,                                                                    
Alaska was the  only state that had an anomaly  in the trend                                                                    
of the  crime rate.  He asked if  other states  were dealing                                                                    
with the  epidemic in a  different way or whether  there was                                                                    
another factor  that had  not been  discussed. He  asked Mr.                                                                    
Skidmore to comment.                                                                                                            
                                                                                                                                
Mr.  Skidmore  did  not have  an  answer  to  Representative                                                                    
Carpenter's question.  He offered  that there was  a problem                                                                    
with  the opioid  epidemic which  had a  dramatic impact  on                                                                    
Alaska. He could  not confirm whether the  opioid crisis was                                                                    
the  only thing  that affected  Alaska's crime  rates. There                                                                    
were clearly  other factors that  had an impact.  He focused                                                                    
on drugs because they were the  focus of HB 20. At the time,                                                                    
when Alaska was experiencing an  increase in its crime rate,                                                                    
the  state  chose  to  engage  in  criminal  justice  reform                                                                    
dramatically shifting  how Alaska addressed opioids.  He did                                                                    
not believe  the shift turned  out in the state's  favor. He                                                                    
was laying out the case for  the state to go back to certain                                                                    
drug laws  with some changes.  The state needed some  of its                                                                    
previous tools back.                                                                                                            
                                                                                                                                
Representative  Josephson  believed  Mr.  Skidmore  when  he                                                                    
stated the  SEJ would  be used liberally.  He wanted  to see                                                                    
where the SEJ would be paid for in the fiscal notes.                                                                            
                                                                                                                                
2:52:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson responded that the request would be added.                                                                      
                                                                                                                                
Representative  Knopp  understood   numbers  as  opposed  to                                                                    
percentages, and he  did not like surveys  with "per capita"                                                                    
because of Alaska's  location. He asked how to  take a state                                                                    
like  Alaska with  its small  population and  compare it  to                                                                    
other   states.  He   suggested  using   real  numbers   for                                                                    
comparison. He did not believe  the comparison was accurate.                                                                    
He asked  Mr. Skidmore to  comment. He provided  an example.                                                                    
He was unclear as to the basis of the studies.                                                                                  
                                                                                                                                
Mr. Skidmore  agreed about  the importance  of understanding                                                                    
all   of  the   ingredients  in   the  charts.   He  thought                                                                    
Representative  Knopp could  have access  to the  underlying                                                                    
numbers. He suggested that when  it came to comparing Alaska                                                                    
to   other  states   such  as   Texas,   Oregon,  or   Utah,                                                                    
statisticians  used  100,000.  The   raw  numbers  could  be                                                                    
provided.  The slide  containing the  crime rates  contained                                                                    
actual  numbers. The  recidivism numbers  could be  obtained                                                                    
through DOC.                                                                                                                    
                                                                                                                                
Co-Chair Wilson  thanked Mr.  Skidmore for  his presentation                                                                    
and  indicated the  committee would  transition to  the next                                                                    
bill, HB 96.                                                                                                                    
                                                                                                                                
2:55:39 PM                                                                                                                    
At EASE                                                                                                                         
                                                                                                                                
2:57:23 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 96                                                                                                             
                                                                                                                                
"An  Act  relating  to  Alaska  Pioneers'  Home  and  Alaska                                                                    
Veterans' Home rates and services."                                                                                             
                                                                                                                                
2:57:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   ZACK  FIELDS,   BILL  SPONSOR,   introduced                                                                    
himself.                                                                                                                        
                                                                                                                                
REPRESENTATIVE   LADDIE  SHAW,   BILL  SPONSOR,   introduced                                                                    
himself.                                                                                                                        
                                                                                                                                
Representative  Fields thanked  the  committee for  allowing                                                                    
him to present  HB 96. He turned to slide  2: "Goal of House                                                                    
Bill  96"  to  explain  the goals  of  the  legislation.  He                                                                    
offered  that the  bill had  a couple  of simple  goals. The                                                                    
first  goal was  to maintain  the Pioneer  Homes' commitment                                                                    
for  Alaska  elders.  The following  day  marked  the  106th                                                                    
anniversary  of the  Pioneer Homes  system. The  second goal                                                                    
was to grow revenues and  improve the financial stability of                                                                    
the   Pioneers  Home.   He   thanked  Representative   Shaw,                                                                    
Representative  Ortiz,  and   Representative  Josephson  for                                                                    
being the original  cosponsors of the bill.  He also thanked                                                                    
Representative  Johnston  for  co-chairing  the  Health  and                                                                    
Social  Services   Committee  and  making  sure   there  was                                                                    
adequate funding for the Pioneer  Homes. The bill was a two-                                                                    
part effort of making sure  there was adequate funding while                                                                    
at  the same  time addressing  the statutes.  He turned  the                                                                    
presentation over  to Representative Shaw to  talk about his                                                                    
involvement with  the bill  and some of  the reasons  he was                                                                    
working to protect the Pioneer Homes.                                                                                           
                                                                                                                                
Representative Shaw  explained that when he  was working for                                                                    
the administration in 1999, he  was looking at the potential                                                                    
for a  Veteran's home in Alaska,  as it did not  have one at                                                                    
the time.  The cost  of building a  Veteran's home  would be                                                                    
cost prohibitive.  Instead, he approached the  Pioneer Homes                                                                    
to  discuss the  possibility of  tying in  with the  Pioneer                                                                    
Homes system. He  had hoped to bring about  a Veteran's home                                                                    
in the state regardless of  its size. The Pioneer Homes were                                                                    
onboard with  the idea.  The process  was initiated  in 2001                                                                    
and designated  the Pioneer  Home in  Palmer as  the Pioneer                                                                    
and Veteran's Home  for Alaska. He was about  to establish a                                                                    
Veteran's home  commitment. Alaska  ended up being  the last                                                                    
of  the  50 states  to  have  its  own Veteran's  home.  The                                                                    
process took place  and was initiated after he  had left the                                                                    
administration  in 2003.  It  was put  into  place in  2007.                                                                    
Currently, the  State of  Alaska had  a representation  of a                                                                    
Veteran's home. He was pleased to  be an initial part of the                                                                    
process.                                                                                                                        
                                                                                                                                
Representative  Fields turned  to slide  3: "Pioneer  Homes:                                                                    
Background."  He thought  Representative  Shaw helped  frame                                                                    
the backdrop  which was  that Alaska  had an  amazing system                                                                    
built  over  the previous  100  years  in Sitka,  Fairbanks,                                                                    
Palmer,   Anchorage,   Ketchikan,   and   Juneau.   However,                                                                    
currently the  Pioneer Homes faced some  challenges which he                                                                    
asserted were  two-fold. Currently, Pioneer Home  rates were                                                                    
adjusted by regulation. It  was a time-consuming contentious                                                                    
process.  He surmised  that because  the regulation  process                                                                    
was time-consuming and contentions,  the real value of rates                                                                    
had actually  fallen by  about 15  percent. In  other words,                                                                    
the  real value  of rates  had  fallen as  the division  had                                                                    
adjusted  rates periodically  but  not enough  to keep  pace                                                                    
with real  value. At the same  time, the state had  an aging                                                                    
population with a rising rate  of dementia. He reported that                                                                    
about half  of residents  had dementia.  The state  also had                                                                    
budgetary challenges.  The goal of  the bill was  to protect                                                                    
the  incredible  system  that so  many  Alaskans,  including                                                                    
Representatives Shaw, helped build.                                                                                             
                                                                                                                                
3:01:06 PM                                                                                                                    
                                                                                                                                
Representative   Fields   moved   to  slide   4:   "Resident                                                                    
Population." He  highlight an  important point  with respect                                                                    
to  the  financial  sustainability  of  the  Pioneer  Homes:                                                                    
Presently 51  percent of residents  were self-pay.  In other                                                                    
words,  they paid  the advertised  rates  in the  respective                                                                    
Pioneer Homes and contributed about  $17 million annually to                                                                    
the system. It  was very significant in terms  of the system                                                                    
being self-supporting. One of  the reasons he introduced the                                                                    
bill and one  of his concerns was  inadvertently pushing out                                                                    
self-pay  people.  The  departments   were  not  allowed  to                                                                    
advertise  the rates,  which were  very high.  He wanted  to                                                                    
avoid having  an adverse  selection process,  where self-pay                                                                    
people leave and  go to private care, while  those who would                                                                    
take their places would be  more subsidized by the state. He                                                                    
suggested that if  that were to happen the  state would find                                                                    
itself  with  more obligations  as  the  number of  self-pay                                                                    
residents declined. He did not  have a problem with having a                                                                    
larger population  of poor seniors  supported by  the state.                                                                    
However,  looking at  the long-time  mission of  the Pioneer                                                                    
Homes,  the diversity  of their  population was  integral to                                                                    
their mission. He thought the  housing should continue to be                                                                    
affordable even for those families  that could pay their own                                                                    
way.                                                                                                                            
                                                                                                                                
Representative Fields reviewed the  changes to the committee                                                                    
substitute on slide 5: "Committee  Substitute for House Bill                                                                    
96." The rates were adjusted  to reflect real cost increases                                                                    
since 2004.  Levels 4  and 5  were added  to allow  for more                                                                    
complex  care, so  the  bill  would have  5  levels of  care                                                                    
consistent  with the  direction  of the  department. It  was                                                                    
consistent  with  the Agnew  Beck  Report  which was  issued                                                                    
following SB  74 [Legislation passed  in 2016:  Short Title:                                                                    
Medicaid  Reform; Telemedicine;  Drug  Database] in  broader                                                                    
Medicaid reforms.                                                                                                               
                                                                                                                                
Representative  Sullivan-Leonard  had  heard that  for  some                                                                    
residents,  because  of  a  change   in  their  health  like                                                                    
Dementia or  Alzheimer's, they  were being  transferred from                                                                    
the Pioneer Homes to Alaska  Psychiatric Institute (API) for                                                                    
care or housing.  If the information was  correct, she asked                                                                    
that  Representative  Fields  provide  an  explanation.  She                                                                    
wondered if the  added levels of care  took the circumstance                                                                    
into account.                                                                                                                   
                                                                                                                                
Representative Fields  had not  heard about  residents being                                                                    
transferred  from  Pioneer Homes  to  API.  However, he  was                                                                    
aware  of  seniors  with   complex  behavior  health  issues                                                                    
including severe dementia who were  housed at API for a cost                                                                    
of more than a half million  dollars per year per person. He                                                                    
reported that Agnew Beck and  DHSS wanted to have behavioral                                                                    
health  neighborhoods in  some  of the  Pioneer Homes  where                                                                    
people with  severe dementia  would be  physically separated                                                                    
to be safe  - a care level  of 5. He noted that  the cost of                                                                    
level  5  care  was  about  $15,000  per  month,  which  was                                                                    
expensive but much less than  $500,000 per year, per person.                                                                    
He thought,  when looking  at the broader  system of  how to                                                                    
save  money in  healthcare and  long-term care,  the Pioneer                                                                    
Homes   were   an  important   part.   Some   of  the   most                                                                    
expensive-to-care-for seniors could be taken  out of API and                                                                    
placed into the  Pioneer Homes system in  a safe environment                                                                    
while  saving hundreds  of dollars.  It would  be part  of a                                                                    
broader evolution  where there  was an  increasingly elderly                                                                    
population  at  the Pioneer  Homes  with  a rising  rate  of                                                                    
residents with dementia.                                                                                                        
                                                                                                                                
Co-Chair Wilson  asked Representative Fields to  explain the                                                                    
difference  between  assisted  living and  a  nursing  home,                                                                    
since the Pioneer Homes were no longer nursing homes.                                                                           
                                                                                                                                
Representative   Fields  responded   that  assisted   living                                                                    
generally had a  lower acuity or intensity  of care compared                                                                    
to a nursing home.  There were different reimbursement rates                                                                    
for   federal  healthcare   programs.  He   understood  that                                                                    
Medicaid-eligible residents in the  Pioneer Homes were under                                                                    
the  Residential  Supported  Living (RSL)  Medicaid  Program                                                                    
which billed at  a daily rate of approximately  $160 per day                                                                    
resulting in a  cost of $4880 per month.  The monthly amount                                                                    
was not  sufficient to cover  the cost for the  higher level                                                                    
of care.  Aside from level  5, the Pioneer Homes  system was                                                                    
assisted  living,  just  higher  on the  acuity  scale.  The                                                                    
Pioneer   Homes  system   served  an   important  need.   He                                                                    
elaborated  that in  some  cases in  the  private market,  a                                                                    
person would  have a difficult time  finding assisted living                                                                    
homes at  a higher level  of care for people  with dementia.                                                                    
He concluded that the Pioneer  Homes offered a higher acuity                                                                    
of  care without  reaching the  level of  care at  a nursing                                                                    
home.                                                                                                                           
                                                                                                                                
Co-Chair Wilson asked what the  rate would be if the Pioneer                                                                    
Homes  were nursing  homes.  Representative  Fields did  not                                                                    
know  the rates  in  terms  of the  federal  programs. In  a                                                                    
subsequent  slide  he  would discuss  the  significant  cost                                                                    
differences.                                                                                                                    
                                                                                                                                
3:06:07 PM                                                                                                                    
                                                                                                                                
Vice-Chair Johnston  thought there  might be a  great output                                                                    
of capital  costs for the  Pioneer Homes system to  the meet                                                                    
the requirements of a nursing home.                                                                                             
                                                                                                                                
Co-Chair  Wilson  was concerned  with  trying  to provide  a                                                                    
certain  level of  care without  being certified  to provide                                                                    
that level of care.                                                                                                             
                                                                                                                                
Vice-Chair  Johnston  clarified  that the  Pioneer  Home  in                                                                    
Anchorage had a separate wing for patients with dementia.                                                                       
                                                                                                                                
Representative Fields added  that there was a  wide range of                                                                    
category for assisted living. The  Pioneer Homes system fell                                                                    
within  the assisted  living  category. It  was  not at  the                                                                    
nursing home rate.  Many of the Pioneer  Home residents were                                                                    
at the upper end of the spectrum for assisted living care.                                                                      
                                                                                                                                
Co-Chair Wilson  agreed that  many of  the homes  fell under                                                                    
the  assisted living  category. She  was concerned  that the                                                                    
Pioneer  Homes were  starting to  behave like  nursing homes                                                                    
where the level  of care was much different.  She was trying                                                                    
to  better  understand  the   line  of  distinction  between                                                                    
assisted  living  and nursing  home  care.  She thought  the                                                                    
committee could get her queries answered at a later time.                                                                       
                                                                                                                                
Representative Fields turned to  slide 6: "CSHB 96: Proposed                                                                    
Levels  of  Care."  He reported  that  under  the  committee                                                                    
substitute there was a wide range  of rates. The goal was to                                                                    
be competitive  and to  keep self-pay  people in  the system                                                                    
with relatively affordable rates of  care for level 1 and 2.                                                                    
Under  the  committee  substitute (CS)  the  rate  increases                                                                    
could be annual and could be  as high as the Social Security                                                                    
rate  of inflation  - a  more efficient  process that  could                                                                    
keep pace  with the cost of  care, rather than having  to go                                                                    
through  the  more  arduous   public  comment  process.  The                                                                    
concept would ideally keep the  state from falling back into                                                                    
a hole like it had over the previous 15 years.                                                                                  
                                                                                                                                
Representative Tilton  asked about the Social  Security rate                                                                    
of inflation  compared to a  health care inflation  rate she                                                                    
had  heard   of  that  was  higher.   Representative  Fields                                                                    
responded  that he  was aware  of  the health  care rate  of                                                                    
inflation  which  had generally  been  higher.  Most of  the                                                                    
Pioneer Homes'  costs related to  personnel were  higher. He                                                                    
mentioned that the sum had  been discussed in the Health and                                                                    
Social Services  Committee. He  suggested that,  in reality,                                                                    
the Pioneer Homes' costs would  not perfectly reflect either                                                                    
the health care costs or  the CPI [Consumer Price Index]. He                                                                    
thought it would be somewhere in the middle.                                                                                    
                                                                                                                                
Representative  Fields  explained  slide 7:  "Complexity  of                                                                    
Care."  The slide  reflected the  changes from  3 levels  of                                                                    
care to 5  levels of care. He reiterated the  levels of care                                                                    
were  consistent with  where the  department  was going  and                                                                    
consistent with Agnew  Beck and the broader  changes made to                                                                    
the state's health care system in SB 74.                                                                                        
                                                                                                                                
3:09:44 PM                                                                                                                    
                                                                                                                                
Representative  Fields reviewed  slide 8:  "Would you  buy a                                                                    
$37 hamburger?"  He stated that Pioneer  Homes were assisted                                                                    
living homes which existed in  a competitive marketplace. He                                                                    
reemphasized  the importance  of  retaining the  self-paying                                                                    
residents.  He  commended  the   Pioneer  Homes'  staff  and                                                                    
Department of  Health and Social Services  (DHSS) leadership                                                                    
at the  division director level  about adapting  to changing                                                                    
in  very challenging  circumstances.  His  concern with  the                                                                    
department's  proposed  rate  increases   was  that  it  was                                                                    
assuming inelastic demand - if  a certain price was charged,                                                                    
fees  would  be  collected  from  a  significant  number  of                                                                    
people. He had heard from  people in his district and people                                                                    
who had  left the Pioneer  Homes system based on  the threat                                                                    
of  price increases.  They were  self-pay residents.  He did                                                                    
not  want to  see the  state  go into  an adverse  selection                                                                    
process where more and more  residents were fully subsidized                                                                    
by the state. He believed it  was in the interest as a state                                                                    
to have  a financially  viable system with  a health  mix of                                                                    
self-pay individuals.                                                                                                           
                                                                                                                                
Representative  Fields  continued  that under  the  CS,  the                                                                    
prices  for levels  1 and  2 of  care would  continue to  be                                                                    
competitive in  Alaska's region and  to make sure  to retain                                                                    
the  self-paying individuals  that  contributed $17  million                                                                    
annually to  the system. The bill  did not put a  cap on the                                                                    
rates  for  level  5  because  it was  a  different  set  of                                                                    
reimbursement  that was  separate  from Residential  Support                                                                    
Living (RSL).  The state could set  a high price at  level 5                                                                    
and continue  to save  money as a  state by  shifting people                                                                    
out   of  API   and  other   environments  that   were  less                                                                    
appropriate.                                                                                                                    
                                                                                                                                
Representative Fields turned to  slide 9: "Cost of Long-Term                                                                    
Care  in Pacific  Northwest" which  was  an illustration  of                                                                    
regional  costs.   He  pointed  out  that   in  the  Pacific                                                                    
Northwest and  in Anchorage assisted living  care rates were                                                                    
in the  range of $5000  to $6000 which was  competitive with                                                                    
the bill he had laid out.                                                                                                       
                                                                                                                                
Representative Fields  moved to  slide 10:  "Social Security                                                                    
Cost of Living Adjustment." He  explained that the slide was                                                                    
an illustration of the Cost  of Living Adjustment (COLA). He                                                                    
indicated that if  the state had been  adjusting rates every                                                                    
year, it  would not have fallen  into a hole like  the state                                                                    
had over  the previous  15 years.  He thanked  the committee                                                                    
for hearing his presentation  and made himself available for                                                                    
questions.                                                                                                                      
                                                                                                                                
Representative  Josephson  asked   how  the  cost  increases                                                                    
proposed  in  the  bill  compared  to  the  administration's                                                                    
regulatory  increase.  Representative  Fields  replied  that                                                                    
they  were substantially  less. He  returned to  side 8.  He                                                                    
pointed  out  that the  blue  bars  represented the  current                                                                    
monthly  rate; the  orange bars  reflected the  department's                                                                    
proposal;  and  the  green bar  indicated  rates  advertised                                                                    
under the bill.                                                                                                                 
                                                                                                                                
Representative Josephson  asked what the  administration was                                                                    
going to  do with  the extra dollars.  Representative Fields                                                                    
responded  that  the   administration's  proposal  regarding                                                                    
advertised rates  corresponded to a  change in the  way they                                                                    
put  forward  a budget.  The  department  still requested  a                                                                    
significant  amount of  general funds  but changed  it to  a                                                                    
needs-based  payment  assistance  program. The  reality  was                                                                    
that  either under  the administration's  plan or  the bill,                                                                    
the state would  continue to invest a  significant amount of                                                                    
money into  the Pioneer  Homes. The question  remained about                                                                    
what  the advertised  rated  would be.  He  deferred to  the                                                                    
division for additional details.                                                                                                
                                                                                                                                
Representative  Josephson referred  to  the  topic of  state                                                                    
assistance.  He wondered  about the  difference between  the                                                                    
general  fund subsidy  and state  assistance. Representative                                                                    
Fields responded  that the orange  bars equated to  what the                                                                    
division  said  was the  true  cost  of providing  care.  In                                                                    
looking  at the  difference between  the green  bar and  the                                                                    
orange bar for level 1,  there would be a small differential                                                                    
between  what people  paid and  the actual  cost to  provide                                                                    
care, if  HB 96 passed  as written. The  traditional general                                                                    
fund allocation  would fill  the very  small gap.  Under the                                                                    
administration's  bill,  if  people  were able  to  pay  the                                                                    
rates, there would be no gaps and no state subsidy needed.                                                                      
                                                                                                                                
Representative  Carpenter  asked  if there  was  an  inverse                                                                    
relationship  with demand.  He  wondered if  there was  more                                                                    
demand  at level  1 than  level 5  and across  the spectrum.                                                                    
Representative  Fields   replied  that  he   thought  people                                                                    
recognized the Pioneer Homes provided  quality care and many                                                                    
people got on  the waitlist before they were at  level 4. He                                                                    
reemphasized  the importance  of having  competitive pricing                                                                    
at  levels  1  and  2 because,  regardless  of  when  people                                                                    
actually enter  the Pioneer Homes,  many of them get  on the                                                                    
list before being at level  1. Once people enter the Pioneer                                                                    
Homes it  was not unusual for  people to move up  the tiers.                                                                    
They might end up paying at levels 1, 2 and 3.                                                                                  
                                                                                                                                
3:15:30 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson OPENED Public Testimony                                                                                         
                                                                                                                                
3:15:48 PM                                                                                                                    
                                                                                                                                
MARGIE BEEDLE,  SELF, JUNEAU (via  teleconference), reported                                                                    
being in support  of HB 96. She represented  119 people that                                                                    
had signed a  letter in support of the bill.  Her mother was                                                                    
a  self-pay resident  of  the Pioneer  Home  in Juneau.  The                                                                    
governor's budget  proposed increases up to  140 percent for                                                                    
some  residents to  mitigate  the state's  cost  to run  the                                                                    
Pioneer Homes. The governor's  proposal illuminated how much                                                                    
the state  had subsidized the Pioneer  Homes previously. She                                                                    
informed the  committee that  many of  the residents  of the                                                                    
Pioneer Home  came to Juneau  before statehood.  They helped                                                                    
develop and defend  the state. She mentioned  that they paid                                                                    
a state  income tax for  most of  the years they  had worked                                                                    
including  during  the  time of  inception  of  the  Pioneer                                                                    
Homes.  She thought  the  people in  the  Pioneer Homes  had                                                                    
contributed greatly  to the state and  deserved proper care.                                                                    
She relayed  a number of  contributions made by  the elderly                                                                    
in the community.  Her mother worked until she  was 87 years                                                                    
old. She  had been good  and generous to the  community. She                                                                    
thought the  state should  meet her  half way  at supporting                                                                    
her care. House Bill 96  was a compromise. She urged support                                                                    
for the bill. She submitted a letter signed by 120 people.                                                                      
                                                                                                                                
3:19:31 PM                                                                                                                    
                                                                                                                                
BRAD  RIDER,  SELF,  JUNEAU  (via  teleconference),  favored                                                                    
HB 96  and supported  Alaska's elders.  He thought  they had                                                                    
been  kicked around  with  all of  the  suggested pieces  of                                                                    
legislation.  He  opined that  from  the  beginning of  time                                                                    
people  have taken  care  of their  elders  and thought  the                                                                    
state should  continue to do  so. He reiterated  his support                                                                    
of the bill.                                                                                                                    
                                                                                                                                
3:21:11 PM                                                                                                                    
                                                                                                                                
FRED KOKEN,  SELF, JUNEAU (via  teleconference), appreciated                                                                    
the committee's time.  He had been a resident  of Alaska for                                                                    
about 50 years. His wife was  a resident of the Pioneer Home                                                                    
in Juneau.  He had  worked in  the state for  30 years  as a                                                                    
financial consultant.  He relayed that when  he received the                                                                    
information  regarding  the administration's  proposed  rate                                                                    
increase, it was like a punch  in the gut. He suggested that                                                                    
the  current residents  within the  Pioneer Homes  should be                                                                    
grandfathered with  the prices  they currently paid  and had                                                                    
budgeted  for. He  implored  members to  support  HB 96  and                                                                    
urged them  not to balance  the budget  on the backs  of the                                                                    
elderly.                                                                                                                        
                                                                                                                                
3:23:25 PM                                                                                                                    
                                                                                                                                
JANET HENDERSON, SELF, JUNEAU,  reported that her mother was                                                                    
currently in the Pioneer Home.  Her mother had worked in the                                                                    
school district  and her father  had worked as  a contractor                                                                    
and an  employee of  the state. Both  parents had  paid into                                                                    
the system and  planned to enter into the  Pioneer Home. Her                                                                    
mother  was  scared  about  the  future  and  finances.  She                                                                    
supported the bill.  She did not think it was  fair to raise                                                                    
the elders' rent by 140 percent.                                                                                                
                                                                                                                                
3:25:07 PM                                                                                                                    
                                                                                                                                
AVES   THOMPSON,  SELF,   ANCHORAGE  (via   teleconference),                                                                    
thought HB  96 was a step  in the right direction.  His wife                                                                    
was currently  in the Anchorage  Pioneer Home. He  paid over                                                                    
$6,795 per month  for his wife to be there.  The annual cost                                                                    
was over  $81,540 per year.  The governor's  proposed change                                                                    
would increase  the rate  to $13,333  per month  or $159,996                                                                    
per year.  The annual increase  would equate to  $78,456. He                                                                    
thought  the  increase  was  driven by  the  fact  that  the                                                                    
governor's  amended budget  proposal  zeroed  out about  $34                                                                    
million in  undesignated general  funds shifting  the entire                                                                    
fund  source to  user  fees. He  continued  that the  Alaska                                                                    
House of Representatives just passed  a budget that included                                                                    
the fund shift.  However, it was not a  budget reduction, it                                                                    
was a change  in the fund source shifting all  of the burden                                                                    
to the user.                                                                                                                    
                                                                                                                                
Mr.  Thompson  continued that  his  wife  was a  self-paying                                                                    
resident  of  the  Pioneer Home  and  received  no  monetary                                                                    
subsidies from  the state or  federal governments. He  had a                                                                    
small  amount of  long-term care  insurance that  would last                                                                    
about 12 to 13 months. The rest  of the cost was paid for by                                                                    
their retirement  income and personal savings.  The proposed                                                                    
cost increase  would displace  his wife  out of  the Pioneer                                                                    
Home.  In the  long  run,  many of  the  residents would  be                                                                    
subsidized  by  public  dollars.  The  proposed  30  percent                                                                    
increase  remained   excessive  in   his  mind.   He  quoted                                                                    
Representative  Foster  from  an article  in  the  Anchorage                                                                    
Daily  News.  He urged  members  to  carefully consider  the                                                                    
impact of an increase and to support HB 96.                                                                                     
                                                                                                                                
3:29:17 PM                                                                                                                    
                                                                                                                                
SHARON LONG,  SELF, ANCHORAGE (via teleconference),  was the                                                                    
wife of a  2-year resident of the Pioneer Home  and a friend                                                                    
of a 92-year-old  resident, Mrs. Lucy Gross.  Lucy could not                                                                    
sit  back  and  watch  Alaska's pioneers  and  veterans  get                                                                    
bludgeoned  with exploited  rates.  She  created a  petition                                                                    
that members  should have  that gave  families a  voice. She                                                                    
urged members to read the  letter signed by over 1120 people                                                                    
petitioning a change in the  proposed increase in rates. She                                                                    
was speaking  on behalf of  the petitioners who  were scared                                                                    
and  bewildered  by how  the  state  they helped  build  was                                                                    
threatening  their financial  bearings  and  peace of  mind.                                                                    
She  thanked   the  committee  for  attempting   to  find  a                                                                    
legislative  solution  to  repeal the  regulatory  authority                                                                    
under which the administration  was making unprecedented and                                                                    
draconian  changes  to  the mission  and  operation  of  the                                                                    
Pioneer Homes  and for confirming existing  rates as drafted                                                                    
in the  original version  of HB 96.  She thought  the Social                                                                    
Security  COLA was  a rational  and incremental  approach to                                                                    
increases  and   something  people   could  plan   for.  She                                                                    
encouraged  the committee  to  do the  right  thing for  the                                                                    
elders of the state.                                                                                                            
                                                                                                                                
3:32:10 PM                                                                                                                    
                                                                                                                                
WILLIAM  HARRINGTON, SELF,  ANCHORAGE (via  teleconference),                                                                    
was  a 70-year-old  resident and  believed an  elder subsidy                                                                    
should  be  equal for  all  residents.  He proposed  several                                                                    
amendments to the bill. He  thought a business should be run                                                                    
by a  business or  should be out  of business.  He suggested                                                                    
the golden  years would  be tough  everywhere. He  hoped the                                                                    
legislature could come up with some solutions.                                                                                  
                                                                                                                                
3:33:26 PM                                                                                                                    
                                                                                                                                
ROCKY  PLOTNICK,   SELF,  ANCHORAGE   (via  teleconference),                                                                    
thanked  members   for  hearing   her  testimony.   She  was                                                                    
currently  looking for  assisted living  in Seattle  for her                                                                    
92-year-old mother.  She was testifying  in favor of  HB 96.                                                                    
Her  husband was  in  his  70s and  lived  in the  Anchorage                                                                    
Pioneer Home with Parkinson's disease.  He had spent most of                                                                    
his years as  a physician working throughout  Alaska. He was                                                                    
a level  2 self-pay  resident. Currently, they  paid $56,304                                                                    
per  month. If  HB  96  were to  pass,  their  costs at  the                                                                    
Pioneer Home would increase to  $75,600 per month. She hoped                                                                    
the rate would not increase  any more than what was proposed                                                                    
in HB  96. She  was grateful  to know  that her  husband was                                                                    
safe at the Pioneer Home.                                                                                                       
                                                                                                                                
3:36:22 PM                                                                                                                    
                                                                                                                                
GEORGE PAUL,  SELF, WASILLA (via  teleconference), supported                                                                    
the  concept of  HB 96.  He had  been in  the nursing  field                                                                    
since 1999. He supported  the governor's proposed amendment.                                                                    
He had worked  at two different Pioneer  Homes and currently                                                                    
worked at  a private assisted  living facility. He  spoke of                                                                    
the different  services provided  at the Pioneer  Homes that                                                                    
were not provided at private  sector facilities. He provided                                                                    
some  examples. He  argued that  services  such as  physical                                                                    
therapy that  had to  be sought  independently of  a private                                                                    
facility should be subsidized to make things equitable.                                                                         
                                                                                                                                
3:40:09 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson CLOSED Public Testimony.                                                                                        
                                                                                                                                
Co-Chair  Wilson  indicated  amendments were  due  Thursday,                                                                    
May 2,  2019  by  5:00  P.M.   The  committee  would  review                                                                    
amendments and the fiscal notes at another hearing.                                                                             
                                                                                                                                
HB  96  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 31                                                                                                             
                                                                                                                                
     "An Act making a special appropriation to the Alaska                                                                       
     permanent fund; and providing for an effective date."                                                                      
                                                                                                                                
3:40:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNATHAN   KREISS-TOMPKINS,  BILL  SPONSOR,                                                                    
indicated  that HB  31 was  a simple  bill that  transferred                                                                    
$5.5 billion from the Earnings  Reserve Account (ERA) to the                                                                    
corpus of the Alaska Permanent  Fund (PF). He introduced the                                                                    
PowerPoint presentation: "HB 31:  $5.5 billion transfer from                                                                    
the ERA  to the  Corpus." The presentation  had a  number of                                                                    
slides  that   would  contextualize   the  impacts   of  the                                                                    
legislation  or such  a  transfer  especially given  actions                                                                    
taken in  the other  body on the  previous Friday.  He would                                                                    
discuss  the impacts  of different  sizes  of transfers.  He                                                                    
noted that  the House was  interested in the  concept before                                                                    
the Senate.                                                                                                                     
                                                                                                                                
Representative Kreiss-Tompkins  turned to  slide 2:  "If the                                                                    
deficits  continue,  the  CBR   is  most  likely  gone."  He                                                                    
reported that since  he became a legislator in  2013, he had                                                                    
seen  the  legislature  collectively   spend  down  all  the                                                                    
state's  savings. He  found it  discouraging and  thought it                                                                    
was a collective  action problem. The genesis of  the ERA to                                                                    
principal  transfer reflected  his  grave  fear and  concern                                                                    
that  the legislature  might  soon regard  the  ERA as  just                                                                    
another savings account that was  available to spend down as                                                                    
opposed  to an  intergenerational asset  for the  benefit of                                                                    
future generations of Alaskans.                                                                                                 
                                                                                                                                
Representative  Kreiss-Tompkins  spoke  to slide  3:  "Other                                                                    
ERA-to-principal  transfer proposals."  He reported  that in                                                                    
the previous year in the  operating budget, Amendment 58 was                                                                    
considered but not voted on.  The amendment reflected a $5.5                                                                    
billion  transfer  from the  ERA  to  the principal  of  the                                                                    
Alaska  PF.  On  the  previous Friday,  the  Senate  Finance                                                                    
Committee dropped  a bomb  shell by  amending the  budget to                                                                    
reflect  a  $12  billion  transfer   from  the  ERA  to  the                                                                    
principal. The  amendment was passed without  objection from                                                                    
the minority Democrats to the  Mat-Su Republicans to the co-                                                                    
chair. He  thought the  action taken  by the  Senate Finance                                                                    
Committee made  his bill containing a  $5.5 billion transfer                                                                    
look like minor league baseball in comparison.                                                                                  
                                                                                                                                
3:44:35 PM                                                                                                                    
                                                                                                                                
Representative Kreiss-Tompkins  discussed slide  4: "History                                                                    
of Legislative Appropriations to  the Principal." He relayed                                                                    
that it was  not out of the ordinary for  the legislature to                                                                    
have transferred funds from the  ERA to the principal of the                                                                    
PF. The legislature had  an inflation-proofing transfer most                                                                    
years.  There  were  a  couple of  missed  years  in  recent                                                                    
history. Most years the legislature  abided by the operating                                                                    
budget. The  current year  included the  inflation transfer.                                                                    
The slide  showed an inventory  or summary of all  the other                                                                    
ERA-to-Principal  transfers   above  and   beyond  inflation                                                                    
proofing. The high-water  mark was $1.3 billion  even if the                                                                    
figure  was inflation  adjusted. The  numbers that  had been                                                                    
proposed, $5.5 billion  or $12 billion, were  well in excess                                                                    
of the  highest recorded number.  He noted that  the balance                                                                    
of the ERA was at an all-time historic high.                                                                                    
                                                                                                                                
Representative Kreiss-Tompkins moved  to slide 5: "Permanent                                                                    
Fund  Account   Structure."  He  reported  that   the  slide                                                                    
reflected the  year-end projections of the  account balances                                                                    
for the PF.  He noted that there were large  amounts in both                                                                    
the principal and the ERA.                                                                                                      
                                                                                                                                
Representative Kreiss-Tompkins turned  to slide 6: "Earnings                                                                    
Reserve Account:  $18.9 billion  balance." He  reported that                                                                    
HB 31 called  for a $5.5 billion transfer. The  number was a                                                                    
carryover from  the operating budget  in the  previous year.                                                                    
The  number in  the previous  year  was not  random. It  was                                                                    
based  on an  analysis of  prudence and  conservatism. Under                                                                    
SB 26   [Legislation   passed    in   2018:   Short   Title:                                                                    
Appropriations  Limit   and  Permanent  Fund   Dividend  and                                                                    
Earnings], there  was a structure  and framework  to sustain                                                                    
and  properly  manage  the  PF  and  manage  it  for  future                                                                    
generations.  He indicated  that the  legislature would  not                                                                    
want to  take more than 5  percent of market value  in any 1                                                                    
year after  the first  3 years. He  continued that  the $5.5                                                                    
billion figure, as  proposed in the operating  budget in the                                                                    
previous year,  would have  drawn down all  of the  money in                                                                    
the ERA until an amount equal  to 4 times the 5 percent draw                                                                    
was left  in the  account. If the  math was  calculated with                                                                    
the numbers in the PF in  the prior year, the pink number on                                                                    
the slide  would have  been $5.5  billion. Moving  forward a                                                                    
year, the  ERA accumulated more earnings.  Applying the same                                                                    
analysis  would  lead  to  about   an  $8  billion  transfer                                                                    
presently.  He indicated  that the  $8 billion was  a number                                                                    
that  should be  considered by  the committee.  He suggested                                                                    
that transferring  $8 billion for  the ERA to  the principle                                                                    
would still  leave 4  times the 5  percent POMV  [Percent of                                                                    
Market  Value] draw  amount in  the ERA  while protecting  a                                                                    
huge  amount of  money permanently  and for  the benefit  of                                                                    
future generations.                                                                                                             
                                                                                                                                
3:48:05 PM                                                                                                                    
                                                                                                                                
Representative   Kreiss-Tompkins   turned    to   slide   7:                                                                    
"Scenario:  Moderate bear  market  from FY  21-  FY 23."  He                                                                    
suggested that  when the  legislature considered  the amount                                                                    
of money to  transfer from the ERA to the  principal, it was                                                                    
a  balance  and a  legitimate  conversation  that needed  to                                                                    
happen. The  transfer amount needed  to be  balanced against                                                                    
the  function  of  the  ERA  - the  only  pot  of  cash  the                                                                    
legislature had to pay for  dividends and state services. He                                                                    
added  that  the ERA  could  fluctuate  depending on  market                                                                    
conditions. If  the state  had poor  returns, the  ERA would                                                                    
get smaller  which could happen  quickly. He  indicated that                                                                    
the scenario on the slide,  as worked out by the Legislative                                                                    
Finance  Division,  projected  3   consecutive  years  of  3                                                                    
percent returns. He noted it wound  not be that bearish of a                                                                    
market.                                                                                                                         
                                                                                                                                
Representative  Kreiss-Tompkins mentioned  the recession  in                                                                    
2008 and  2009 the  state had -17.9  percent return  and the                                                                    
year preceding there  was a -3.6 return. He  admitted it was                                                                    
a severe  recession, but  it helped  to provide  context. If                                                                    
the stock market  was not doing well,  the legislature would                                                                    
be  starting   to  play   with  fire   the  more   money  it                                                                    
transferred. Some  liquidity needed to be  maintained in the                                                                    
account - a shock absorber  for bad market years. He pointed                                                                    
out  that  the  3  graphs demonstrated  how  the  ERA  would                                                                    
perform  in a  moderate bear  market. He  noted that  with a                                                                    
transfer  of  $5.5  billion there  would  be  a  significant                                                                    
amount  of  shock  absorption  left   in  the  ERA  after  3                                                                    
consecutive  bear market  years.  A transfer  of $8  billion                                                                    
would  leave  slightly less  of  a  cushion. A  transfer  of                                                                    
$12 billion  would  leave just  enough  in  the account  but                                                                    
would be riskier. He noted  that a $13 billion transfer when                                                                    
the bear market  was slightly worse would  leave the balance                                                                    
at zero.  There would be  no money  to pay for  dividends or                                                                    
public services. At  such a point, the  legislature would be                                                                    
up against a hard wall.                                                                                                         
                                                                                                                                
Representative Merrick  asked where  the other body  got the                                                                    
$12 billion and $14  billion figures. Representative Kreiss-                                                                    
Tompkins did not know.                                                                                                          
                                                                                                                                
Co-Chair Wilson  thought it was  not appropriate  to comment                                                                    
on the reasoning of the other body.                                                                                             
                                                                                                                                
Representative  Kreiss-Tompkins  commented   that  a  person                                                                    
could consider  the ERA in  isolation and what  amount might                                                                    
make  sense  to  transfer  to   the  principal.  There  were                                                                    
constitutional  amendments  moving through  the  legislature                                                                    
currently. He  was a sponsor  of a  constitutional amendment                                                                    
that  would create  a constitutional  POMV  and combine  the                                                                    
earnings  reserves  and  the  principal.  If  and  when  the                                                                    
combination were  to happen, it would  eliminate the problem                                                                    
of  the  ERA  hitting  zero because  of  a  simpler  classic                                                                    
endowment  model. There  could  be some  merit  in moving  a                                                                    
large amount  of cash  to the  principal if  it was  done in                                                                    
tandem with  restructuring the PF  to have  a constitutional                                                                    
cap and combine the ERA and the principal.                                                                                      
                                                                                                                                
Representative  Sullivan-Leonard asked  if  the Director  of                                                                    
the Alaska Permanent Fund Corporation  offered an opinion on                                                                    
the   transfer  of   $12   billion   versus  $5.5   billion.                                                                    
Representative  Kreiss-Tompkins responded  that  he had  not                                                                    
spoken  directly  with  her,  though,  he  thought  she  was                                                                    
online.                                                                                                                         
                                                                                                                                
3:52:40 PM                                                                                                                    
                                                                                                                                
ANGELA  RODELL, EXECUTIVE  DIRECTOR,  ALASKA PERMANENT  FUND                                                                    
CORPORATION (via teleconference),  responded that the Alaska                                                                    
Permanent Fund  Corporation (APFC)  did not take  a position                                                                    
on the amount.                                                                                                                  
                                                                                                                                
Vice-Chair Ortiz indicated that  the slide showed what might                                                                    
happen if a bear market were to  start in FY 21. He asked if                                                                    
Representative Kreiss-Tompkins agreed that  if a bear market                                                                    
were to  begin in  FY 20, the  model would  potentially look                                                                    
significantly    worse.    Representative    Kreiss-Tompkins                                                                    
responded in  the positive.  He suggested  that if  the bear                                                                    
market were 4 years instead of  3 years or 1 percent instead                                                                    
of 3 percent, all of the  charts would look worse. He eluded                                                                    
to his previous reference of playing with fire.                                                                                 
                                                                                                                                
Vice-Chair Johnston understood why  2.72 percent was used in                                                                    
the prior year.  She asked if the draw should  have been 2.9                                                                    
percent in the current year.                                                                                                    
                                                                                                                                
3:54:39 PM                                                                                                                    
                                                                                                                                
KEVIN  MCGOWAN,   STAFF,  REPRESENTATIVE   JONATHAN  KREISS-                                                                    
TOMPKINS, responded that the percentage  was used because of                                                                    
the effective date  was immediate. If the bill  were to pass                                                                    
in the current  year, it would be  effective immediately. If                                                                    
it  did not  pass until  the following  year, it  would make                                                                    
sense to adjust it.                                                                                                             
                                                                                                                                
Vice-Chair Johnston referred  to the charts on  slide 7. She                                                                    
had been reminded that in 2008,  when the ERA went under, it                                                                    
was  the first  time the  legislature looked  at paying  the                                                                    
dividend with general fund dollars.  She was a firm believer                                                                    
in putting funds into the corpus  but wanted to bring up the                                                                    
issue.                                                                                                                          
                                                                                                                                
Representative Josephson asked if  the other proposal, where                                                                    
all funds would  be placed in the corpus,  would be workable                                                                    
because it  would have  to be  accompanied by  the allowance                                                                    
for the  legislature to use  the corpus in a  sustained way.                                                                    
Representative Kreiss-Tompkins  did not  want to  respond to                                                                    
what the  other body might  be thinking. He thought  it made                                                                    
sense  if the  legislature moved  all or  almost all  of the                                                                    
funds (about  $14 billion)  into the  corpus in  tandem with                                                                    
restructuring the fund to  be all constitutionally protected                                                                    
and  combining the  ERA with  the  principal. His  suggested                                                                    
scenario would eliminate  risk of a bad market  year and not                                                                    
having  enough   money  to  pay  for   dividends  or  public                                                                    
services.                                                                                                                       
                                                                                                                                
Representative Josephson  had some concerns relative  to the                                                                    
2007-2009    period.    He     asked    if    Representative                                                                    
Kreiss-Tompkins  used 3  percent  in a  bear  market in  his                                                                    
hypothetical   scenario.  He   noted  it   was  not   a  bad                                                                    
experience,  not like  presently. He  thought Representative                                                                    
Kreiss-Tompkins  had mentioned  -17  percent  in a  calendar                                                                    
year.  He   asked  if  he   had  heard   the  representative                                                                    
correctly.                                                                                                                      
                                                                                                                                
Representative   Kreiss-Tompkins   replied   that   he   was                                                                    
accurate. He emphasized  that it was a  moderate bear market                                                                    
rather than  a severe  market. In 2008  and 2009  the market                                                                    
returns were -18 percent and  -3.5 percent. In 2001 and 2002                                                                    
immediately  following September  11th, the  market turndown                                                                    
was  -3.25  percent and  -2.25  percent  respectively for  2                                                                    
consecutive   years.   All   of  the   graphs   would   look                                                                    
substantially  worse   if  they  were  modeled   over  those                                                                    
scenarios  which had  happened  before  and would  certainly                                                                    
happen again.                                                                                                                   
                                                                                                                                
3:58:25 PM                                                                                                                    
                                                                                                                                
Representative Josephson  shared the concern of  the history                                                                    
of postponement of fiscal planning  and that the legislature                                                                    
might  draw down  all  of its  earnings.  He wondered  about                                                                    
undermining the use  of a POMV or  devastating the dividend.                                                                    
Representative    Kreiss-Tompkins    asked    Representative                                                                    
Josephson to repeat his question.                                                                                               
                                                                                                                                
Representative  Josephson suggested  that  even  with the  2                                                                    
deterrents  from an  overdraw  and reckless  spending -  the                                                                    
lack of a dividend and the  lack of sustainability of a POMV                                                                    
- the legislature might still abuse the ERA.                                                                                    
                                                                                                                                
Representative  Kreiss-Tompkins  replied,  "Yes,  that's  my                                                                    
concern."  He had  only been  around the  legislature for  7                                                                    
years but  had heard a  marked shift in public  dialog about                                                                    
the  inviolateness  of  the  PF. He  wanted  to  severe  the                                                                    
conversation  from   how  large  the  dividend   should  be.                                                                    
However, he thought  all of the legislators  could or should                                                                    
agree on  not spending down the  PF. It would be  easy to do                                                                    
for a  year or  two, even  if it  put the  state in  a tough                                                                    
position  a generation  from present  day.  Based on  recent                                                                    
discussions, he thought  it was very possible  to spend down                                                                    
the  fund. He  explained when  the legislature  struggled to                                                                    
balance the  budget or  reach a fiscal  plan, it  kicked the                                                                    
can  down  the road.  His  goal  was  to have  enough  money                                                                    
protected permanently  in the PF that  the legislature could                                                                    
continue to have the argument  about how to spend the money.                                                                    
However,   if  the   legislature  spent   that  money   down                                                                    
currently, the  state would  not have money  in 20  years to                                                                    
argue  about  how  it  should  be spent  or  how  large  the                                                                    
dividend should be.                                                                                                             
                                                                                                                                
Co-Chair Wilson  clarified that the committee  was currently                                                                    
talking about  the PF Earnings  Reserve. The  Permanent Fund                                                                    
Corpus could not be touched by  anyone without a vote of the                                                                    
people.                                                                                                                         
                                                                                                                                
4:01:20 PM                                                                                                                    
                                                                                                                                
Representative Carpenter  thought it was  disconcerting that                                                                    
legislators were having conversations  about what to do with                                                                    
the money when  there were laws in place  dictating where it                                                                    
should be spent. Lawmakers  had subsequently disregarded the                                                                    
laws. The money  in reference was supposed to go  out to the                                                                    
people  over the  previously several  years in  the form  of                                                                    
dividend checks that instead, stayed  in the ERA. There were                                                                    
individuals  that were  rightly upset  about it.  Presently,                                                                    
the  committee was  having a  conversation about  taking the                                                                    
money and not paying it  to them as requested. Instead, what                                                                    
was being suggested  was to lock it away  forever, a portion                                                                    
of  which  would  come  back   in  the  form  of  future  PF                                                                    
dividends.                                                                                                                      
                                                                                                                                
Co-Chair  Wilson  corrected Representative  Carpenter  about                                                                    
what was being  discussed. The bill did not take  all of the                                                                    
money in the  ERA. Currently, the bill was  in committee and                                                                    
reflected $5.5 billion.  It did not reflect the  back pay or                                                                    
the  dividend.  Both  could  still be  paid  even  with  the                                                                    
transfer.  She  did  not  want the  wrong  message  sent  to                                                                    
Alaskans.                                                                                                                       
                                                                                                                                
Representative Carpenter explained that  the question he was                                                                    
getting   to  was   about  the   requirement  to   back  the                                                                    
Constitutional Budget  Reserve (CBR).  The state had  a very                                                                    
small balance in the CBR  and an unfunded liability of sorts                                                                    
to  fund it.  He asked  why  it would  be more  appropriate,                                                                    
considering it  was important for the  legislature to follow                                                                    
the law,  to put it into  the PF corpus rather  than the CBR                                                                    
to meet its obligation.                                                                                                         
                                                                                                                                
Representative    Kreiss-Tompkins    responded   that    the                                                                    
representative  first  talked  about   money  that  was  not                                                                    
distributed as dividends  but stayed in the  ERA. He thought                                                                    
the  instance referred  to the  time Governor  Walker vetoed                                                                    
part of  the dividend.  The money was  retained in  the ERA.                                                                    
Speaking to  that scenario, it  was a small fraction  of the                                                                    
total amount  of cash  in the  ERA presently.  He elaborated                                                                    
that the  vast majority, $16  billion or $17 billion  of the                                                                    
$18.9  billion   in  the  ERA,   was  from   market  returns                                                                    
independent  of  the   point  Representative  Carpenter  was                                                                    
making. The  reason there was so  much money in the  ERA was                                                                    
mostly independent  of the decisions made  by past governors                                                                    
regarding dividends.                                                                                                            
                                                                                                                                
Representative   Kreiss-Tompkins  addressed   Representative                                                                    
Carpenter's  question about  the CBR  account replenishment.                                                                    
The Constitutional  Budget Reserve  Account was  designed to                                                                    
be  spent   down  when  the  legislature   deemed  the  need                                                                    
sufficient. The  goal was to  protect the PF  monies forever                                                                    
for the benefit of  future generations. There were different                                                                    
purposes for the  CBR and the ERA. Taking money  from the PF                                                                    
and putting  it into the  CBR was effectively  equivalent to                                                                    
spending down  the PF. There would  be a time delay,  but it                                                                    
would be tantamount to spending the PF.                                                                                         
                                                                                                                                
Co-Chair  Wilson added,  for the  purpose of  accuracy, that                                                                    
Governor  Walker   vetoed  the  dividend  1   year  and  the                                                                    
legislature in the following 2  years chose an amount out of                                                                    
the sky versus following the prescribed formula.                                                                                
                                                                                                                                
Representative  Carpenter did  not  understand the  equation                                                                    
between  spending  down  the  PF when  the  corpus  was  not                                                                    
getting spent, while  spending down the CBR,  the account in                                                                    
which  the legislature  was required  to pull  from in  lean                                                                    
times.                                                                                                                          
                                                                                                                                
Co-Chair Wilson explained  that the POMV draw  came from the                                                                    
PF  ERA. The  difference between  putting $5.5  billion into                                                                    
the corpus  versus the CBR  was to protect the  savings from                                                                    
being used except with a  vote of the people. She emphasized                                                                    
that once money was placed into  the corpus, it could not be                                                                    
accessed  without a  vote of  the people.  If the  money was                                                                    
placed into the CBR, it could  be used to fulfill the budget                                                                    
as had been  done in the past. If the  legislature wanted to                                                                    
protect the  ERA, which only  required a vote of  21/11, the                                                                    
money could be placed into the  corpus of the PF or into the                                                                    
CBR.  The   money  in  the   CBR  could  be  spent   by  the                                                                    
legislature. If the legislature  truly wanted to protect the                                                                    
earnings, it  would be best  to transfer the money  into the                                                                    
corpus because  it required a  vote of the people  to spend.                                                                    
The question  came down to  how much the  legislature wanted                                                                    
to protect the PF.                                                                                                              
                                                                                                                                
4:07:01 PM                                                                                                                    
                                                                                                                                
Representative Carpenter understood  the reasons. He pointed                                                                    
to the requirement for the  legislature to pay back the CBR.                                                                    
He thought  they were  effectively ignoring  the requirement                                                                    
to repay the CBR if the money went towards the PF corpus.                                                                       
                                                                                                                                
Co-Chair  Wilson  asked the  sponsor  to  follow up  with  a                                                                    
reference to the  statutory requirement for the  money to go                                                                    
to the  CBR first.  She appreciate  Representative Carpenter                                                                    
bringing up the point.                                                                                                          
                                                                                                                                
Representative Kreiss-Tompkins  would look up  the statutory                                                                    
requirement. He  noted that the state  had other obligations                                                                    
such  as  paying down  the  oil  tax credits,  the  unfunded                                                                    
liability  of the  state pension,  and the  replenishment of                                                                    
the CBR.  All of the  obligations exist, but there  was sort                                                                    
of a Chinese wall with the PF.  The money in the ERA was not                                                                    
available   for   government   spending   whether   it   was                                                                    
replenishing the CBR or paying  down the pension obligation.                                                                    
Everything  under the  5  percent draw  was  fair game,  but                                                                    
everything  above  that amount  should  be  off limits.  The                                                                    
legislature  had set  rules  around the  5  percent mark  in                                                                    
order  to guarantee  a sustainable  PF. He  did not  want to                                                                    
take more than 5 percent from the PF in any given year.                                                                         
                                                                                                                                
Representative  LeBon  recalled  that funding  for  the  CBR                                                                    
began  about 15  years  previously. High  oil  prices and  a                                                                    
significant throughput  allowed for  a build  up in  the CBR                                                                    
over a 5 or 6 year  period. He asked if his recollection was                                                                    
accurate.  Representative  Kreiss-Tompkins deferred  to  the                                                                    
Legislative Finance Division.                                                                                                   
                                                                                                                                
Representative LeBon  iterated his point  of the ramp  up of                                                                    
the CBR  due to a  higher price  for oil and  revenue rather                                                                    
than  from earnings  from  the  PF or  the  ERA.  If he  was                                                                    
correct, the  legislature enacted  a decision to  spend down                                                                    
the money. If the money were  to be replaced, he wondered if                                                                    
it  should be  from business  and oil  revenues at  a future                                                                    
date versus earnings of the PF.                                                                                                 
                                                                                                                                
4:10:25 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilson  addressed  the constitutional  mandate  to                                                                    
repay the CBR.  She was unclear about where  the money could                                                                    
come from to repay the CBR.                                                                                                     
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
addressed the  question about  which money  went to  the CBR                                                                    
and  indicated  that  the requirement  was  defined  in  the                                                                    
Alaska  Constitution rather  than in  statute. He  explained                                                                    
that  at the  end of  each year  general fund  balances were                                                                    
swept into the  CBR as long as there was  a liability to the                                                                    
CBR. The  legislature has typically reversed  the sweep each                                                                    
year so that  the state was not repaying unless  there was a                                                                    
surplus. The  state would  not be  repaying unless  it truly                                                                    
had a surplus as the state  did when oil prices increased as                                                                    
they did  a few years prior.  At the time, the  state repaid                                                                    
all  of its  liability to  the  CBR. He  suggested that  the                                                                    
legislature  could  appropriate earnings  reserve  balances.                                                                    
They  would not  normally be  swept into  the CBR,  but they                                                                    
could be appropriated  there if the legislature  chose to do                                                                    
so.                                                                                                                             
                                                                                                                                
Representative LeBon  asked if repaying the  CBR from normal                                                                    
revenue  sources  would  be  predicated  on  the  price  and                                                                    
production of oil.                                                                                                              
                                                                                                                                
Mr.  Teal   answered  it  was   the  way  foreseen   by  the                                                                    
constitution.  The surplus  revenue was  automatically swept                                                                    
into the CBR without  an appropriation. The legislature also                                                                    
appropriated general  funds to  the CBR  in addition  to the                                                                    
constitutional  requirement. The  logic  behind that  action                                                                    
was  that  if  the  money was  swept  constitutionally,  the                                                                    
legislature  received no  credit  for repaying  the CBR.  In                                                                    
times of a large surplus  there was an effort to appropriate                                                                    
money to the CBR as well.                                                                                                       
                                                                                                                                
Representative Carpenter  asked about earnings. He  asked if                                                                    
the legislature was  trading the PF earnings  as revenue. He                                                                    
suggested that it all spent the same by the government.                                                                         
                                                                                                                                
Mr. Teal answered they did  not consider the ERA as revenue.                                                                    
If  it was  considered  revenue, the  state would  currently                                                                    
have a  general fund surplus  of $ 18 billion.  He indicated                                                                    
that the  ERA was not  shown as  a general fund  balance, it                                                                    
was  a  balance  in  the  PF.  In  the  PF  section  of  the                                                                    
constitution stated  that earnings of  the PF went  into the                                                                    
general fund unless otherwise specified  by law. There was a                                                                    
statute that stated  that the earnings reserves  are part of                                                                    
the PF.  If the legislature  wanted to it could  require the                                                                    
entire  ERA appear  as general  fund  revenue; however,  LFD                                                                    
looked at  revenue as  a cashflow  issue. Therefore,  the PF                                                                    
balance should not  be counted as general  fund revenue. The                                                                    
only portion  of the  earnings reserve  that was  counted as                                                                    
revenue was the  5 percent or 5.25 percent  POMV payout. The                                                                    
state  counted  approximately $3  billion  from  the ERA  as                                                                    
general fund revenue.                                                                                                           
                                                                                                                                
4:15:47 PM                                                                                                                    
                                                                                                                                
Representative  Josephson wanted  to  confirm  that the  CBR                                                                    
language in  Section 17 of  Article 9 referred  to repayment                                                                    
but did not  designate a timeline. He was  struck that given                                                                    
the  state's  other obligations  and  because  there was  no                                                                    
interest requirement,  he suggested the legislature  did not                                                                    
receive credit for repayment.                                                                                                   
                                                                                                                                
Mr. Teal responded that there  was no timeline on repayment.                                                                    
He relayed  that the timing  envisioned by  the constitution                                                                    
was  that if  there  was  a surplus,  the  state would  make                                                                    
repayment. If there was not  a surplus, the state might have                                                                    
additional  draws  from  the CBR  if  needed.  However,  the                                                                    
constitution did not envision  a repayment schedule, nor was                                                                    
interest assessed.                                                                                                              
                                                                                                                                
4:17:05 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson OPENED Public Testimony.                                                                                        
                                                                                                                                
4:17:16 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilson CLOSED Public Testimony.                                                                                        
                                                                                                                                
Co-Chair  Wilson  indicated the  bill  would  be set  aside.                                                                    
Amendments for  HB 31  were due in  her office  by Thursday,                                                                    
May 2,  2019 at 5:00 p.m.  The meeting scheduled at  5:00 pm                                                                    
in the current day was canceled.                                                                                                
                                                                                                                                
HB 31 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
4:18:02 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 4:18 p.m.                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
2019 House Finance Criminal Justice Reform.pdf HFIN 4/29/2019 1:30:00 PM
HFIN
HB031 Sponsor Statement 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 31
HB031 Sectional Analysis ver U 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 31
CSHB 96 Sectional Analysis Version M 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Sponsor Statement 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Summary of Changes Version M to Version U 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Supporting Document Combined Letters of Support 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
CSHB 96 Supporting Document PPT Presentation 4.24.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 96
HB031 Presentation 4.29.19.pdf HFIN 4/29/2019 1:30:00 PM
HB 31
HB 96 Supporting Doc. Support .pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
HB 96 Supporting Doc Petition of Support.pdf HFIN 4/29/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96