Legislature(2003 - 2004)

02/05/2004 09:00 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 05, 2004                                                                                    
                              9:00 AM                                                                                         
SFC-04 # 5,  Side A                                                                                                             
SFC 04 # 5,  Side B                                                                                                             
SFC 04 # 6,  Side A                                                                                                             
CALL TO ORDER                                                                                                               
Co-Chair Gary Wilken convened  the meeting at approximately 9:00 AM.                                                            
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Ben Stevens                                                                                                             
Senator Donny Olson                                                                                                             
Senator Con Bunde                                                                                                               
Also Attending:  PHIL  YOUNKER SR.,  Chair, Board  of Trustees,  The                                                          
Alaska  Mental Health  Trust Authority;  STEVE  PLANCHON,  Executive                                                            
Director,  Trust  Land  Office,  The  Alaska   Mental  Health  Trust                                                            
Authority, Department  of Revenue; JEFF JESSEE, Executive  Director,                                                            
The Alaska  Mental Health  Trust Authority,  Department of  Revenue;                                                            
Alaska Mental Health Trust  Authority Board of Trustees Members: TOM                                                            
HAWKINS, JOHN PUGH, SUSAN  LABELLE, JOHN MALONE, and CAREN ROBINSON;                                                            
MILLIE RYAN, Executive  Director, Governor's Council on Disabilities                                                            
& Special  Education,  Department  of  Health and  Social  Services;                                                            
DENNY DEWITT, Special Staff  Assistant, Office of the Governor; JOHN                                                            
BELL, Director,  Division of Alaska  Longevity Programs,  Department                                                            
of  Administration;   CHARLIE   HUGGINS,   State  Veterans   Affairs                                                            
Coordinator;  Governor's Veteran's  Home Advisory  Council  Members:                                                            
RONALD ELLER,  JOSEPH FIELDS,  JIM BRASELL,  RONALD HUFFMAN,  ROBERT                                                            
MURRAY, WEVLEY  SHEA, TED TAYLOR,  JOHN WILKENS, CLAY GLOVE,  ROBERT                                                            
(BERT) HALL, SR., Chair                                                                                                         
Attending   via  Teleconference:   There   were  no  teleconference                                                           
SUMMARY INFORMATION                                                                                                         
THE ALASKA MENTAL HEALTH TRUST AUTHORITY PRESENTATION                                                                           
VETERAN'S HOME: PROJECT UPDATE                                                                                                  
The Committee  heard  presentations  from the  Alaska Mental  health                                                            
Trust Authority  and an update on the status of an  Alaska Veteran's                                                            
Home in Palmer.                                                                                                                 
             The Alaska Mental Health Trust Authority                                                                           
PHIL  YOUNKER  SR., Chair,  Board  of Trustees,  The  Alaska  Mental                                                            
Health  Trust Authority,  introduced  the attending  members of  the                                                            
Board of Trustees  as follows: JOHN PUGH; TOM HAWKINS;  JOHN MALONE;                                                            
and CAREN ROBINSON.  Board members  not in attendance, he  continued                                                            
are Nelson Page and Susan LaBelle.                                                                                              
Mr. Younker noted  that Members' packets contain "The  Alaska Mental                                                            
Health Trust  Authority (AMHTA)  2003 Annual  Report [copy  on file]                                                            
which, he noted,  provides financial details; the  AMHTA's Fall 2003                                                            
newsletter,  "Trustworthy" [copy  on file];  and a flowchart  titled                                                            
"AMHTA  FY 06/07  Budget Recommendation  Planning  Process -  draft"                                                            
[copy on file].  He communicated that  the flowchart portrays  a new                                                            
budgetary process  that the Trustees and AMHTA staff  have developed                                                            
and  that   the  newsletter  contains   an  insert  titled   "inside                                                            
Trustworthy,  Budget Recommendations  - Fall  2003)" [copy  on file]                                                            
which portrays  the FY 05 Budget Recommendations.  He read  from the                                                            
"AMHTA Presentation  to the Senate Finance Committee,"  report [copy                                                            
on file] dated February 5, 2004, as follows.                                                                                    
     History of Trust Formation                                                                                               
     *Litigation (related to breach of Mental Health                                                                            
      Enabling Act trust established by Congress in 1956)                                                                       
      ongoing for 13 years                                                                                                      
     *State would have been required to reconstitute                                                                            
      the old Trust                                                                                                             
     *Millions of dollars in litigation costs                                                                                   
     *Millions in lost resource development opportunities                                                                       
     *Paralyzed and fractured mental health community                                                                           
     Key Terms of Settlement                                                                                                  
     *Trust Authority free to use Trust resources to                                                                            
      act as a catalyst for change                                                                                              
     *Trust Authority funding recommendations considered                                                                        
      in a single appropriation bill                                                                                            
     *Trust Authority to aid in comprehensive planning                                                                          
      for mental health program                                                                                                 
     *Mental Health Trust Lands and associated state                                                                            
      lands released for development                                                                                            
Mr. Younker  stated that during the  years that the State  "ignored"                                                            
the fact that the Trust  had been federally established, it disposed                                                            
of a lot  of designated Trust  land. However,  he noted that  as per                                                            
the 1995 settlement of  the Trust's lawsuit against the State, Trust                                                            
land that had  not been disposed of; $200,000; and  the right to re-                                                            
select land to  provide the Trust with a total of  one million acres                                                            
of land,  as per the original  agreement,  was awarded. He  informed                                                            
the Committee  that the State's thirteen-year action  of denying the                                                            
Trust's rights  was "very expensive"  to the Trust as it  was unable                                                            
to  develop its  resources  during  that  time and,  therefore,  was                                                            
unable to provide for its beneficiaries.                                                                                        
Mr. Younker stated  that AMHTA would prefer a single  appropriations                                                            
bill because it would enable the Trust to track items.                                                                          
     The Trust Beneficiaries                                                                                                  
     *People with mental illness                                                                                                
     *People with developmental disabilities                                                                                    
     *People with Alcoholism/other addictions                                                                                   
     *People with Alzheimer's disease & other dementia                                                                          
Mr.  Younker stated  that  the Trust  serves  these  four groups  of                                                            
beneficiaries,  and he  noted that,  oftentimes,  individuals  being                                                            
served are "crossovers" from one group to another.                                                                              
     Four Boards Advise the Trust                                                                                             
     *Alaska Mental Health Board                                                                                                
     *Advisory Board on Alcoholism & Drug Abuse                                                                                 
     *Governor's Council on Disabilities & Special                                                                              
     *Alaska Commission on Aging                                                                                                
     The Four Advisory Boards have been engaged in a                                                                            
     collaborative effort with the Division of Behavioral                                                                       
     Health to oversee a federal CMMS grant for planning                                                                        
     and implementation of a service delivery system for                                                                        
     individuals with a Traumatic Brain Injury.                                                                                 
Mr.  Younker stated  that  these Boards  were established  upon  the                                                            
State's settlement with  the Trust. He identified Richard Rainery as                                                            
the Executive  Director of  Alaska Mental  Health Board, and  Millie                                                            
Ryan  as  the  Executive  Director  of  the  Governor's  Council  on                                                            
Disabilities  &  Special  Education.  He noted  that  the  Executive                                                            
Director positions of the  Advisory Board on Alcoholism & Drug Abuse                                                            
and the Alaska Commission on Aging are currently vacant.                                                                        
Mr. Younker shared that  the AMHTA is participating in a new federal                                                            
Center for Medicaid and  Medicare Services grant program in order to                                                            
address the needs of individuals  with traumatic brain injuries, and                                                            
he noted, "that  Alaska has a fairly high incidence  of people" with                                                            
this condition.  Furthermore, he shared  that a large percentage  of                                                            
these injuries  are incurred by children below the  age of three who                                                            
are injured  as  the result  of being  shaken "violently"  by  their                                                            
caregivers  or as the result of a  fall. Furthermore, he  noted that                                                            
in Alaska,  injuries of this  type also result  from such things  as                                                            
motorcycle and snow-machine accidents.                                                                                          
STEVE PLANCHON,  Executive Director,  Trust Land Office,  The Alaska                                                            
Mental Health  Trust Authority, Department  of Revenue, shared  with                                                            
the Committee  that  the mission  of the  Trust Land  Office "is  to                                                            
protect and enhance  the value of Trust lands, and…  to maximize the                                                            
revenue from Trust  lands over time." He shared that  the Trust Land                                                            
Office's ten person staff  is charged with operating and adhering to                                                            
Trust specific  regulations; a long-term asset management  strategy;                                                            
and "a prioritized  annual work plan,"  all of which were  developed                                                            
in consultation  with  the Board  of Trustees.  He  stated that  the                                                            
Trust Land Office generates  "spendable income" by establishing such                                                            
things as land leases and  licenses, and that the Trustees could use                                                            
this spendable income to  support the following year's Mental Health                                                            
services. He noted that  the Land Trust generates revenues exceeding                                                            
$2.4  million  annually  in  this manner.  He  stated  that  further                                                            
information  regarding   the Land  Trust  Office's   operations  are                                                            
depicted  in  charts   located  on  page  three  and   four  of  the                                                            
aforementioned handout.                                                                                                         
Mr.  Planchon  noted  that,  in  addition,  the  Trust  Land  Office                                                            
"converts  land corpus to  cash corpus via  such things as  land and                                                            
timber  sales as well  its recent  undertakings  to develop  revenue                                                            
from mineral and gas royalties."  He stated that, to date, the Trust                                                            
Land  Office  has   generated  approximately  $25   million  by  the                                                            
conversion of  land corpus to cash, and he noted that  this money is                                                            
deposited  into the Trust  Fund, which is  the principle account  of                                                            
the  AMHTA.  He  voiced pride  in  the  fact  that  the operational                                                             
expenses of  the Trust Land Office  average less than 15  percent of                                                            
the budget, annually. He  stated that the Trust Land Office operates                                                            
efficiently  with minimal staffing  because it "makes strategic  use                                                            
of public and private contractors,"  who are experts in their field,                                                            
to provide project resources.                                                                                                   
Mr. Planchon stated that  during the past nine years, the Trust Land                                                            
Office  has generated  revenue  from the  entirety  of its  resource                                                            
categories  including the sale of  200 million board feet  of timber                                                            
and the leasing of one  tenth, or 100,000 acres, of the Trust's land                                                            
for oil and gas development.                                                                                                    
Senator Bunde  observed that according  to the information  provided                                                            
in the  chart on  page three,  titled "Spendable  Income from  Trust                                                            
Land," the Trust's  FY 03 projected income was less  than its actual                                                            
Mr. Planchon  clarified that the chart  is limited to depicting  the                                                            
revenue generated each  year that is classified as spendable income.                                                            
He communicated  that because this  is the category of revenue  upon                                                            
which  AMHTA primarily  bases  the following  year's  budget, it  is                                                            
important  to  project  it  "very  tight"  as  the  budget  for  the                                                            
following year is often  established before the current year's total                                                            
revenue  is realized.  He noted that  the chart  titled "Trust  Land                                                            
Office  Operating  &  Capital  Expenditures   VS.  Revenue  Earned,"                                                            
located at the  top of page four, depicts the total  revenue earned.                                                            
Therefore, he noted that  while the FY 03 spendable income was lower                                                            
than expected,  the overall funding revenue in FY  03 was sufficient                                                            
due to several multi-year  real estate transactions being solidified                                                            
and  producing  cash in  FY  03 with  additional  assistance  by  an                                                            
accelerated  timber  harvest in  Thorne  Bay, which  generated  more                                                            
money  than anticipated.  However,  he  cautioned that  even  though                                                            
revenue  projections   are  tightly  monitored  and   forecast,  the                                                            
unexpected  spikes, such  as occurred  in FY 03,  and should  not be                                                            
expected,  as  they are  unpredictable.  He  communicated  that  the                                                            
monies  above the  projections  are deposited  into  the Trust  fund                                                            
Senator Bunde voiced appreciation  for the conservative approach the                                                            
AMHTA undertakes in regard to its budget.                                                                                       
Mr. Planchon compared the  Trust Land Office operations to that of a                                                            
small Alaska  Native  corporation with  a million  acres that  has a                                                            
goal of  utilizing all  its resources  over time.  He noted  that in                                                            
regard to mineral  development, the Trust has supported  such things                                                            
as  improvements  at the  Fairbanks'  Fort Knox  Mine  mill site  to                                                            
convert it  into a regional  rather than a  local processor  of ore.                                                            
Other noteworthy  things, he shared, include the mineral  leasing of                                                            
approximately 11,000 acres  in the Livengood area for drilling which                                                            
would subsequently generate  royalties; land sales; coal leases; and                                                            
being involved in "numerous  community enhancement projects" wherein                                                            
AMHTA owns a significant  amount of land in a community and of which                                                            
the development  would benefit both the AMHTA and  the community. He                                                            
noted that the  Sub-port area in the City & Borough  of Juneau is an                                                            
example of this endeavor.                                                                                                       
Co-Chair  Wilken  asked the  level  of funding  that  the Fort  Knox                                                            
facility might provide, annually, to the Trust.                                                                                 
Mr.   Planchon  responded   that   annually,  the   Trust   receives                                                            
approximately  "$160,000  in distributable  income  in  the form  of                                                            
rents."  He noted  that  once the  mine returns  a  net profit,  the                                                            
State,  who has  an operating  lease with  the mine,  and the  Trust                                                            
would  begin to receive  royalty  monies. He  noted that  continuing                                                            
elevated gold prices would benefit the situation.                                                                               
Co-Chair  Wilken  asked  whether   the True   North  Project  mining                                                            
operation involves Trust Land.                                                                                                  
Mr. Planchon  replied that  the True North  Project is operating  on                                                            
State land.                                                                                                                     
Co-Chair  Wilken asked the  potential monetary  impact to the  Trust                                                            
were the Fort Knox mine to become profitable.                                                                                   
Mr. Planchon  estimated  that,  on an annual  basis,  "no more  than                                                            
$50,000" would be generated  through the three percent of net profit                                                            
arrangement between the Trust and Fort Knox.                                                                                    
Mr.  Younker  noted   that  the  Trust's  more  recent   leases  are                                                            
calculated  on gross  revenue  rather than  a net  profit basis.  He                                                            
stated  that  this  method  assures   that  some  royalty  would  be                                                            
                     Trust FY05                                                                                                 
     TRUST Distributable Income                                                                                               
     Land Office Income              $ 2,400,000                                                                                
     Trust Fund Payout 3.5%          $10,858,800                                                                                
              Prior Year Lapse       $ 2,317,400                                                                                
              Interest               $   900,000                                                                                
     Trust Projected Payout          $16,476,200                                                                                
     MHTAAR Expenditure                                                                                                         
          Recommendations            $11,986,900 Operating                                                                      
                                     $ 3,730,000 Capital                                                                        
     Total MHTAAR Recommendations $15,698,900                                                                                   
     MH Budget Base FY 04            $136,372,000                                                                               
     MH Budget Base FY 05            $125,788,000                                                                               
     FY 04 GF/MH 99,774,200/Alcohol Tax 21,400,000/AHFC 1,700,000                                                               
     FY 05 GF/MH 93,172,500/Alcohol Tax 17,925,000/AHFC 1,800,000                                                               
Mr. Younker  informed the Committee  that the information  contained                                                            
in the chart  titled "Trust  FY05," which is  located at the  top of                                                            
page  five   in  the  handout,  provides   the  Trustees   with  the                                                            
information  upon  which the  budget  is  determined each  year.  He                                                            
reiterated that the Land  Trust Income specified on the chart is the                                                            
spendable income rather  than the Land Trust's total income. He also                                                            
noted  that  even  though  the  total  income  is  projected  to  be                                                            
$16,476,200, FY 05 expenditures  would amount to $15,698,900 because                                                            
the Trustees  retain  some monies  to provide  for emergencies  that                                                            
might occur during  the year. Furthermore, he stated  that the total                                                            
Mental Health Trust Fund  FY 05 budget "is a dramatic drop" from the                                                            
FY 04  budget, and  he pointed out  that the  primary causes  of the                                                            
reduction  are a decline  in State  general funds  and a decline  in                                                            
alcohol  tax revenue  as a result  of the  FY 04  alcohol tax  funds                                                            
containing unallocated  FY 03 program funds. He noted  that this was                                                            
because the program operated for only a portion of FY 03.                                                                       
Mr.  Younker   declared   that  while   the   Trust's  $12   million                                                            
contribution to  its total operating budget is a "small  drop in the                                                            
bucket,"  the  Trust's  role  as  "a  catalyst  for  change…makes  a                                                            
tremendous difference."  He declared that the Trust's  programs were                                                            
never intended  to "supplant the State's general funds  contribution                                                            
to AMHTA  budget. As an example  of the Trust  being a catalyst  for                                                            
change, he reminded  the Committee of its involvement  in the effort                                                            
to allow persons with disabilities  to live in their own communities                                                            
rather than  being cared for in institutions  such as the  State-run                                                            
Harborview  Psychiatric Institute.  He declared  that without  Trust                                                            
funding support during  the transition period, the effort would have                                                            
been unsuccessful.                                                                                                              
Senator Bunde  pointed out that "traditionally," Trusts  return five                                                            
percent as opposed to the AMHTA's 3.5 percent.                                                                                  
Mr. Younker responded that  the Trust's operation model differs from                                                            
traditional  operation  models.  Continuing,  he reminded  that  the                                                            
Trust's  operation model  was originally  based on  a three  percent                                                            
payout level,  which he noted has been, over time,  increased to 3.5                                                            
percent "as  assets developed." He  stated that the objective  is to                                                            
maintain a  level of income to assure  a continuity of services,  as                                                            
most of the  programs operated by  the Trust are three to  five year                                                            
programs  as  opposed to  being  one-year  programs.  Therefore,  he                                                            
declared that a level and  continuous income model is preferred to a                                                            
more volatile model.                                                                                                            
Mr. Younker  detailed the current  operations model as one  based on                                                            
the  establishment  of  two  principal  funds:  the  first  being  a                                                            
principal  fund from  which the  Trust  is limited  to spending  the                                                            
income generated  from it; and the second being a  principal reserve                                                            
fund. He  stated that  the principal  reserve fund  is regulated  to                                                            
equate  to 400-percent  of the  year's payout;  therefore, he  noted                                                            
that the amount  required in the principal  reserve fund  changes in                                                            
relation  to each  budget,  and that  when the  specified  principal                                                            
reserve fund level is reached,  any excess funds flow into the other                                                            
fund. He noted  that there have been  years when the balance  of the                                                            
principal reserve  fund was 50-percent  of the obligated  level, and                                                            
in that  case, he continued,  continuing efforts  are made  to reach                                                            
the  appropriate  level.  He  also noted  that  while  no  inflation                                                            
appropriation  is required, the flexible  model allows for  that and                                                            
other  considerations  to  be addressed.  He  noted that  while  the                                                            
payout  level evolving  from this  model was  questioned by  current                                                            
Governor Frank Murkowski's  Administration, the Office of Management                                                            
and Budget  analysis [copy not provided]  determined that  the Trust                                                            
"actually paid  out more" over the long term than  were the standard                                                            
five-percent payout model  in effect. He assured that two things are                                                            
in place to maintain  program continuity: the first  being that were                                                            
the principal  reserve fund account to shrink to 200-percent  of its                                                            
allotted amount,  consideration would  be given to lowering  the 3.5                                                            
percent  payout   level;  and  the  second  action   that  has  been                                                            
implemented to  protect the Trust is that a specified  percentage of                                                            
money has been  transferred from the  Trust's Permanent Fund  to the                                                            
Department of  Revenue and placed into "an intermediary  account" in                                                            
order to protect  the fund from stock  market volatility.  He stated                                                            
that this  intermediary  account is  a more  stable earning  account                                                            
than a traditional "full growth account."                                                                                       
Senator Bunde  stated that AMHTA has established an  account akin to                                                            
the State's  Constitutional  Budget Reserve  (CBR) and that  perhaps                                                            
the State would benefit from studying this model.                                                                               
Co-Chair Wilken  complimented the  AMHTA on its financial  model. He                                                            
concluded  that the  amount  of money  specified  for the  principal                                                            
reserve fund is  equal to four times the Trust's annual  expenditure                                                            
amount. He also  asked Mr. Younker for his professional  background.                                                            
Mr. Younker stated  that he is a finance business  professional; and                                                            
he credited his son with developing the Trust's financial model.                                                                
                    New Trust Budget Recommendation                                                                             
                     Planning Process for FY 06/07                                                                            
     •Collaborative planning process with four Trust advisory                                                                   
     groups, state agencies and major partners.                                                                                 
     •Limited number of focus areas targeting system change +                                                                   
     Partnerships, mini-grants and other ongoing projects.                                                                      
     •Emphasis on partnering to maximize and coordinate funding                                                                 
     goals across systems serving beneficiaries.                                                                                
Mr.  Younker  informed  that  rather than  funding  and  tracking  a                                                            
multitude  of small projects,  AMHTA is developing  a new  budgetary                                                            
process that would concentrate  on "four major work projects" with a                                                            
fifth  work  project  capturing  miscellaneous  small  projects.  In                                                            
addition, he noted  that another budget component  would address the                                                            
Trust's partnership programs with other entities.                                                                               
Mr. Younker  informed  the Committee  that in addition  to the  four                                                            
aforementioned  advisory  boards, the  Trust would  further seek  to                                                            
develop four working groups  consisting of individuals from the four                                                            
advisory  boards,   the  Trustees,  Alaskan  Native   groups,  State                                                            
employees from  departments that would  be involved in a  particular                                                            
project, as well  as other individuals to assist in  the development                                                            
of a plan. He noted that  as this effort is formalized, and a budget                                                            
that would  be presented to the Board  of Trustees for approval.  He                                                            
noted that  further information regarding  this process is  outlined                                                            
in  a handout  titled  "Proposed New  Trust  Budget Recommendations                                                             
Planning Process (BRPP)"  [copy on file], dated January 23, 2004. He                                                            
noted  that these  groups would  continue to  oversee their  project                                                            
during its  three to five  year duration,  and he continued,  were a                                                            
project  determined  to be "off  track,"  action would  be taken  to                                                            
revise it before it might be eliminated.                                                                                        
Mr. Younker  stated that in addition  to program development,  these                                                            
work groups would  provide an opportunity through  which AMHTA could                                                            
develop partnership opportunities  "on this level, too." He exampled                                                            
therefore,  that  as a  program  is  developed,  partnerships  could                                                            
include  the Trustees,  departments, private  organizations,  Native                                                            
organizations, so that,  for instance, the $5 million contributed by                                                            
the Trust  could be leveraged,  through these  partnerships,  into a                                                            
$25  million project.  He  assured  that while  the  Trust would  be                                                            
furthering partnerships  to enhance its endeavors, the consideration                                                            
of providing Trust beneficiaries  with programs that provide quality                                                            
benefits would be a foremost priority.                                                                                          
Co-Chair Wilken interjected  to note that a forthcoming Senate bill,                                                            
SB 258  contains  the proposed  AMHTA's budget,  including  language                                                            
pertaining to  the biennial budget process that has  presented here.                                                            
Mr. Younker  asserted that  the development  of multi-year  projects                                                            
via the working  and advisory group process would  align well with a                                                            
biennial budget approach.                                                                                                       
JEFF JESSEE,  Executive  Director,  The Alaska  Mental Health  Trust                                                            
Authority, Department of  Revenue, explained that the Trust does not                                                            
"budget  toward specific  results" such  as the  Mission &  Measures                                                            
exercise. Instead, he stated,  the Trust has begun "budgeting toward                                                            
target numbers  for specific areas of the budget and  then trying to                                                            
figure out,  within those  boxes, how we can  to best serve  people,                                                            
mitigate  any damage  that people  might suffer"  by a reduction  in                                                            
such things  as services.  He  characterized  the current  budgeting                                                            
approach as a paradigm  in that it switches the process "from aiming                                                            
at a result  and then budgeting to  get there to aiming at  a number                                                            
and figuring  out how to mitigate  the damage that's caused  usually                                                            
because the number requires  reductions someplace in the budget." He                                                            
shared that while the Trust  does "a pretty good job" of identifying                                                            
new  things and  what they  might  accomplish and  concentrating  on                                                            
measurable  outcomes and  results; it  is now,  he conveyed,  taking                                                            
into consideration  the base, which  "is the big chunk of  the money                                                            
that is spent  on the mental health program." Continuing,  he stated                                                            
that the  focus now "is to  look at how  this base impacts"  program                                                            
beneficiaries.  He  stated that  the  Trust is  currently  gathering                                                            
information about  how the FY 04 budget affected the  base and would                                                            
use that information  to determine  the state of the base  during FY                                                            
Mr. Jessee  stated that with the support  of the Governor  Murkowski                                                            
Administration,   "many  very   positive"   Mental  Health   program                                                            
initiatives such  as the reorganization of the Department  of Health                                                            
and  Social  Services  and the  consolidation  of  the  Division  of                                                            
Alcohol  and Drug Abuse  with a  section of the  Division of  Mental                                                            
Health   were  positive   steps  forward.   These  initiatives,   he                                                            
continued,  would  result in  better,  more comprehensive  and  more                                                            
integrated services  to Trust beneficiaries. In addition,  he stated                                                            
that, in some  instances, cost efficiencies would  occur and thereby                                                            
more funds would be available for services.                                                                                     
Mr. Jessee  voiced that the  partnership model  as explained  by Mr.                                                            
Younker  would benefit  the  Trust  and the  State by  allowing  the                                                            
maximum support  of programs from  external entities such  as tribal                                                            
organizations  as opposed to using  additional Trust or State  funds                                                            
to support  the  program.  He asserted,  therefore,  that "the  less                                                            
pressure  there is on the  budget," the more  available funds  there                                                            
are  for such  things  as grant  programs  and other  mental  health                                                            
programs to which the partnership method might not apply.                                                                       
Mr.  Jessee stated  that  the Administration's  efforts  to  further                                                            
efficiencies  have also produced positive  impacts as the  result of                                                            
shared services  and administration  consolidation of multiple  non-                                                            
profits  that  provide  similar  services.   He  commented  that  in                                                            
addition  to saving  money,  consolidation  efforts  also result  in                                                            
better services being provided.                                                                                                 
Mr.  Jessee   informed  the   Committee  that   rather  than   being                                                            
apprehensive about  the concepts or ideas that are  being furthered,                                                            
the concern  arises  from "the  aggressiveness and  the risk  levels                                                            
that  are being  undertaken  in  the  budget."  He stated  that  the                                                            
assumption that  all the programs would meet their  expected outcome                                                            
"and predicting  that  in advance"  affects the  entire savings  and                                                            
efficiencies  in the budget  as time advances.  He stated that  this                                                            
concern is  beginning to appear in  the FY 04 budget as outlined  on                                                            
page 6 of the handout as follows.                                                                                               
                              FY 04 Budget                                                                                    
     •Infrastructure cuts - will impact direct services to                                                                      
     •Cuts to MH Budget Base + current DHSS FY 04 restrictions                                                                  
     (belt tightening) = Service Cuts (examples)                                                                                
          -1.3 million in DD grants                                                                                             
          -Reduction in legal support for DD in Bethel, Fairbanks                                                               
          and Juneau offices of DLC.                                                                                            
          -Hope Community Resources - closed apartment for                                                                      
          emergency rural housing.                                                                                              
           -Quality Assurance funds (GF/MH) for DD cut.                                                                         
          -Care Coordination grants for seniors reduced by 20%.                                                                 
                              FY 04 Impacts                                                                                   
     •Tribal substance abuse program cuts 977.3 - 35% of all ADA                                                                
      cuts while AK Natives are 20% of population (and 40% of                                                                   
     treatment population)                                                                                                      
     •Rural ASAP programs cut $908.0 - 70-90% no show rates thus                                                                
     far in FY 04 for those programs that have tried self-pay.                                                                  
     •10% to 25% match on alcohol grants                                                                                        
Mr.  Jessee stated  that  the Trust  is  very supportive  of  saving                                                            
administrative  and staffing funds. However, he noted  that as staff                                                            
reductions  are being implemented,  impacts  of that downsizing  are                                                            
beginning  to  surface  in that  such  things  as grant  awards  and                                                            
quarterly  reports  are  being delayed.  This,  he  continued  could                                                            
negatively  affect local  non-profits. In  addition, he stated  that                                                            
reduced  staffing is  resulting in  such things  as project  delays,                                                            
lapsed funds, and a lesser degree of program auditing.                                                                          
Co-Chair Wilken asked that an example be provided.                                                                              
Mr. Jessee  exampled that a partnership  had been developed  between                                                            
the Divisions  of Mental Health, the Developmentally  Disabled (DD),                                                            
the  Infant Learning  Program,  and the  Trust wherein  the  Trust's                                                            
contribution of fifty percent  of the program's funds was matched by                                                            
the three divisions. He  stated that teams of subject matter experts                                                            
developed program  expectation standards  and results, and  then the                                                            
teams met with program  managers and consumers to review and issue a                                                            
report  that  rated  the  agency on  a  number  of  the performance                                                             
measures. He stated that  the review provided a qualitative analysis                                                            
that could be compared  to different program standards. Furthermore,                                                            
he  stated that  the  reports were  available  on the  Internet  and                                                            
interested  individuals  could  compare one  program  to another  or                                                            
gauge the effective of  a program in a community. However, he noted,                                                            
the general fund  match for this quality assurance  program has been                                                            
eliminated in  the budget and renegotiations have  had to occur with                                                            
the Department  and the Division regarding  how this resource  could                                                            
be maintained.  He opined  that quality assurance  of a program  "is                                                            
tricky as there  is a temptation to  make a program look  like it is                                                            
working." Therefore,  he asserted  that when two different  entities                                                            
are  responsible  for a  program,  it is  more difficult  "to  spin"                                                            
program results.  While supportive  of restructuring and  other cost                                                            
saving efforts,  he stated that efforts are continuing  to determine                                                            
how to reinstate such things as the quality assurance measures.                                                                 
Mr. Jessee  stated that another  impact to  the FY 04 Mental  Health                                                            
base budget was the removal  of $1.3 million in State funds from the                                                            
DD grant program. He explained  that while this money lapsed with no                                                            
affect on services,  it did result in a reduction  in such things as                                                            
legal  service  support  to  persons  recently   released  from  the                                                            
Department   of  Corrections'  who   need  supportive  housing   and                                                            
assistance in establishing  Medicaid eligibility. He noted that many                                                            
of these individuals  had been receiving "serious  treatments" while                                                            
incarcerated, and that  these people, without legal assistance, have                                                            
been repeatedly denied services following their release.                                                                        
Co-Chair  Green clarified  that inmates  are not  eligible for  such                                                            
things  as Medicare  while  in State  incarceration,  and that  upon                                                            
their release  they must  reestablish their  eligibility. She  asked                                                            
whether  support could  be provided  by caseworkers  rather than  by                                                            
legal staff.                                                                                                                    
Mr. Jessee  stated that  assistance from  caseworkers would  suffice                                                            
were back-up  legal  assistance available  as he  declared that  the                                                            
eligibility  re-determination process  for social security  is "very                                                            
Co-Chair Wilken  noted that further and more in-depth  discussion in                                                            
this regard would occur when SB 258 comes before the Committee.                                                                 
Senator B. Stevens  asked whether the Mental Health  Trust Authority                                                            
budget or the  State budget is being referenced in  this discussion.                                                            
SFC 04 # 5, Side B 09:47 AM                                                                                                     
Mr.  Jessee responded  that  the  State settlement  with  the  Trust                                                            
established  a  system   whereby  the  Trustees  recommend   to  the                                                            
Legislature the level of  State funding required for AMHTA services.                                                            
He continued,  that  were  general funds  not appropriated  at  that                                                            
requested  level, the  Legislature would  be required  to provide  a                                                            
letter  of   explanation.  He  noted   that  the  purpose   of  this                                                            
presentation  is to communicate to  the Legislature how Trust  funds                                                            
have been  spent as  well as to  explain the  process regarding  the                                                            
general fund  level requested by the  Trustees and the consequences                                                             
that would occur were the requested funding level unmet.                                                                        
Co-Chair  Wilken stated  that, in  order to  more thoroughly  answer                                                            
Senator  B.  Stevens's  question,  this  subject  could  be  further                                                            
discussed  when the operating  budget legislation  comes before  the                                                            
Senator Olson  asked whether the State  could be penalized  were the                                                            
requested appropriation level not allotted.                                                                                     
Mr. Jessee responded  that rather than a penalty being  imposed when                                                            
either the  Legislature or the Governor  does not support  the AMHTA                                                            
general  funds  request,   the  purpose  of  the  provision  in  the                                                            
AMHTA/State  settlement that requires  a written explanation  of the                                                            
denial,  is to encourage  "policy  and budget  dialogue between  the                                                            
Trust and the Administration  and the Trust and the Legislature." He                                                            
stated   that  in  addition   to  identifying   areas  of   priority                                                            
misalignment,  the process has identified  areas of common  interest                                                            
such as the desire to reduce program wait lists.                                                                                
Senator B.  Stevens noted  that language on  page eight of  the 2003                                                            
Annual  Report states  that, "The  total funding  available for  the                                                            
mental  health  trust  budget  in  FY 2004  is  $18,636,800  for  an                                                            
increase of 6.37 percent over FY 2003."                                                                                         
Senator B. Stevens  questioned whether the FY 04 percentage  rate of                                                            
change increases  are accurate as, according to his  FY 05 verses FY                                                            
04  calculations,   the  proposed  FY  05  Land  Office   Income  of                                                            
$2,400,000  "is down 8.5  percent, Trust Office  Payout is  down 1.6                                                            
percent;  Prior Year Lapse  is down 28 percent."  He continued  that                                                            
the FY 05 Total  Trust Projected Payout of $16,476,200  is down 11.6                                                            
percent. Continuing,  he stated that  the total FY 04 Mental  Health                                                            
Budget Base of $136,372,000  as compared to the projected FY 05 Base                                                            
of $125,788,000  "is  down 7.7 percent  with the  Trust payout  down                                                            
11.8 percent."                                                                                                                  
                     Trust FY05                                                                                                 
     TRUST Distributable Income                                                                                               
     Land Office Income              $ 2,400,000                                                                                
     Trust Fund Payout 3.5%          $10,858,800                                                                                
              Prior Year Lapse       $ 2,317,400                                                                                
              Interest               $   900,000                                                                                
     Trust Projected Payout          $16,476,200                                                                                
Senator B. Stevens reiterated  that the projected FY 05 Trust Payout                                                            
of  $16,476,200   as  compared  to   the  FY  04  Trust   Payout  of                                                            
$18,636,8006 reflects a downturn of 11.8 percent.                                                                               
Mr. Jessee responded  that one million dollars of  the difference is                                                            
the result of a change in the lapsed amount.                                                                                    
Senator B. Stevens agreed;  however he pointed out that the Trust FY                                                            
05 chart depicts  the FY 04 General Funds/Mental Health  funds total                                                            
to be  $99,774,200 as  compared to  the FY  05 General funds/Mental                                                             
Health funds  total of $93,172,500.  He calculated this to  be a 6.6                                                            
percent reduction. Therefore,  he stated that the percentage rate of                                                            
change of the  Mental Trust's contribution  to the total  fund "is a                                                            
greater  negative rate  of change"  than the general  funds rate  of                                                            
change.  He  surmised   therefore  that  the  State  general   funds                                                            
contribution  "is  expected  to  make  up  that  difference  in  the                                                            
percentage rate of change."                                                                                                     
Mr. Jessee  stated that the reduction  in the total market  value of                                                            
the Fund during  recent years combined with the change  in the Lapse                                                            
has  negatively affected  the  Trust's  total available  payout.  He                                                            
further acknowledged that  the Trust' rate of reduction exceeds that                                                            
of  the State's  general  fund  contribution  to the  Mental  Health                                                            
program.   However,   he  communicated    that  from   the   Trust's                                                            
perspective, rather than  there being the expectation that the State                                                            
should "make up" the AMHTA  contribution decrease, it is the AMHTA's                                                            
"job  to  work  with  the Legislature   to meet  the  needs  of  the                                                            
beneficiaries,"  as "it  is a joint  problem,"  regardless of  whose                                                            
contribution has decreased.                                                                                                     
Senator B. Stevens concurred;  however, he declared that the State's                                                            
contribution  is experiencing  a lesser  percentage  rate of  change                                                            
reduction  than  that of  AMHTA. He  stressed  that  this should  be                                                            
reviewed when the FY 05 budget is being considered.                                                                             
Co-Chair  Wilken agreed that  this would be  discussed when  SB 258-                                                            
APPROP:MENTAL HEALTH BUDGET is presented to the Committee.                                                                      
                              FY 05 Budget                                                                                    
     •Medicaid - Federal Control and Support concerns                                                                           
     •Budget built on assumptions                                                                                               
          -Litigation around Medicaid                                                                                           
          -Proshare viability                                                                                                   
          -Tribal agenda                                                                                                        
          -Catchment area consolidation                                                                                         
          -ASAP program self-pay                                                                                                
          -Restructuring of service waivers                                                                                     
          -Cost containment (really service cuts)                                                                               
     •Continued infrastructure cuts/Reorganization impacts                                                                      
Mr.  Jessee  informed the  Committee  that  in  the proposed  FY  05                                                            
budget, the  Trust is continuing  its ongoing  efforts to  refinance                                                            
its  public  health  programs  by  maximizing  the  use  of  federal                                                            
Medicaid  funds.  However, he  continued,  the consequence  of  this                                                            
action is  that the State  is becoming more  reliant on the  federal                                                            
Medicaid  program  and must  adhere  to federal  specifications.  He                                                            
compared  the process of  the State becoming  less dependent  on the                                                            
federal Medicaid program  as a youth trying to become less dependent                                                            
on his or her  parents by moving out and getting a  job "in order to                                                            
provide  the  environment,"  or  in  the  case  of  the  State,  the                                                            
services, that are required.                                                                                                    
Mr. Jessee also  characterized the public health programs  supported                                                            
by Medicaid  as "swiss cheese"  in that sometimes  a single  medical                                                            
condition,  such  as  Alzheimers,  would  not  qualify  someone  for                                                            
Medicaid; however,  Alzheimers combined with another  factor, might.                                                            
He clarified  that State  funds, in  the forms  of grants, would  be                                                            
necessary to  support those individuals  with Alzheimers  who do not                                                            
qualify  for Medicaid.  He  cautioned that  as State  grant  program                                                            
funding for services is  reduced, the ability to provide services to                                                            
these individuals  is reduced. He  stated that the State's  "working                                                            
poor  "are also  often ineligible  for  Medicaid,  and were  medical                                                            
benefits  unavailable  at  their  place  of employment,   additional                                                            
burden would be placed on the Trust services.                                                                                   
Mr.  Jessee  noted that,  "the  FY  05 budget  …  has significantly                                                             
increased the tolerance  for risk in developing strategies to reduce                                                            
the general funds." However,  he stated that in developing the FY 05                                                            
budget,  the  Trust   has  relied  upon  and  proceeded   under  the                                                            
assumption  that many  factors  such as  the level  of savings  from                                                            
various economic  efforts would be  realized. Continuing,  he voiced                                                            
that while  some of the  assumptions would  work as planned,  others                                                            
might  not work  to the extent  of the  expectations  or within  the                                                            
projected timeline. Therefore,  he noted, when those deficits occur,                                                            
either  impacts  would occur  in  other  areas of  the  budget or  a                                                            
supplemental  request  would  be forthcoming.   He stated  that  the                                                            
tolerance   of  the   risk  is   increased  when   such  things   as                                                            
consolidation  of services occur.  He reminded the Committee  of the                                                            
negative  effects  incurred by  a reduction  in  the infrastructure                                                             
where less staff  is available to write regulations,  administer, or                                                            
monitor  programs. Nonetheless,  he  stated that  the Trust is  very                                                            
excited   about  working   with   the  Administration   to   develop                                                            
partnerships  to deal with  issues such as  waitlist reductions  and                                                            
other areas.  In summary,  he communicated  that while the  Trust is                                                            
optimistic  about   the  positive  outcomes  that   might  occur  by                                                            
partnering  with  the  Administration  and  Legislature  to  address                                                            
issues,  the fact  is that  the Trust's  beneficiaries  are  already                                                            
being impacted  and would continue to be impacted  by infrastructure                                                            
Senator Olson  asked for a brief synopsis of how the  Trust would be                                                            
operating two years into the future.                                                                                            
Mr. Jessee responded that  were the State's fiscal gap remedied, the                                                            
Trust would be rebuilding  its mental health program and progressing                                                            
to serve its  beneficiaries appropriately.  Were the fiscal  gap not                                                            
remedied, he stated,  "that despite the best efforts"  of the Trust,                                                            
people  would be dying  or receiving  institutional  care and  costs                                                            
would continue to spiral upwards.                                                                                               
Senator Bunde commented  that the organization, "Psych Rights," had,                                                            
earlier  in this  Legislative session,  distributed  information  to                                                            
Legislators  pertaining to  a lawsuit they  might further  regarding                                                            
inadequate  funding of programs. He  asked the Trust's relationship                                                             
with  this group  as  well as  the Trust's  position  regarding  the                                                            
merits of the lawsuit.                                                                                                          
Mr. Jessee  stated that Psych  Rights is  a mental illness  advocacy                                                            
association  comprised  of members  who  have mental  illnesses.  He                                                            
stated that while the Trust  has provided a grant to the group, that                                                            
funding would not be used to support the group's litigation.                                                                    
Mr. Jessee  stated that  one member  of the Mental  Health Board  of                                                            
Trustees has been  participating in the development  of a resolution                                                            
to  stabilize  general  fund  funding  and  to  provide   sufficient                                                            
resources for  the Boards to conduct their missions  as specified in                                                            
the  Settlement.  He  informed  the  Committee  that  the  Board  of                                                            
Trustees  recently approved  the plan  and, furthermore,  the  Board                                                            
authorized Mr.  Jessee to work with the Administration  to determine                                                            
whether the resolution  would be acceptable to them.  He stated that                                                            
even though  the Psych  Rights  group's litigation  has been  filed,                                                            
were a  consensus reached,  the expectation  is that the  litigation                                                            
would be terminated.                                                                                                            
Senator Dyson  spoke to the danger  of litigation of this  nature as                                                            
it   could  serve   to   supplant  the   Legislature's   "power   of                                                            
appropriation."  He stated  that the preferred  avenue would  be for                                                            
the individuals  furthering these types of endeavors  to instead run                                                            
for political office.                                                                                                           
Senator Dyson  asked whether  the Trust views  "soft brain  injuries                                                            
from prenatal alcohol poisoning as a mental illness."                                                                           
Mr.  Jessee  stated  that the  Trust  "considers  those  people  our                                                            
beneficiaries because they  have a mental health disability, broadly                                                            
Senator  Dyson opined  that  treating  this condition  through  "the                                                            
mental health model" is  "absolutely off-base" because he continued,                                                            
this condition  is "non- treatable."  He further questioned  whether                                                            
the Trust is  recommending that the  current level of fetal  alcohol                                                            
disorder treatment is adequate.                                                                                                 
Mr. Jessee responded that the treatment is inadequate.                                                                          
Senator Dyson  asked whether  efforts are  being taken to  encourage                                                            
people to refrain from drinking when they are pregnant.                                                                         
Mr. Jessee responded in the affirmative.                                                                                        
Co-Chair Green  complimented the Trust on the quality  of the Annual                                                            
Mr. Jessee  introduced Trustee  SUSAN LABELLE  to the Committee  and                                                            
noted that  her involvement on the  Board has assisted the  Board in                                                            
its endeavors on rural and Native issues.                                                                                       
Co-Chair Wilken asked how the Trust is addressing Autism.                                                                       
MILLIE RYAN, Executive  Director, Governor's Council on Disabilities                                                            
&  Special  Education,  Department  of Health  and  Social  Services                                                            
stated that the Council  has furthered programs to address the needs                                                            
of Autistic  people and their  support groups.  She stated  that the                                                            
most common  request was for the development  of an information  and                                                            
resource center  to enable Autistic individuals to  live at home and                                                            
receive the help  they need. She stated that both  the Trust and the                                                            
Department  of Education and Early  Development have provided  funds                                                            
to provide  a grant to the Special  Education Service Agency  (SESA)                                                            
to provide this service  on a Statewide basis. She stated that while                                                            
this  is the  beginning step  and  that further  program  assistance                                                            
would be required, the  response to this resource has been positive.                                                            
Co-Chair Wilken  noted that an acquaintance of his  who has a family                                                            
member with Autism has  affirmed that the SESA program is helpful to                                                            
the family.                                                                                                                     
There being  no further  discussion, Co-Chair  Wilken concluded  the                                                            
presentation on the Alaska Mental Health Trust Authority.                                                                       
AT EASE 10:09 AM/ 10:10 AM                                                                                                      
AT EASE 10:10 AM/ 10:11 AM                                                                                                      
                Veteran's Home: Project Update                                                                                  
DENNY  DEWITT, Special  Staff  Assistant,  Office of  the  Governor,                                                            
informed the Committee  that were the Palmer Pioneers Home converted                                                            
into the  State's Veteran's  Home, it would  culminate a minimum  of                                                            
twelve years of  his and many other people's efforts  to establish a                                                            
Veteran's Home  in Alaska. He declared  that a Veteran's  Home would                                                            
provide a multitude  of positive opportunities  to the Pioneer  Home                                                            
system, to  the State's veterans,  and to  the State's pioneers.  He                                                            
shared  that Governor  Murkowski  has "directed  staff  to get  this                                                            
Mr. Dewitt  communicated that  as part of  the on-going discussions                                                             
regarding  the  establishment  of  an  Alaska  Veteran's  Home,  the                                                            
Legislative Budget and  Audit Committee conducted a study from which                                                            
three Veteran's  Home options were  developed. He communicated  that                                                            
the Administration  considered the  most do-able of the three  to be                                                            
to convert the Palmer Pioneer Home into a Veteran's Home.                                                                       
Mr. DeWitt noted  that Alaska is one of three states,  the other two                                                            
being Delaware and Hawaii,  that does not currently have a Veteran's                                                            
Home;  however,  he  noted  that all  three  of  these  states  have                                                            
submitted applications to develop a Veteran's Homes.                                                                            
Mr. DeWitt  noted that,  in the  year 2003, there  were 96  veterans                                                            
living in  the State's Pioneer  Homes and  this number provides  the                                                            
State with a good base  upon which to project the program. He shared                                                            
that the Palmer Pioneer  Home currently has 17 resident veterans and                                                            
22 open beds.  He stated that this  situation would allow  the State                                                            
to make  the transition  without displacing  very many pioneers.  He                                                            
stated that currently the  federal Veteran's Home formula for Alaska                                                            
specifies  79 beds be available  for veterans;  however, due  to the                                                            
fact  that  the  proposed  Veteran's  Home  would  use  an  existing                                                            
facility  which  has 82  beds,  the  State would  be  submitting  an                                                            
application  to increase  the State's  allotment  by three beds.  He                                                            
voiced confidence  that the increase to a total of  82 beds would be                                                            
approved.  He stated  that  the establishment  of  a Veteran's  Home                                                            
would be a phased process  with the first step of the process having                                                            
been  the submittal  of  the  application  to the  federal  Veterans                                                            
Administration  (VA). He noted that this application  was positively                                                            
received.  He  commented that  continuing  discussions  between  the                                                            
State  and the  VA  are occurring,  and  he shared  that  the VA  is                                                            
anxious that  the State secure its'  funding of the project  so that                                                            
the VA could match it.                                                                                                          
Mr. DeWitt  stated  that the concept  of transitioning  the  current                                                            
Palmer  Pioneer  Home  into  a Veteran's  Home  is  based  upon  the                                                            
commitment  to assure that no pioneer  in a Pioneer's home  would be                                                            
displaced and that were  a veteran living in another Pioneer Home to                                                            
desire  to move  to the  Palmer Veteran's  Home,  the accommodation                                                             
would occur on a space  available basis. He assured that no resident                                                            
living at the  Palmer Pioneer Home  would be asked to relocate,  and                                                            
he noted that  Governor Murkowski  is upholding the State's  current                                                            
policy in that  no pioneer would be moved unless they  initiated the                                                            
Mr. DeWitt mentioned that  a request has been submitted to the VA to                                                            
allow for an adequate transition  period, and that request is moving                                                            
forward. Continuing,  he shared that  the State would establish  the                                                            
admission  criteria   for  the  Palmer  Veteran's   Home,  and  that                                                            
criteria,  he continued,  would be  similar to  the current  Pioneer                                                            
Home admission  policies with the additional requirement  being that                                                            
the person must be a veteran.                                                                                                   
Mr. DeWitt specified  that 75 percent, or 62 beds,  of the Veteran's                                                            
Home would be  reserved for veterans, and he noted  that the balance                                                            
of the beds would be available  for individuals meeting the criteria                                                            
currently in  place for admission  to the State's Pioneer  Homes. He                                                            
summarized  the facility  as "a home  that will  be focused  towards                                                            
veterans but will  also have a substantial number  of beds available                                                            
for  pioneers," with  the  expectation that  the  majority of  those                                                            
individuals would be from the Matanuska-Susitna (Mat-Su) area.                                                                  
Mr.  DeWitt stated  that  the numbers  have  been reviewed  and  the                                                            
belief  is that  the home  could be  transitioned  into a  Veteran's                                                            
Home, "without  disrupting anyone," in approximately  five years. He                                                            
noted  that during  a  recent inspection  of  the facility,  the  VA                                                            
"cautioned us that that  might be too quick a transition period." He                                                            
understood  that, while a  formal response  to the State's  question                                                            
regarding  an  acceptable  transition  timeframe  has not  yet  been                                                            
received, efforts  are in play at the federal level  to allow for an                                                            
open-ended  transition  period.  He commented  that  the  transition                                                            
would require  approximately  $3.5 million  in facility upgrades  to                                                            
address such concerns  as fire safety, heating, and  ventilation. He                                                            
noted that of the upgrade  estimation, 65-percent would be paid with                                                            
federal funds  with the State being  responsible for the  35-percent                                                            
balance. He  stated that this funding  request has been included  in                                                            
the Department  of Health and Social  Services section of  the FY 05                                                            
Capital Budget  Request. He stated  that upon the State's  action in                                                            
this regard,  the VA would be able  to award the balance.  He stated                                                            
that the VA has also informed  the State that efforts are being made                                                            
to accelerate the federal  funding prior to the federal FY 05 budget                                                            
being formalized.                                                                                                               
Mr.  DeWitt  declared  that  a  tremendous  amount  of  activity  is                                                            
occurring to  further the establishment  of a Veteran's Home  in the                                                            
State. He shared  that during an August 2003 visit  to the facility,                                                            
the  VA was  "extremely  impressed"  with  the State's  senior  care                                                            
social model that  provides seniors with a wide ranges  of services,                                                            
from assisted  living services  to comprehensive  care services.  He                                                            
stated that  this care model differs  from the "traditional  medical                                                            
model" currently  in effect in VA  homes, and he shared that  the VA                                                            
is contemplating  the  incorporation  of some  of  the State's  care                                                            
model into its care model.                                                                                                      
Mr. DeWitt voiced the hope  that the Legislature would authorize the                                                            
conversion of  the Palmer Pioneer Home into a State  Veteran's Home.                                                            
He informed that in addition  to the budgetary request, the Governor                                                            
would be requesting  some additional legislative changes.  He stated                                                            
that the  transition could  be completed  by the  summer or  fall of                                                            
2005. He stated  that the establishment  of a Veteran's Home  in the                                                            
State would  provide  a great opportunity  to veterans  as it  would                                                            
enable them  to receive the  federal VA services  to which  they are                                                            
entitled,  and he continued  the establishment  of a Veteran's  Home                                                            
would be  combined in a  context which would  continue to serve  the                                                            
State's pioneers.  He also  noted that a  Veteran's Home would  also                                                            
provide  an additional  revenue stream  to the  Pioneer Home  system                                                            
that  would  strengthen   the  system  on  a  statewide   basis.  He                                                            
characterized this as "a win/win" situation.                                                                                    
Senator Dyson  voiced appreciation  for the  efforts that have  been                                                            
exerted in this endeavor.  He asked whether a veteran's spouse would                                                            
be allowed to reside in the Home with his/her spouse.                                                                           
Mr.  DeWitt responded  that  the system  "envisioned"  by the  State                                                            
would allow  a spouse  to reside at  the Home,  as he reminded,  the                                                            
proposed admission  policy would allocate 25-percent  of the beds in                                                            
the  Home  to  non-veterans.  He  further  noted  that  the  spousal                                                            
situation  would  be similar  to  that  currently  in place  in  the                                                            
Pioneer  Home regulations.  However, he cautioned  that while  there                                                            
might be a case  where an appropriate bed is unavailable  or another                                                            
"abnormality"  existed, efforts would  be undertaken to accommodate                                                             
the spouse.                                                                                                                     
Senator Bunde  understood that the monthly fee for  resident care in                                                            
the Pioneers  Home is determined  on a sliding  scale of ability  to                                                            
pay,  and that  the  average  expense is  approximately  $6,000  per                                                            
month. He asked  for an estimate of the expected monthly  charge for                                                            
the Veterans Home.                                                                                                              
JOHN  BELL,  Director,   Division  of  Alaska  Longevity   Programs,                                                            
Department of  Administration, explained that currently  five levels                                                            
of care  programs are available  to Pioneer  Home residents,  and he                                                            
noted that  these programs would be  available to both veterans  and                                                            
pioneers in the Veteran's  Home. He specified that a specific fee is                                                            
in place for each level of care.                                                                                                
Senator Bunde asked for examples of the costs of those programs.                                                                
Mr. Bell  responded  that the  average  cost ranges  from $2,000  to                                                            
$6,000 per month.                                                                                                               
Senator Bunde  asked whether veterans would qualify  for the sliding                                                            
fee scale for services that applies to pioneer residents.                                                                       
Mr.  Bell clarified  that  a veteran  would  pay "the  same rate  as                                                            
anyone  else in the  facility." However,  he explained  that  the VA                                                            
would  be responsible   for a  daily  contracted  per diem  rate  of                                                            
approximately  $26.95  per  day. He  stated  that  the VA  would  be                                                            
billed, and  that the VA  payment would offset  the amount  that the                                                            
individual would be responsible for.                                                                                            
Senator Bunde  asked for verification  that the VA payment  would be                                                            
deducted from the individual veteran's sliding scale fee.                                                                       
Mr. Bell  qualified  that rather than  characterizing  the fee  as a                                                            
sliding fee, it  should more correctly be referred  to an ability to                                                            
pay schedule.  He reiterated that the resident would  be responsible                                                            
for the  entire fee;  however, the  per diem amount  paid by  the VA                                                            
would reduce the amount owed by the individual.                                                                                 
Senator  Bunde  understood  therefore,  that  an  impoverished  non-                                                            
veteran who  requires care amounting  to $6,000 per month  would pay                                                            
based on their ability to pay.                                                                                                  
Mr. Bell concurred.                                                                                                             
Senator  Bunde asked,  therefore, how  the fee  for an impoverished                                                             
veteran would be determined.                                                                                                    
Mr. Bell stated  that the fee for  a veteran would also be  based on                                                            
the individual's ability to pay.                                                                                                
Mr. Dewitt  informed the  Committee that the  State has agreed  with                                                            
the VA to "initially  begin billing at a domiciliary  rate, which is                                                            
the lower  rate." He clarified  that while  rate negotiations  would                                                            
continue,  the  current  objective  is  to get  the  Veteran's  Home                                                            
Senator Olson  asked whether any private funds could  be used toward                                                            
the  improvements  that the  Veteran's  Home  would be  required  to                                                            
Mr. DeWitt stated that  no private funding is included at this time.                                                            
However, he  noted that among the  requests that the Governor  would                                                            
be presenting  for consideration would be one to allow  the State to                                                            
receive private funds for the Home.                                                                                             
Co-Chair Green  mentioned that she had attended some  of the initial                                                            
meetings that  were conducted in Palmer regarding  transitioning the                                                            
Palmer  Pioneer  Home  into  a Veteran's  Home.  She  noted  that  a                                                            
depressing  tone was  evident at  the beginning  of those  meetings;                                                            
however,  she continued,  as  questions  concerning  such things  as                                                            
whether current  and new  pioneers would be  allowed to live  in the                                                            
home and how would the  Veteran's Home affect other Pioneer Homes in                                                            
the  State  were  answered,  the  tone  changed   from  negative  to                                                            
accepting. She  thanked everyone involved for the  effort to further                                                            
this endeavor.                                                                                                                  
CHARLIE HUGGINS,  State Veterans Affairs  Coordinator, informed  the                                                            
Committee that  the Governor's Veteran's  Home Advisory Council  had                                                            
just met  for the first  time as  a group to  discuss some areas  of                                                            
JIM  BRASELL, a  World  War II  Veteran,  was recognized  for  being                                                            
selected to represent the  State at the upcoming May 2004 dedication                                                            
of the World War II Memorial in Washington, D.C.                                                                                
ROBERT (BERT)  HALL introduced  himself as  Chair of the  Governor's                                                            
Veteran's Home Advisory Council.                                                                                                
WEVLEY  SHEA,  Member,   The  Governor's  Veteran's   Home  Advisory                                                            
Council,  informed  the  Committee  that his  service  consisted  of                                                            
combat missions in Vietnam  from 1965 to 1970.  He stated that it is                                                            
a privilege to  serve on the Veteran's Home Advisory  Council and to                                                            
appear before the Committee.                                                                                                    
RONALD  ELLER,  Member,  The  Governor's  Veteran's   Home  Advisory                                                            
Council,  noted  that he  was  from Kodiak  and  had served  in  the                                                            
military from 1966 to 2000.  He assured the Committee that this is a                                                            
"good council" of veterans.                                                                                                     
RONALD  HUFFMAN,  Member, The  Governor's  Veteran's  Home  Advisory                                                            
Council,  informed the Committee  that he had  served in the  United                                                            
States Air Force from 1961 to 1993.                                                                                             
Mr. Brasell informed the  Committee that he had served in the United                                                            
States  Marine Corps  during World  War II, from  December 8,1941  -                                                            
1945, in the South Pacific.                                                                                                     
Senator  Dyson  pointed  out that  the  Battle  of Coral  Sea  saved                                                            
Australia  and  was  the  "turning  point  in  the  Pacific"  as  it                                                            
curtailed  the Japanese expansion  and set  the stage for "the  huge                                                            
victory" over Japan at the Battle of Midway.                                                                                    
JOHN  WILKENS,  Member,  The  Governor's  Veteran's   Home  Advisory                                                            
Council, informed  the Committee that he had served  in the military                                                            
from 1964 through 1984 and had conducted two tours in Vietnam.                                                                  
CLAY GLOVE, Member, The  Governor's Veteran's Home Advisory Council,                                                            
informed  the Committee  that  he had served  in  the military  from                                                            
TED TAYLOR, Member, The  Governor's Veteran's Home Advisory Council,                                                            
informed the Committee  that he had served in numerous capacities in                                                            
the military from  1973 through 1976 including tours  in Vietnam and                                                            
JOESPH  FIELDS  Member,  The  Governor's  Veteran's   Home  Advisory                                                            
Council, informed  the Committee that he had served  as a helicopter                                                            
gunner from 1965 to 1968.                                                                                                       
ROBERT  MURRAY  Member,  The  Governor's  Veteran's   Home  Advisory                                                            
Council, informed the Committee  that he had served as a member of a                                                            
fighter squadron.                                                                                                               
Mr. Huggins  stated that his military  experience includes  25 years                                                            
in the Army.                                                                                                                    
Mr. Hall  stated that  when he was  in the service,  he was  an Army                                                            
Medic.  He  shared  that  another  member of  the  Council  is  Nona                                                            
Mr. Huggins stated that  other members of the Council include Victor                                                            
Karmun, Richard Franks, and George Gaguzis.                                                                                     
Mr. Huggins  stated that in his capacity  as State Veterans  Affairs                                                            
Coordinator,  he is proud  to represent the  71,000 veterans  in the                                                            
State  of Alaska.  He  noted that  in addition  to  personal  health                                                            
issues, the most  talked about issue and the thing  that brings "the                                                            
biggest glee"  to a veteran  is the prospect  of having a  Veteran's                                                            
Home in  the State. He  noted that every  veteran's organization  in                                                            
the State supports the Palmer Veteran's Home concept.                                                                           
SFC 04 # 6, Side A 10:36 AM                                                                                                     
Mr. Huggins  also informed  that efforts  are underway to  recognize                                                            
the 6,000 Alaskans  who served in  the Alaska Territorial  Guard and                                                            
helped protect  the State between  1941 and 1947, before  Statehood.                                                            
He stated that  these great Alaskans have never been  recognized nor                                                            
received  honorable discharge  certificates.  He continued that  the                                                            
recognition of  these individuals' service would also  allow the 300                                                            
living Guard veterans to  receive VA assistance, including residency                                                            
in the Veteran's Home.  He stated that the ages of these individuals                                                            
range between 70 and 104 years of age.                                                                                          
Mr. Huggins  next attested  to the tremendous  return on  investment                                                            
that the State  receives by the Department of Military  and Veterans                                                            
Affairs' hiring  of three Veterans Service Officers.  He stated that                                                            
because of  these Veterans  Service Officers'  efforts on behalf  of                                                            
the State's  veterans, $27  million of VA  benefits are pumped  into                                                            
the State's economy.  He urged the Committee to continue  to support                                                            
the funding of these three positions.                                                                                           
Mr. Huggins also  noted that there is a national Veteran's  cemetery                                                            
in Anchorage and one in  Sitka; the first having a projected 40-year                                                            
life  and  the  latter  having  a  ten-year   life.  He  noted  that                                                            
discussions to address  long-term demand are taking place and that a                                                            
variety of concepts have  been identified. He stressed that while no                                                            
money  is being  requested; setting  aside  land in  such places  as                                                            
Fairbanks, which has the  third largest concentration of veterans in                                                            
the State,  could be  a consideration.  He stated  that the  Council                                                            
would continue to provide  information in this regard. He noted that                                                            
were a State Veteran's  Cemetery built, the federal government would                                                            
fund "everything up to opening the gates."                                                                                      
Mr. Huggins  informed that the State's  Veterans Memorial  Endowment                                                            
is now operational,  and that the Council would be  distributing the                                                            
grant application  guidelines to communities in the  State. He noted                                                            
that the Council  would be awarding up to $10,000  grants to be used                                                            
for the maintenance  and preservation  of war memorials.  He thanked                                                            
the Committee  for establishing  the program  and he noted  that the                                                            
monies in the endowment are the result of private contributions.                                                                
Senator  Dyson   opined  that  the   federal  VA  "often   takes  an                                                            
adversarial  role or posture in addressing  combat related  injuries                                                            
and diseases for  veterans" such as Agent Orange.  However, he noted                                                            
that in most cases, over  time, evidence in support of the Veteran's                                                            
position  that they  were wronged  is being provided.  He asked  the                                                            
Council's position on this  issue, and also asked whether any action                                                            
by the Legislature could assist the situation.                                                                                  
Mr. Huggins  responded that  while the situation  was once  abysmal,                                                            
the situation  has tremendously improved  in recent years.  He noted                                                            
that  "where  the  VA  is  headed  and what  it  is  doing  is  very                                                            
positive."  He  attested  that  while  the  treatment  of  Gulf  War                                                            
veterans  is  still  being  tested,  the  VA  treatment  of  Vietnam                                                            
veterans  is encouraging.  He  noted that  in addition  to  resource                                                            
shortages, another  issue of concern is concurrent  receipts in that                                                            
those  people,  who  are  retired  and  have  a  disability,  get  a                                                            
disability payment  that offsets retirement pay. He  stated however,                                                            
that this issue is being  remedied via a ten-year phase out program.                                                            
Senator Dyson  asked whether  the Legislature  could do anything  to                                                            
further the veterans' cause.                                                                                                    
Mr. Huggins responded  that the veterans realize that  transitioning                                                            
the Palmer  Pioneer  Home into  a Veteran's  Home is  the most  cost                                                            
effective  and deliverable  option. However,  he asked that,  in the                                                            
future,  veterans  be  provided  an  opportunity  to  present  their                                                            
position when things concerning them arise in the future.                                                                       
Mr. Hall added  that at the Council's  meeting, "the common  thread"                                                            
between  the members was  their "passion"  to act  on the behalf  of                                                            
other veterans.  He stated that the Council is receiving  widespread                                                            
support that could serve to benefit the State's veterans.                                                                       
Co-Chair Wilken  recognized the efforts  exerted by citizens  of the                                                            
State to further veteran's  needs, and also acknowledged the efforts                                                            
exerted  by  US Congressman,   Senator  Ted Stevens  in  support  of                                                            
Mr.  Huggins  informed  the  Committee  that the  Council  voted  in                                                            
support  of  the  continuance  of  the  Veterans  Service  Officers'                                                            
contract. He noted that  the funds to continue this contract are not                                                            
included in the State budget,  and he urged the Committee to provide                                                            
the required funding.                                                                                                           
Senator Olson  inquired as to whether a 79 to 82-bed  Veteran's Home                                                            
facility would be adequate in ten years.                                                                                        
Mr. Huggins  responded that the VA  has dictated that the  number of                                                            
beds  be 79.  He noted  that  the State  has  petitioned  the VA  to                                                            
increase that number to  82 beds, which is the capacity of the Home.                                                            
He acknowledged that the  veterans' population in the State would be                                                            
growing; however,  he noted that veterans have the  choice of living                                                            
in the Palmer  home or other Pioneers homes in the  State. He voiced                                                            
doubt that the VA would authorize a larger number of beds.                                                                      
Co-Chair Wilken thanked the veterans for their participation in the                                                             
discussion, and concluded the presentation.                                                                                     
Co-Chair Gary Wilken adjourned the meeting at 10:53 AM                                                                          

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