House State Affairs Hears Constitutional Amendment

Here 's the House State Affairs Committee Chair Rep. Bob Lynn's letterhead for this week's schedule. 

The committee meets Tuesdays and Thursdays at 8am-10 am.  The Uniform Rules [note:  I couldn't open this page while I was writing the post] which regulate how the House and Senate operate, sets up ten standing committees (Rule 20) including State Affairs and the areas it covers:

State Affairs (programs and activities of the Office of the Governor and the Departments of Administration, Military and Veterans' Affairs, Corrections, and Public Safety, and programs and activities of the Department of Transportation and Public Facilities relating to public facilities)

This was the committee I was originally assigned to, so I'm going to try to attend the meetings, at least as long as there isn't something else of more interesting happening at the same time, and I can get up early enough to attend.

Here's this week's schedule.

Tuesday, February 2, 2010  8:00 – 10:00am

+*    HJR 38  CONST. AM: INCREASE NUMBER OF LEGISLATORS

= Bills Previously Heard/Scheduled
+Teleconferenced

Thursday, February 4, 2010  8:00 – 10:00am

+=    HB 76  LEGISLATIVE COUNCIL & LB&A MEMBERSHIP
   
= Bills Previously Heard/Scheduled
+ Teleconferenced


Saturday, February 6, 2010 8:00 – 10:00am

No Meeting Scheduled

Tuesday (today) it hears a proposed Constitutional Amendment offered by Rep. Peggy Wilson (R - Petersberg.)  [Actually her district covers much more than Petersberg.)  

When a bill is discussed at a Committee meeting like this, a "packet" of relevant material is put together for the committee.  You can see these at the State Affairs link on BASIS. [I won't go into how I got to this link.  It took a while.  BASIS has lots of interesting stuff, but finding it isn't always easy.]

One of the documents is the Sponsor's Statement.  It explains in more everyday language the purpose of the bill.  Here's the Sponsor Statement for HJR 38:

Posted: January 30, 2010 : v26-LS1323\A
Status: (H) STA : 2010-01-19
Next Hearing: (H) STA 2010-02-02 8:00 am, Room 106
Contact: Rebecca Rooney, 465-3824, Committee Aide

''... Each house district shall be formed of contiguous and compact territory containing as nearly as practicable a relatively integrated socio-economic area ...'' Alaska Constitution Article VI, Section 6, titled Legislative Apportionment.

HJR 38 will put a constitutional amendment before the voters in the 2010 general election that would increase the size of the legislature to 48 representatives and 24 senators. Upon voter approval, the measure would apply to the 2012 determination of new boundary's for the election district.

In the first 50 years of statehood, Alaska has not changed the 20 senator, 40 representative size of its legislative body, the smallest bicameral legislature in the nation. In this time span, the population of the state has more than tripled. Most significantly, the population increase is disproportionate, strongly favoring large urban areas over rural and small community areas. The task then of applying the proscriptions of Article VI, above, has correspondingly become more difficult and contentious. Except for the 1960 reapportionment, all subsequent reapportionments have faced successful legal challenges, requiring boundary adjustments and on several occasions, a court constructed plan.

Federal protections of the U.S. Voter Rights Act of 1965 for large minority concentrations further complicate Alaska's reapportionment process. Indeed, they can act to counter the Section 6 requirements. Rural election district distortions are evident in the current plan. There is a probability that the new population distribution of the 2010 census cannot reconcile Section 6 and the Voter Rights Act without increasing the size of the legislature.

Between 1960 and 2006, twenty nine states have changed the size of their legislative body. For the nine states with small populations similar to Alaska (509,000 to 1,429,000), the average size of their legislative bodies is 134 members.

Another measure of the effect of the state's growth and complexity on the work of the legislature is its budget responsibilities. Legislative expenditures for government programs and projects has risen from a figure of $104 million in FY 61 to somewhere in the neighborhood of $7 billion currently. This is an increase from $2700 per capita in 1961 nominal dollars to $10,000 per capita today.

For these reasons, putting a proposal to increase the size of the legislature before the voters is timely and merited.

By the way, HJR stands for House Joint Resolution.  Resolutions are used for Constitutional Amendments (and other things) while HB (House Bill) is just for legislation as I understand this.

And here's the actual resolution as it gets heard for the first time in the State Affairs Committee. This resolution, as it moves through the committees, will accumulate changes, but ultimately it will be in this sort of language and format.  [On my computer, the resolution is cut off on the right.  You can get it in full here.]

HOUSE JOINT RESOLUTION NO. 38                                                                     
01 Proposing amendments to the Constitution of the State of Alaska relating to and                                         
02 increasing the number of members of the house of representatives to forty-eight and the                                 
03 number of members of the senate to twenty-four.                                                                         
04 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                               
05    * Section 1. Article II, sec. 1, Constitution of the State of Alaska, is amended to read:                          
06            Section 1. Legislative Power; Membership. The legislative power of the                                     
07       State is vested in a legislature consisting of a senate with a membership of twenty-                          
08       four [TWENTY] and a house of representatives with a membership of forty-eight                             
09       [FORTY].                                                                                                          
10    * Sec. 2. Article VI, sec. 4, Constitution of the State of Alaska, is amended to read:                             
11            Section 4. Method of Redistricting. The Redistricting Board shall establish                                
12       forty-eight [FORTY] house districts, with each house district to elect one member of                          
13       the house of representatives. The board shall establish twenty-four [TWENTY] senate                           
14       districts, each composed of two house districts, with each senate district to elect one                           
15       senator.                                                                                                          
01    * Sec. 3. Article VI, sec. 6, Constitution of the State of Alaska, is amended to read:                             
02            Section 6. District Boundaries. The Redistricting Board shall establish the                                
03       size and area of house districts, subject to the limitations of this article. Each house                          
04       district shall be formed of contiguous and compact territory containing as nearly as                              
05       practicable a relatively integrated socio-economic area. Each shall contain a                                     
06       population as near as practicable to the quotient obtained by dividing the population of                          
07       the state by forty-eight [FORTY]. Each senate district shall be composed as near as                           
08       practicable of two contiguous house districts. Consideration may be given to local                                
09       government boundaries. Drainage and other geographic features shall be used in                                    
10       describing boundaries wherever possible.                                                                          
11    * Sec. 4. Article XV, Constitution of the State of Alaska, is amended by adding a new                              
12 section to read:                                                                                                        
13            Section 30. Applicability of the 2010 Amendments Increasing the Number                                     
14       of Members in the Legislature. The 2010 amendments increasing the number of                                     
15       members in the legislature (art. II, sec. 1, and art. VI, secs. 4 and 6) apply only to plans                      
16       for redistricting and proclamations of redistricting adopted on or after January 1, 2011,                         
17       and to the membership of legislatures subject to those redistricting plans and                                    
18       proclamations.                                                                                                    
19    * Sec. 5. The amendments proposed by this resolution shall be placed before the voters of                          
20 the state at the next general election in conformity with art. XIII, sec. 1, Constitution of the                        
21 State of Alaska, and the election laws of the state.

So this is for Tuesday.  It's already Tuesday as I write 

and since it begins at 8am I need to bring this to a close. 

But note that in the schedule there is a + on this committee 

meaning it will be televised online.  I think this is the link 

to see it. Maybe I'll see you at the meeting.  Or you'll see me. 

Actually, I'm not sure how much of the audience

you'll be able to see.  I'll hide in back anyway.                                                                 

Governor, Commissioners And Legislative/Administration Pay Raise Process Badly Flawed

Are the Alaska State Officers Compensation Commission pay raise recommendations for the governor, his commissioners, and the legislature reasonable?  My basic response is "No."  First round, the Commission only recommended raises for the administrative branch (governor and department commissioners), but not legislative branch.  The legislature rejected it.  All the members of the Commission then were either removed or resigned and governor appointed a whole new board which came up with new recommendations in a matter of days including a 67% increase for legislators.  

I'm going to take a look at this from human resources perspective.  While this isn't something I've spent my life on, I did teach human resources at the graduate level including compensation and I was involved in a major classification study at the Municipality of Anchorage - from helping write the RFP to working with the consultants - so I know a little more than the average person about how this should work.

Here are the basic issues for me: 

1. Compensation changes in large organizations are usually preceded by a study that gathers relevant data which becomes the basis and justification for the changes.  The final report also would discuss the fiscal implications of increases in compensation.  The report the Commission posted on its website in January is NOT a serious compensation study.
2. Traditionally, commissioners of state departments, like US cabinet officers, serve for a relatively brief time.  It's been considered an honor to serve one's state or country and good commissioners are respected for taking a break in the careers to serve the public.  Those coming from the private sector often take a cut in pay to serve.  Such servicet also makes someone more desirable for jobs after their service because they better understand how government works and they have personal connections that can be helpful.  So prestige and public service, but not a high salary, have been the traditional remuneration for these kinds of jobs.  No one seems to have discussed this. 
3. The Commission did not follow the steps listed in the statutes that establishes the Commission.
4. Given that the first Commission recommendation was no raise for the legislature, and the second Commission's recommendation was a huge raise, there's the appearance that the governor was really offering the legislature a bribe so that he could get his own salary and those of his commissioners raised.  This is obviously speculation.  But it's consistent with the governor's reelection campaign where he basically offered voters a higher Permanent Fund check if they reelected him.

That's the gist of this post.  If you want more details see below.  

[I'm trying to give you some headlines to act as guideposts, but separating out the issues so neatly also hides the interconnectivity of the issues.  I'm doing my best but also mindful if I wait to make this perfect, the issue will no longer be current.]

How to determine fair pay

There is no foolproof way to do this, but human resources experts have come up  two standard, general approaches to calculating salary:

• What is a job worth?  Classification and Pay studies try, in the simplest terms, to examine the duties of each job , the qualifications required  for each job, and the value that work contributes to the organization. You can see more details here.  It's an imperfect system at best as it tries to pin down and quantify many qualities that can't be quantified in a system that is constantly changing.  
• Market analysis looks at what specific jobs get paid in other organizations in order to determine what pay must be given to compete for workers.  This works best for common job types, but less so for more specialized positions.  This system tends to keep high wage jobs high and low wage jobs low.   You can learn more about this process here.

Large organizations often do a combination, trying balance both those strategies.  

Commission Doesn't Seem To Have Done That

The Alaska Compensation Commission proposed significant raises.  There is no evidence they did any serious data gathering or analysis to arrive at their recommendations.  The Compensation Report at the Commission's website basically says it was decided to increase legislative salaries by 2% a year to match inflation, but that hasn't been done.  So let's add up all those years and bingo, here's the number.  (OK, I'm being slightly facetious here.  You can see the study here.  Don't worry.  It's short. Two and a quarter pages, and that includes the cover page.)

This is NOT the serious report one would expect.  The posted one was dated January 24, 2023.  That's the one that didn't recommend any increases for legislators and was quickly voted down by those legislators.  

The new Commission, quickly created after the legislature turned down the original Commission's recommendations, doesn't have a study up on the website, presumably because there was no time to actually do one between their appointment and their recommendation a couple of days later.  

Basically, the January report  reads more like something written by a bunch a guys meeting to play poker one night, but they have to get this recommendation out before they play cards.  

"What do you think guys?  

"Is this fair?" 

"Yeah sure, that sounds good." 

"We're done.  Start dealing."

That is NOT how you run an efficient and effective organization.  This is a good old boys style of operating.   

Do we know what the cumulative costs of 60 legislators (40 house members and 20 Senators) would be?  No. 

What about the impact on the state employees' health system and retirement system?  

What do we compare ourselves to?

Was there any consideration of how much Alaskans get paid compared to other state legislators?  There is in a comment or two that observers made after the proposal went public, but was that part of their discussion?  The Juneau Empire writes very briefly about that:

"Alaska ranked 12th in legislative salaries in 2022, although it also is among 10 states that are classified as full-time legislatures whose members receive an average salary of $82,258, according to the National Conference of State Legislators. The raises would rank Alaska fourth among all states in 2022 (although other states’ salaries may have also changed since then), with California topping the list at $119,702 (plus roughly $210 in per diem)." (emphasis added)

Full time legislatures? 

Is that from discussion among Commission members or research the Juneau Empire did?  But even so, while the Alaska Legislature has exceeded its 90 day limit regularly in the last few years, calling it a full time legislature is something of stretch.  Certainly it's not a full time permanent legislature.  It meets for four or five months full time, then lots of members go back to their regular jobs.  Do we want to continue with part time, amateur legislators?  Do we want professional legislators?  More on this below.

Size of population, land mass?

And how do we compare based on populations of the states?  Alaska is the third smallest state (after Vermont and Wyoming)  How difficult is being an Alaskan legislature compared to legislatures of other states?  Ours is  the smallest legislature in the country. By a lot, compared to most states, though a few - Delaware, Nevada - are close to our size. One could argue that means more work per legislator, or one could argue it means far fewer people to deal with and negotiate with which should make it easier.

Alaskan is also the largest state geographically, with at least one house district larger than many states, yet with few roads.  On the other hand,  manyAnchorage legislators could walk across their districts in an afternoon.  It does seem reasonable evaluate pay of Alaska legislators based on how much it costs 

• to get to and from Juneau
• to meet with their constituents (though electronic meetings are much more common these days, the reliability of internet can be terrible in many remote villages)

Other considerations that were raised in media coverage

Alaska Public Media reports that Senate President Gary Stevens said,

“I think the younger folks that are entering the Legislature, they deserve to have a livable wage,”

Compensation Commission Member Larry LeDoux is  quoted in the Juneau Empire:

“I think if we’re really going to have a citizen legislature we need to have a salary that will allow citizens to maintain their households while they serve in the Legislature.”

  One could argue that a citizen legislature is a more amateur legislature and shouldn't get paid professional salaries.  

Professional or Amateur ("Citizen Legislator")

Do we have a citizen legislature or a professional legislature?  What does 'professional' legislator even mean?  One with many years of experience in the legislature?  Or one with educational training and work experience in a field relevant to understanding the issues facing the state?  

Surely we have a number of legislators who would qualify as 'professional' by those definitions.  But we also have people whose basic qualification is that they are residents of Alaska with a party brand that is in the majority of their districts.  And some sort of name recognition in that district helps.

Amateur suggests this is public service more than a career.  That they just need enough to get by for a term or two.  But people get addicted to the Juneau summer camp atmosphere and to the prestige that comes with being called Representative or Senator.  And after two terms as a Representative or just one term as a Senator - the next term vests them in the State retirement system.   But I appreciate the argument.  I'd note that I did spend a session in Juneau blogging the legislature on my own dime.  It's doable, but my kids were on their own by then.   

Former legislator Adam Wool from Fairbanks wrote in a March 29, 2023  letter to the editor in response    (sorry there's a pay wall) :

"But I feel compelled to counter the narrative I’ve been hearing lately that the current pay is not sufficient to entice legislators with young families to come to Juneau. As a legislator who had a young family, I find this untrue.

The salary of $50,000 per year, although not great is what a beginning teacher makes, and although it isn’t high, it isn’t low for a job that is only full-time for four months per year. The job also includes full medical benefits and a pension plan, another draw for a young family.

The tax-free per diem of $300 per day while in Juneau is much more than adequate. Many of us paid around $1,500 per month in rent; some even had roommates, which made it lower. A few rented bigger houses, some owned condos and one even lived on a boat he owned. Between restaurants, cooking at home, eating in the legislative lounge and the various dinners and receptions we attended, food totaled around another $1,500 per month. Altogether, that leaves about $6,000 per month of untaxed income to send home, making the salary closer to $80,000 per year."

Nat Herz, a reporter who covers the legislature, thinks they should get the salary raise, but cut out the per diem.  That's not an unreasonable suggestion - though it has tax consequences for the legislators.  

These are the kind of things a good compensation study would have looked at in detail instead of making broad generalization about pay and then suggesting a huge increase without any back-up data.

We also heard from the governor and a legislator that the State department commissioners' salaries were too low in an Anchorage Daily News article about the first recommendations that were voted down by the legislature:

"[Senator] Stevens said Dunleavy has told him that he has struggled to hire commissioners on their current $125,000-per-year salaries. Eagle River Rep. Dan Saddler, who worked at Division of Natural Resources between stints serving in the Legislature, said $125,000 may sound like a lot of money, but that it can be an impediment to hiring highly skilled administrators.

“There are more opportunities in the private sector for people with those administrative talents,” he said."

 

In it for the money or to do public service? 

 This, again, gets back to the issue of whether being a commissioner is a regular job that people apply for because of the pay, or a way for a seasoned professional to spend a few years taking a cut in pay to do public service.  

A Brookings Institute study in 2002 which looked at Federal appointee salaries (not just cabinet secretaries) did not put much emphasis on the public service motive, but did say this:

"People who accept top federal appointments derive non-monetary benefits from their service, of course, and these benefits help to explain why government service continues to attract outstanding candidates. Many public-spirited Americans are eager to serve in influential or high-profile positions, even if the financial rewards are far below those obtainable in a private-sector job. Experience in a senior government job allows workers to acquire skills, knowledge, and reputation that may have considerable value outside the government. Few appointees say they are forced to accept a big cut in earnings when they leave federal office. More than one-third of the appointees who served between 1984 and 1999 say they modestly or significantly increased their earning power as a result of holding a senior administration job (Light and Thomas, 2000, p. 35)." (emphasis added)

The Center for Presidential Transition, answering the question "I Was Offered a Political Appointment—How Much Will I Be Paid?" in 2020, writes: 

 "The government does not pay senior officials the kind of money typically found in the private sector. In the government, you may run a multi-billion-dollar program with thousands of employees and make less (sometimes much less) than $200,000 per year. You should also not be surprised if you receive a political appointment and have subordinates who make more than you. Career employee pay is much more controlled by statute and regulations, and is not connected to the pay of political appointees."(emphasis added)

So what's a reasonable pay level for Alaska state commissioners? Chron  lists the salaries of the top appointees in the US federal government:

"Level I Officials [highest Federal level]

Twenty-one federal officials have Level I jobs and earn $210,700 annually, as of 2018. These positions include all cabinet secretaries, such as secretary of state, secretary of defense and secretary of education, as well as the U.S. attorney general, U.S. trade representative, the director of the Office of Management of Budget, the commission of Social Security for the Social Security Administration, the director of the National Drug Control Policy in the Office of National Drug Control Policy, the chairman of the Federal Reserve and the director of national intelligence."

I doubt that any Alaska commissioners have more responsibility than the top people in the US President's staff.  So this is easily a ceiling figure, though one could also argue being a Commissioner in Alaska doesn't carry the prestige of being a Cabinet member in Washington DC.

The Commission's Process Doesn't Follow Statutes

The Alaska Statutes clearly spell out some procedures the Compensation Board is supposed to follow:

(c) The commission shall meet at the call of the chair. Notice of a meeting shall be mailed to each member at least 20 days before the date scheduled for the meeting.

(d) The commission shall meet to discuss its findings and recommendations at least twice before submitting its final report to the presiding officers of each house of the legislature and the governor.

They did not give 20 days notice.  They came up with their recommendations in about two days after being appointed.  

They do not seem to have met twice.  And if their "final report" is just the salary recommendations with no data to support those recommendations, they truly have no defensible basis for their recommendations.  

There is no evidence they met twice.  

What can the Legislature do now? 

I'm not 100% sure.  I can't find the statute that says what the legislature can do with the Commission's recommendation.  I'm not sure one exists.  

I did call Rep. Andy Josephson because he's a lawyer and until the last Redistricting Board changed the boundaries of his district, he has been my representative.  I asked how much leeway the legislature has to change the Commission's recommendation.  He thought they could vote for part but not all, but they couldn't change it.  He said there was a statute, but couldn't immediately find it.  He also said that since the legislature writes the statute, they could also change it.  But, I responded, that defeats the idea of having an independent commission, rather than the legislators themselves, setting the legislative compensation.  He agreed.  

Rep. Josephson also reinforced the idea that this was a pre-arranged deal.  That the Commission was set up to make this proposal.  And since the Governor appoints the members, I understood that this came from the Governor's office.  

Should the legislature approve the recommendations, could a member of the public sue because the Commission didn't follow its procedures?  Anyone can sue, but I'm not sure how the courts would respond.  

Last observation about the work the Commission should have done

Over the last few days, spending maybe 3-5 total hours on this, I'm offering you a lot more information about how to think about appropriate salaries than the State's Compensation Commission offered in their January report.  The second Commission hasn't even posted their report, and given they came up with salary recommendations in about two days, I'm guessing they have no report.  Though, what I've written is hardly a comprehensive salary survey and analysis that would normally be the basis of a professional report, it's way beyond how the Commission considered its recommendations.  

Conclusion

The jobs of governor, state department heads, and legislators are fairly specialized and unique.  Unlike organizations with hundreds of types of jobs, there are only a few types of jobs here and not that many comparables - the 50 states and the federal government.  This sort of study is probably much easier and could be done in less time than such a study for Conoco-Phillips or the Municipality of Anchorage.  It's not that hard, but the Commission didn't even make a symbolic effort to outline the issue and justify their recommendations.

The salary commissioners have let Alaska down. Their work is unprofessional and highly unworthy of the people of Alaska. They didn't even follow the statutory process.   Our legislators need a fair compensation package, not a wholesale giveaway to get them to approve salary increases for the governor and his cabinet officials.  

The legislature should reject these recommendations and ask the governor to commission a serious compensation study.  Or the legislature could commission its own study.  From what I can tell, they don't have the power (and shouldn't) to set their own salaries. Such a study would give them a basis for voting yes or no on the recommendations and/or could form a basis for the Compensation Commission to make new recommendations.  

That's how things should go, from a legal and rational perspective.  But this has become a very political (not partisan that I can tell) decision.  

Dan Fagan, Again

I've written a few posts about Dan Fagan's ADN columns. Last week I didn't have much time to even look at his column on the Supreme Court's decision on the Parental Consent Law. It begins this way:

Gas pipeline, who cares? Raise taxes on the oil industry, go ahead. Mat Maid, dogs on ball fields, the IM program, city budget, fireworks ban, irrelevant.

There is only one issue facing Alaskans and it is this. A 13-year-old girl can today walk into Planned Parenthood and get an abortion without her parents’ knowledge or permission.

Let me rephrase that. A 13-year-old girl can legally have her unborn baby killed without her parents ever knowing about it.

Either Fagan didn't read the Supreme Court ruling, he didn't understand it, or he just lied about it.

This is a contentious enough issue without totally misrepresenting what was decided. The court did strike down the requirement that the parents must give permission, but strongly affirmed that they must be informed. I posted about this case earlier this week.

But such looseness with the facts is evident again this week. And he seems to have changed his mind about the relevance of raising oil and gas taxes. I don't know how to write about this one without giving you the whole column along with my comments. I'll indent his column and put it in italics so it is clear what he says and what I say. (I would hope that would be clear if I did neither, but just in case.)

The anti-oil populist movement is not new to Alaska. The so-called “backbone” folks have always been with us. But now they are in charge. And that has led us to an all-out war with the oil industry.

“Anti-oil populist movement” what exactly does that mean? They are against oil? They are against oil companies? Populists are politicians who speak and work for the people as opposed to those who speak and work for the the power elite (like big oil companies.) So it would seem that being a populist isn’t such a bad thing. Though some have used the term to mean people who PRETEND to speak and work for the poor but really are working for the rich. I’m sure we have a number of fake populists in the legislature. Certainly Pete Kott, the hardwood floor installer (who happened to also be pulling Air Force retirement and had a masters degree;  I see nothing wrong with either of those things, but he was more than a blue collar working eking out a living) and sheet rocker Vic Kohring both offered a populist stance, but were working for their rich big oil friends. And Dan Fagan who talks on the radio like the salt of the earth, warts and all, is writing these articles that make big oil into a deity being abused by legislative ingrates, certainly seems to fit into that pseudo populist category.

"Now they are in charge." And whose been in charge for all these years until now? Finally people not owned by the oil companies are in charge. Why am I having a problem with Fagan's logic?

“All out war with the oil industry.” Come on Dan. You believe in the free market. As I said in a previous post, in an ideal free market there is a buyer and a seller. The state here, as the owner of the oil, is the seller. The oil companies are the buyers. They each negotiate the best deal they can. If the state blows it by taxing too high, the oil companies can walk away. If the people of Alaska are willing to support legislators who stand up to the oil companies a little bit more than our previous governor because they saw tapes of oil industry representatives giving money to legislators to vote for the oil industry’s preferred tax level, then the oil companies have only themselves to blame. They didn’t play their hand well. This is not war. This is simply the give and take of your sacred free market system. True, it does happen that one of the players is a government body, but each of the big three oil companies made net profits that were higher than the Alaska state budget last year. The oil companies are not victims. You even wrote a column about standing up to bullies. I would think most Alaskans see Sarah Palin as doing just that.

The first attack: The governor gets legislation passed shutting out the producers from the process of building the gas pipeline. This will end up hurting us more than them because the oil industry can go other places to get gas to market.

I’m not quite sure what action of our governor he is referring to since he only gives generalizations and no specifics. Even if Fagan's assertion is the true, is that worse than how the previous governor worked out the original PPT bill “in closed-door negotiations with the three major oil companies on a contract for fiscal terms for a pipeline” shutting out the legislature and the public?

But the governor’s second major offensive in her “Operation Oil Companies Bad” campaign will hit the industry hardest.

High school students make less slanted arguments than this. To see how another journalist writes about the Governor’s strategy team, read Tom Kizzia’s piece on Marty Rutherford, apparently one of the governor's ‘oil companies bad’ lackeys.

After the industry has already invested $50 billion in infrastructure in our state and pumped close to $80 billion into state coffers, the governor has cut them down at their knees.

Let me get this straight. Exxon’s annual net profit for 2006 was $39.5 billion, BP’s annual net profit for 2006 was $22 billion. And Conoco-Phillips’ was a mere $15.5 billion. Three of the largest corporations in the world have been cut down at their knees by a 43 year old former mayor of Wasilla, first term Republican governor who still hasn’t been able to oust Randy Ruedrich from the chair of the Alaska Republican party? I can see them hobbling around on their bloody stumps right now. Yeah, right Dan.

According to Tim Bradner in the Alaska Journal of Commerce “Wood Mackenzie, a prestigious London-based consulting group, has ranked Alaska 99th out of 103 petroleum-producing regions surveyed in terms of political stability in fiscal terms on oil and gas. Only Venezuela, Russia, Bolivia and Argentina ranked lower than Alaska” If this is true, then the oil companies have 98 other petroleum-producing regions to get their oil from. Cut off at the knees? Do you even believe that Dan?

The tax increase coming out of Juneau last week is enormous. It proves the governor’s strategy is now abundantly clear. Higher taxes, bigger government are the keys to our economic future.

Well, at least the governor does something right - she has a clear strategy. Is that bad? I think “higher taxes, bigger government” was Vic Kohring’s scare chant too. He’s the guy you accused of selling out in a column two weeks ago about which I said your writing had improved.

The governor has allies in the Legislature made up of three camps. There are those like the governor who believe some consultants who say higher taxes do not influence investment. The problem is these consultants come from the world of theories, not real life.

Dan, please give me the name of one legislator who believes that higher taxes do not influence investment. Just show me one quote where the governor says that. Show me the quote from the consultants you say said that. They don’t exist. They all know that taxes affect investment. They just don’t believe the sky-is-falling rhetoric that oil companies and their friends, like Dan Fagan, are spreading. They are looking at more than the investment climate rating and seeing that those other 98 places all have their downsides too. Fagan is now an expert on real life?

Politicians who fall into the taxes-don’t-affect-investment theory believe they are doing the right thing but are not real bright. The second camp is made up of pure socialists, those who think “corporate America bad, government good.”

How about some names here Dan ‘McCarthy’ Fagan? Who are the pure socialist legislators? Do you even know what a pure socialist is? Again, show me some evidence. And even if there were such simple minded legislators, how is that any less simplistic than your own chant of “Business is good, government is bad?” There has to be a balance between those two sectors, plus room for other organizations and individuals who don’t fit in either camp. Reasonable people understand this and they may debate about where the appropriate balance of power is. But they don’t chant either extreme.

Rep. Les Gara said on my talk show he thinks we should tax the oil companies at 80 percent.

Under the former PPT plan, the industry paid about 63 percent to government. The governor’s new PPT plan raised the rate to about 68 percent. But on Friday the Legislature’s version of the governor’s bill raised the government share to more than 70 percent. That leaves only one branch of government, the judiciary, to make Gara’s 80 percent rate dream come true. With this Supreme Court, anything is possible.

Huh? Can you explain how the judiciary can raise the rate proposed by the governor and set by the legislature? Why would you even say this? Maybe I’m missing something, but I can’t imagine any scenario where the Supreme Court could raise the tax. Please, spell out how this could happen. Can you say red herring?

The third camp of tax-and-spend politicians is the one that bothers me the most. They do it to increase their power. These panderers know the billions of extra cash they are transferring from the private sector to government will allow them to make the media and big labor happy by growing the operating budget even more.

Wait. Originally there were just “allies in the Legislature made up of three camps.” Now you are saying there are three camps of ‘tax and spend” spend politicians. It’s really hard for me to not get sarcastic here. In fact I've failed utterly to keep an objective tone. I’ve been criticized by a few for being too even handed and not explicitly spelling out my conclusions. It’s hard to not make those judgments here about what was written, but I certainly have nothing that would allow me to conclude what Dan Fagan’s motivation is. I can only make hypotheses based on the evidence. Does he truly believe what he’s writing? Is this simply talk show hyperbole to jack up ratings? Is he getting favors from the oil companies for these free screeds in the ADN now that the Voice of the Times is only on the web? I only know that this is as one-sided, simplistic, and full of unsubstantiated allegations that totally distort reality as any thing I can remember reading. That's pretty strong language for me, but that is why I'm going through this paragraph by paragraph. And now that I’ve gotten that out of my system, let me finish the rest of this.

This special session will end up being a windfall not for the public, but for the state’s public employee unions.

For the average Alaskan going to work every day, trying to support a family, hoping their kids’ kids will have a future here, this massive tax increase represents a huge risk.

Here’s Dan the populist coming out. It's those nasty state public employees who do nothing for the public. Who are these average Alaskans? Oil industry employees who might lose their jobs or get transferred to a part of the world with a more stable investment climate? Like Nigeria? Or Myanmar? Well, only about 3.5% of Alaska employees work in the oil and gas industry according to the Alaska Department of Labor. (Well you have to work the numbers, but they say there were 333,100 non-farm employees in September 2007 and of those there were 11,600 in the oil and gas industry. Go here then in the drop down window get "Alaska 2001 to present (excel file).")

What’s a huge risk for you Dan? Do you think the evidence that the oil companies will abandon Alaska because of the tax increase is greater than the risk of global warming due to human causes? If so, could you show me how you analyzed both?

The oil industry as a whole paid $1 billion in production taxes in fiscal year 2006. With the new PPT plan the industry will next year pay $4.5 billion dollars in production taxes.

Let me ask you a simple question. Would a 400 percent tax increase affect your ability to invest your money? This is not brain surgery, folks.

Everything is simple to you Dan, isn’t it? It also depends on how you play with the numbers. 400 percent is pretty impressive. But there are other ways to think about those numbers. How about comparing their tax burden (I’ll accept your numbers for this exercise) to their net profit last year? $1 billion divided by $77 billion. That’s just the big three. I know you’ll complain that I didn’t isolate their Alaska profits from their worldwide profits, but you know where that will lead, don’t you? To the fact that Exxon won’t tell us their Alaska profits. But since you’re so cozy with these guys, maybe you can ask them for the rest of us. Besides, this is NET profit, what they made AFTER taxes. OK, this isn’t perfect, but it’s the best I can do for the moment and it is close enough to make my point. So their taxes will go from 1.3% ($1 billion tax on $77 billion net profit) to 5.8% ($4.5 billion tax on $77 billion net profit). Looking at it that way it’s only a 5% increase. Now I’ll grant you that their Alaska gross income might not be $77 billion, but even if it were only $30 billion their tax would go from 3.3% to 15%. A 12% increase is certainly not anything close to a 400% increase. We can all play with numbers. And I have no idea where you got the $1 billion and $4.5 billion figures to start with. We do know that the PPT tax this year was raised from 22.5% to 25%. That is a 2.5% increase in the last year. So, Dan, there are lots of ways to figure out the percentage increase and each side will come up with numbers that make their argument sound better. But the wisest heads will know which ones are pure whimsy and which ones make some sense.

But the worst part of the new PPT plan is the standard deduction. It severely limits the industry from deducting expenses, making future projects far less attractive. But that’s not what this is all about anyway: future investments. It’s nothing more than a money grab. With this new plan, the state is expected to bring in a total of almost $8 billion in revenue from the industry in fiscal year 2008.

You think the governor is popular now, wait until she starts divvying up all those billions to those with their hands out. Public employee unions may erect a Sarah Palin shrine. They can place it next to the one the media built.

Of course when the oil industry bargains in private meetings with the former governor to come up with a plan they like and then buys legislators to push the plan through the legislature and blankets the state with misleading advertisements that's not a money grab. That's, what, Dan, just doing business? And how about all the private sector company employees that work on contract for the state, building roads, bridges, schools, doing oil forecasts, unsuccessfully lobbying Congress to open ANWR year after year,etc.?

But I believe history will prove this shortsighted tax-increasing frenzy will lead to real pain and heartache down the road. I know this is a radical concept anymore in America, but the truth is that taxes do deter investment. Taxation is the power to destroy. I am confident we will someday reverse what was done last week in the Legislature. The only question is, will it be in time to save our economy?

Well, Dan, at least here we partially agree - in a few years we’ll be able to see whether your dire predictions come true. Maybe. There are lots of factors that go into this that have nothing to do with this tax plan. Ultimately, we will not be able to parse out what would have happened if.... But we will see if the oil companies pack up their marbles and leave Dodge.

"Nuisance" Ballot Initiatives - Translation: Voters Too Stupid To Decide

Let's see how calm I can stay [not very it tuns out] while I give my reaction to a story in today's ADN.

"Scott Hawkins, founder of ProsperityAlaska believes the voting public should not decide complex tax questions or other measures that increase regulations or permitting of businesses. . .

'Our elected officials spent years and thousands of hours in hearings and hired experts and oil taxation is not a suitable subject for the ballot.'"

Where to begin?  There's so much packed in this article.

It cites a question sent to candidates for state office that asks:

"whether the rules for putting initiatives and referendums on the ballot need reform and are being 'abused resulting in a nonstop series of bad ballot measures that Alaska's business community must spend millions of dollars every 1-2 years to fight.'"

Let's get this straight.  Now that business - big and small - has helped elect a conservative legislature that is so lopsided that Democrats are pretty much ignored, they want more.  Business gets most of the legislation they want.  Apparently that isn't enough.

Because when the public gets riled enough by the kind of legislation that gets through this one-party legislature, they write petitions and gather signatures around the state to give the public the opportunity to put some brakes on the business express coming out of the legislature.  So, since Hawkin's friends already are spending so much money contributing to conservative campaigns to get the loyalty of well over half the legislature, they shouldn't have to deal with fighting citizen referendums, the only check left for the public when they think terrible legislation has been passed, or good legislation has been stymied.

And it isn't enough that the petitioning requirements have been made more difficult.  Ballotpedia explains: 

"Signatures equal to 7% of the total district vote in the last general election must be collected in each of 3/4 of the 40 Alaska House districts.

An older, less restrictive, distribution requirement was changed by a legislatively referred ballot measure on the November 2004 ballot, the Distribution Requirement for Initiatives Act. That measure was approved with 51.7% of the vote. The older requirement was that proponents must collect petition signatures from each of 2/3 of Alaska's 40 state House districts--only one voter needed to sign from each of the 27 districts."

But those pesky citizens have managed to overcome these obstacles to get initiatives on the ballot.  In August, they got enough signatures to challenge SB 21 that gave oil companies about a $2 billion a year tax break.  And the oil companies had to spend millions to defeat the referendum, and it was relatively close.  So why not cut off this last way that people can keep their legislature accountable?

I'd also note that I spent a session in Juneau as a blogger.  There are a number of legislators who have no more smarts than the 'public' Scott distrusts.  And then there are those who are reasonably smart, but ethically challenged.  And then there are those whose world view, apparently like Scott's, sees business as the savior of humankind. 

What else might voters be incompetent to decide on Scott?

Don't get me wrong.  I think the voters of Alaska make plenty of mistakes.  They voted to amend the constitution to restrict marriage to one man and one woman.  The voted to make English the official language of the state.  They've elected Don Young again and again and again.  But I trust them a lot more than I trust the oil industry or the various big business interests to decide what's best for Alaska's people now and in the future. 

 Before posting this I checked ProsperityAlaska's website. 

Prosperity has the nerve to run a headline like "Alaska Budgets Have Run Amok!" yet, they have a picture rotating through their header with the  corporate supporters who lead the Republican majority in the legislature along with Gov. Sean Parnell all of whom fought for and passed these out of control budgets!  

Image from PosperityAlaska Header

Another headline "Facing Down "Enviro Whack Jobbery" goes on to tout the bill that passed the legislature that threw out regulations on the cruise industry that were passed by an initiative.

"An important vote on cruise ship wastewater regulations brought the environmental extremists in the Alaska Legislature floating to the surface.  With solid leadership from Gov. Parnell, sound science carried the day. "

Environmental extremists?  In the Alaska legislature?  I think he means anyone who mentions any regulation on business.  This sounds like the language of the old Anchorage Times back in the 1970s.  What about the pro-business extremists in legislature?  These are folks who worship the free-market with no idea that some of its greatest supporters warned that it has serious flaws.  Everything has flaws and we need to use all tools with awareness of when they don't work.   And these folks need to recognize and protect against market's failures.  Anyone who points them out and tries to correct them seems to be pilloried. 

The cruise ship industry is one of the Outside corporations that treat Alaska like a colony and were not happy at all when citizens put restrictions on them through an initiative.  The legislation the site touts gutted much of that citizen initiative. 

Thank you Alex DeMarban (ADN reporter) for writing about this so the rest of us become alerted to this attack on the rights of Alaskans.  An attack on the Alaska Constitution.

Oh yeah, the initiative and the referendum are spelled out in Article 11.  From the Lt. Gov's website:

Article 11 - Initiative, Referendum, and Recall

§ 1. Initiative and Referendum

The people may propose and enact laws by the initiative, and approve or reject acts of the legislature by the referendum.

§ 2. Application

An initiative or referendum is proposed by an application containing the bill to be initiated or the act to be referred. The application shall be signed by not less than one hundred qualified voters as sponsors, and shall be filed with the lieutenant governor. If he finds it in proper form he shall so certify. Denial of certification shall be subject to judicial review. [Amended 1970]

§ 3. Petition

After certification of the application, a petition containing a summary of the subject matter shall be prepared by the lieutenant governor for circulation by the sponsors. If signed by qualified voters who are equal in number to at least ten per cent of those who voted in the preceding general election, who are resident in at least three-fourths of the house districts of the State, and who, in each of those house districts, are equal in number to at least seven percent of those who voted in the preceding general election in the house district, it may be filed with the lieutenant governor. [Amended 1970, 1998 & 2004]

§ 4. Initiative Election

An initiative petition may be filed at any time. The lieutenant governor shall prepare a ballot title and proposition summarizing the proposed law, and shall place them on the ballot for the first statewide election held more than one hundred twenty days after adjournment of the legislative session following the filing. If, before the election, substantially the same measure has been enacted, the petition is void. [Amended 1970]

§ 5. Referendum Election

A referendum petition may be filed only within ninety days after adjournment of the legislative session at which the act was passed. The lieutenant governor shall prepare a ballot title and proposition summarizing the act and shall place them on the ballot for the first statewide election held more than one hundred eighty days after adjournment of that session. [Amended 1970]

§ 6. Enactment

If a majority of the votes cast on the proposition favor its adoption, the initiated measure is enacted. If a majority of the votes cast on the proposition favor the rejection of an act referred, it is rejected. The lieutenant governor shall certify the election returns. An initiated law becomes effective ninety days after certification, is not subject to veto, and may not be repealed by the legislature within two years of its effective date. It may be amended at any time. An act rejected by referendum is void thirty days after certification. Additional procedures for the initiative and referendum may be prescribed by law. [Amended 1970]

§ 7. Restrictions

The initiative shall not be used to dedicate revenues, make or repeal appropriations, create courts, define the jurisdiction of courts or prescribe their rules, or enact local or special legislation. The referendum shall not be applied to dedications of revenue, to appropriations, to local or special legislation, or to laws necessary for the immediate preservation of the public peace, health, or safety.

§ 8. Recall

All elected public officials in the State, except judicial officers, are subject to recall by the voters of the State or political subdivision from which elected. Procedures and grounds for recall shall be prescribed by the legislature.

You best check the link now before the governor thinks the Constitution is too radical to have on the state's website.

Alaska Medicaid Trends - Report By Janet Clark to House Finance

How to present all this information?  Back to the Fire Hose analogy.  I've got my notes while I was there.  I could also try to go through and pick out key points, plus there was the Powerpoint presentation and the Report and Janet Clarke emailed me copies of those today.
So, the easiest way is to give you the Executive Summary.  And then I'll give you my written notes of the mostly questions and answers from the committee members.  The previous post gave a short summary of what people in this meeting said about ways to control costs of Medicaid.

You can also listen to the audio of the meeting from Gavel to Gavel.

EXECUTIVE SUMMARY (from the Report by Clarke)

PURPOSE
In January 2010 the House Finance committee requested consulting assistance to review Medicaid expenditures and projections (which are expected to spike by 17% in FY2010) to better understand the cause of the increase and impacts on budgets. 

 
Three questions were asked

1. What caused the large increase in Expenditures from FY2009 to FY2010 and why did it happen?
2. What is an appropriate level to budget for Medicaid spending in FY2010?
3. What is an appropriate level to budget for Medicaid spending in FY2011?

METHODOLOGY
Several different sources of data including Medicaid spending, enrollment, recipients, Food Stamp caseloads, Alaska Population trends, and the Consumer Price indices were used in the analysis.  Interviews with State officials supplemented the data.

ANALYSIS 
Medicaid spending is based on three main components:  

• PRICE
• RECIPIENTS
• UTILIZATION

       
Each of these components has been analyzed for their impact on Medicaid spending. 
Expenditure trends were developed and spending over time was analyzed.  Reviews were completed of the current budget supplemental budget request and FY2010 and FY2011 forecasts by the Department of Health and Social Services were analyzed.

CONCLUSIONS
Over 11,000 more Children are now enrolled in the Medicaid program than they were one year ago, causing the substantial spike in the budget.
Recipients (those who use services) grew at a slower pace than enrollees.
The cause of the increase is primarily tied to Economic conditions (Unemployment rate at 8.8%) and Alaska’s population increase.
Other factors such as price and utilization also contributed to the increase.
The most recent monthly trends in Medicaid spending show a slowing of expenditures.
RECOMMENDED LEVELS OF SPENDING
Recommended FY2010 Supplemental:     

• $36.8 Million GF (General Fund)(Alaska Pays)
• $37.7 Million Fed (US pays)
• $74.1 Million TOTAL

[NOTE:  This is a recomendation for a SUPPLEMENTAL Increase.  The Total is below:]

Recommended
FY2011 Medicaid Budget:   [FY 2011 = Fiscal Year 2011, which goes from June 2010-June 2011]

• $    441.6 Million GF
• $ 1,318.2 Million TOTAL

My notes convey the back and forth between the committee members and the people presenting.   And the questions you surely have from the above are discussed.   I've tried to clean up the typos.


KEY PLAYERS:  Janet Clarke  was hired by the Finance Committee to review the department budget proposals on Medicaid.  She used to work in the Department and if I got things right, she left about two years ago.  She clearly knew what she was doing.  And the Finance Committee clearly respected her knowledge.

Finance Committee Members: 

CO-CHAIR: Representative Hawker CO-CHAIR:Rep Stoltze  Absent

VICE-CHAIR:	Representative Thomas
MEMBER:	Representative Austerman
MEMBER:	Representative Fairclough
MEMBER:	Representative Joule  Absent
MEMBER:	Representative Kelly Absent
MEMBER:	Representative Doogan
MEMBER:	Representative N.Foster
MEMBER:	Representative Gara
MEMBER:	Representative Salmon

So, Janet Clarke came up to present her report.  The rest is my running notes, which I've gone through to highlight and clean up spelling a bit.  But recognize these are a ROUGH RECORD not a true record.  You get here Clarke's presentation (without the charts) and the questions and answers.

Clarke:  Page 1 of Report: Page 3 - Medicaid declined 2007 and 2008, without cut in service, in part due to good economy, but also cost cutting.

But itʻs back up now. Terms like FMAP  - Federal Medicaid Authorized Percentage - is the federal matching rate.  Alaskaʻs FMPA would have fallen to 50% but the Economic Stimulus Bill (ARRA) increased the rate to 61.12%.Asst When the stimulus FMAP goes away in 2011, the state will be faced with another $100 million.

Thomas:  You mentioned tribal.  Without them, how big would this be? Clarke:  Itʻs about $150 million. Salmon:  We had a report from non-profits out of Anchorage and mentioned the state was funding their program - about $1 million.  Do you know what area of the state that is coming from?

Clarke:  I do not.

Doogan:  So I can understand this, if this were a 50/50 match, it would be about $900 million each, but because itʻs 60/40 it would be lower, but the stateʻs share would still be higher than now.  Is that because some of the programs are 100% Fed?

Clarke:  Youʻre absolutiley right, some are 100%, some 90% and other formulas.

Doogan:  If we go back to 50/50 - how much is it going to jump up?

Clarke:  It will depend on the National formula.  Iʻve seen numbers from $100-120 million.

Clarke:  Factors that determine the spending.  Itʻs an entitlement program.  If people are eligible, they can get the services. Slide: 

Three components of growth:  Price, Population (Enrollment and Recipients) and Utilization.

Part I:  Price: 
1.  Change in CPI. [Consumer Price Index] Now 3% is general cost increase. 2.  Physician rate increases are within normal CPI, but this cost was beyond the CPI.  There were changes in the Medicaid formula that increased Dental rates by 5% and the second which increased medical rates by 15%.  The medical rate increase wasn't anticipated and was linked to a change in the formula the feds use to calculate rates.

Part II:  Population:
1.  Enrollment in Medicaid     
children  , adults, seniors
- main growth is children     Medicaid children monthly enrollment (6100 increase July 09-Dec 09)     
- red Denali Kid Care (2300)(150-175%)     
-grey Regular poverty level (about 9000) [I'm not sure what these numbers mean, perhaps I got them wrong - I think she was dividing the kids into those who got Denali Kid Care and those who qualified through poverty.  But the numbers don't add up.]

Hawker:  Timing on chart is that the low point was last January and so the increase began after we funded last year.

Clarke:  Part III - Recipients - those covered who actually use it. (Medicaid Recipients Chart) Children, Disabled Adults, Adults, Elderly, Disabled children Medicaid Children Monthly Recipients: Last January trend was declining, then it hit.

So, itʻs the children that are increasing.  How to measure?
1.  Look at numbers of enrollees and look at how many use services?  2009 97% used services.
2.  Look at costs/medicaid enrollee. 2006-2009  fairly stable.  About $8200 per enrollee. 2010 - Three models.
a)  high forecast - >$9000 for FY2000
b) low forecast (really moderate, I wouldnʻt call it low)
c) check write and thatʻs $8243(?)

Austerman - thru 2008 actual?  Yes.  2010 been what so far?

Clarke:  Between checkwrite and low projection.

Austerman - pretty much following the trend

Clarke:  Couple things. 
1)  in spring spending accelerates 
2) Also some programs that department pays lump sum payments - some tribal payments and others, special one to API, and thatʻs not taken into account.

Austerman:  so that number will continue to go up?

Clarke:  Yes

What are the factors that led to increase?
Price:  about 3% Population:  11,000 more kids enrolled, about 5% Utilization:  a little bit

Whatʻs causing this?  Alaska Public Assistance Caseload Trends.
Economy is having an impact. Food stamps and medicaid growth almost exactly the same.  FS is a leading indicator, shows where medicaid enrollment will go

Gara:  Food stamps qualifier?  150%

Salmon:  Simple, yellow line on the bottom is what?

Clarke:  ATAP & Tribal TANF  - itʻs very stable and has been great success, Welfare reform set 5 year limit. Alaska Temporary Assistance Program - Remarkable decline in that program.

Clarke:  Dept. of Labor website - Alaska population grew at highest rate in years, birthrate highest since 1992.  Previous studies.  Medicaid pays for 40-50% of births in Alaska.  So population has contributed to cost increase. Delayed impact from SB 27, 2007, Denali Kid Care Program, had been at a 200% Poverty level and was change in 2003 to 175%.  But changed to fixed rate, whatever the number in 2003 = 175%  but in 2007 it actually was 150% of poverty level.  So in 2007, they put it into the law that it was 175%.  They thought kids would return by 2008.  There was a delayed impact.

Last thing:  Two issues that have garnered a lot of media attenion
1. H1N1
2.  Health Care reform These seem to increase utilization

Salmon:  Why is the Adult Public Assistance a straight line?

Clarke:  Itʻs for elderly

Foster:  Would be interesting to see correlation between cost of energy and utilization.  Also, looking at this geographically - urban or rural?

Clarke:  One good thing about Medicaid program:  They have data.  You can get any info you like, just depends how deep you want to drill. 

Hawker:  Medicaid democraphics follow Alaska Demographics.  In urban areas, youʻll see - itʻs not that the services are different between rural and urban - if they are in rural Alaska and they have access to native health care, theyʻll get 100% from the feds.  This allows the state to afford more for the rest of the state.  And transportation costs are high.  And feds keep asking about transportation costs because they are so high.

Chart:  Medicaid Projections Three different monthly forecasts.  Which is most accurate? April 2008 high forecast 1.13Billion for FY 2008, low $984.   Come together in June when we get the actual spending Jan 2010:  suggests 1.26 billion 1.2 and 1.16 Billion. Chart:  Monthly Medicaid Spending Goes back to October 2008.  Weekly trends, but shown as monthly.

Fairclough:  p. 17 after birthrate in Alaska, State lost three cases that were restricted by 2006 intent v. court ruling on controlling costs.

Clarke:  Dept of Law Iʻm sure will talk to you.  When the intent went into place, it dropped and has slowly come back up.  Urge Leg. to consider.
1.  Because of special stimulus FMAP.  If we accept the money, we canʻt cut eligible for services.
2.  I think in the future if Legislature needs to contain costs, will have to put it in legislation.  Legislative intent is just legislative intent.  Having lived through cost containments, there will be challenges by people being cut.

Fairclough:  Want to know what was reinstated and how that related to intent?

Clarke:  Austermanʻs earlier question.  $682 million since Jan. 2010.  Thatʻs $1.2 billion for the year if it continues. 

Gara:  People w/o health insurance going to emergency room.  Those people arenʻt even covered by medicaid.

Clarke:  If they do go in and then qualify for medicaid theyʻre signed up, but ask the department.

Austerman:  Please repeat numbers Clarke:  getting close to $1.2 billion figure. Next charts boring.  Just numbers.  Medicaid Supplemental Alternatives $88.4 million.  that would be $1.264 billion.  I think it is trending to $1.2 billion, about $64 million less, but Iʻm sensitive to the unexpected.  I recommend give them this extra cushion.  That would save $7 million in general funds.

Hawker:  Making judgment calls around the margins.

Gara:  This isnʻt going to impact their costs, just whether there is a supplemental.

Clarke:  This is the supplemental.

Gara:  Through June.  Youʻre hoping theyʻll need $70 million less.  But whether you are right or they are right, it wonʻt affect the actual costs.

Clarke:  I was asked to give my best guess.  But youʻre right Medicaid spending is what it is.

Gara:  If we overestimate, they wouldnʻt overspend it, right?

Clarke:  Typically, there are controls.  This isnʻt to say there arenʻt transfers.  But this department has been historically upfront and returning any extra.

Foster:  Dept. basically is guessing $88 million and youʻre recommending we come in at $74 million.  This is the low forecast plus 2%. Austerman:  Does this increase their starting base next yearʻs budget.

Clarke:  No, it does not affect the base.

Hawker:  it doesnʻt affect the base.

Foster:  You said in response to Gara that Medicaid is what it is.  But one area we do have control.  If there were more facilities around the state IHS, then the state would be paying less of that 50% correct?

Clarke:  I think youʻre correct on an individual basis. FY 2011:  Last Page:  FY 2011 Medicaid Budget: DHSS & Consultant Comparison Both come to the same place.  We get there through different paths.  I think weʻll spend less this year.  I think Medicaid will grow 12% this year and about 7% next year.  (not 100% sure of the numbers.)  Yes, these are large numbers and they are reasonable.

Austerman:
1.  I want to go back and look at containment issues and how they were handled back to 07 and 08.
2.  Behoove us to look at FMAP and changes needed at end of that, possibility of legislation...?

Gara:  Follow up on Rep. Fosterʻs question.  Lack of education.  The IHS funding, if you qualify it is 100% payment.  If it happens in IHS facility that helps us a lot.  Iʻm not clear if someone who qualifies goes to Providence, can you qualify automatically if you go to a non IHS facility?

Clarke:  No.  Has to be in qualified IHS facility.

Gara:  Is there a saving if there are more IHS facilities.

Clarke:  Looking at long term care and nursing homes, there are few in rural Alaska, thatʻs the one area you have.

Hawker:  Let Ms. Clarke off the stand.

Doogan:  I still donʻt get the big spike in medicaid costs that begins in 2009.  3% CPI increase, but not for long.  Some charge changes but not tht big.  Population graph - medicaid recipients total - those trend lines are flat or going down.  Then utilization, I donʻt actually see a particular chart here, but if the other two arenʻt doing it, it has to be more people using the service.

Clarke:  If you go to page 10.  I didnʻt put all charts in powerpoint presentation.  In the Report

Switch to the Commissioner and two Deputy Commissioners:
Bill Hogan Commissioner 
Alison Elgee Assistant Commissioner Finance Management Services
Bill Streur Deputy Commissioner for Medicaid & Health Care Policy

Commissioner Hogan:  If anyone knows this, itʻs Janet and I think itʻs an excellent report. Respond to Rep. Doogan.  Page 13. This is serious stuff.  We take this very seriously.  Iʻve spoken with the Gov.  who committed to the Leg. Leadership to look at this for FY 12. Economic Stimulus.  We have the enhanced FMAP rate through Jan. 2011.  Various things that extend that through June 2011. 

So beginning FY 2012, weʻll need about $125 million more.  (was that billion?) You can see there were circumstances occurring - change in unemployment rate.  26% increase inf food stamps and 9% unemployment. Best way to address this is economic development and more jobs.  As jobs are developed, but we also provide many safety net programs.  Medicaid is one of them.

Hawker:  to your last comments.  Would like to give your clairvoyant, Mr. Streuer, I would like to eat some crow.  Last year you did warn us there was a change on the horizon.  We were looking at the trends to the data points up to the point when we sat here.  Mr. Streuer, I donʻt know how you did it, but you predicted the state economy better than anyone else.
Disclosure:  Heʻs also one of my constituents.

Fairclough:  If we cross tab unemployment and  industries that they are coming from - construction academy, health industry, retail outlet?

Hogan:  Itʻs possible, we have data on people leaving public assistance rolls and where they might go.

Austerman:  What kind of analysis can we get if we have 9% unemployment and itʻs higher Outside, are people moving here to get work? 

My fingers are getting tired.

Salmon: Today I got call from DOT and two days ago from DOL, theyʻre coming back with answers.

Hogan: Cost containment measures several years ago. ONly those eligible were actually getting the program and were only getting the right amount of service. We scrutinized that carefully.

Hawker: We were getting documentation of serious abuses.

Hogan: Absolutely correct. We began to reduce hours people eligible for. Some legal entities felt we didnʻt have legal criteria, objective criteria for determining that. One of the lawsuits. The technical term is ʻmaterial improvementʻ. Since then weʻve adopted a more defendable tool. If you have further qustions, Stacy Crayley? at Department of Law can help.

Hawker: Weʻre trying to encapsualte 8 years of budget reviews into a two hour abstract.

Hogan: REspond to Gara about emergency rooms. Our providers, get the person to sign up if they are eligible, and that eligibility is retroactive. But there are many individuals who do not qualify for medicaid and who do not have insurance. Hospitals are not compensated.

Gara: Iʻm not going to pretend there is some easy solution there. Is that a significant expense and if it is, is there a way to redirect them to less costly service.

Mr. Streuer: Frequent flyers - people who use emergency in lieu of personal physician which could be dealt with much lower costs. We can identify these people and try to put them in touch with primary care provider. To avoid this. Constant problem. New system will give greater lattitude to identify. A couple areas weʻre looking at: Medical home. Assigning someone to work with a particular provider and get all their care through that provider. IHS facility and ocmmunity health centers willing to step forward.

Gara: Anything in the works in cost savings relating to Rep. Fosters comment about getting more federal funding through use of IHS programs.

Streuer: Ongoing program. Itʻs money in the bank.

Gara: Using Neighborhood Health Center. Hard to make an appointment, first come first served, so people go to emergency room.

Doogan: Look at anual medical spending, looks like in 2000 Medicaid was an inoffensive $600 million and in ten years has gone up 100% and in next two years it will have tripled in those 12 years. At some point Iʻll need that answer before the budget leaves the committee.

Hawker: 2003 legislature, remember chart we saw where it was marching upward. I asked. Then they said Iʻm not sure why, it just keeps growing. We intuitively knew it was those three components. We attempted to fund, but took a while, an appropriation for agency to engage consultant to analyze system to look at causal factors. To see how we might contain costs. I think a year or two before - you were working as a staffer - people were looking at 20 years having a $3billion medicaid program. I take pride that we have leveled and stabilized the program. I donʻt think itʻs that mysterious. Med costs are going up like crazy, population going up like crazy.

Allison Elgee, Asst for HHS: Department did develop a model. Annually you get a report with a ten year look assuming no changes. Weʻre looking at a program in 20 years it will be $3.5 billion. We arenʻt talking about reducing meicaid, were talking about bending the curve.

Another point to clarify, need to replace $120 costs in funds that disappear, thatʻs before projection for growth. so it will be higher.

Foster:
1.  how many IHS qualified patients are seen under medicaid program?
2. In trying to save money. Hospital near native population incurring costs fo $10 million and all qualify and FMAP is 50%, can state pay for IHS facilities? And shift the costs to the feds.

Hogan:
1. Yes, very specific info about IHS beneficiaries who are eligible for medicaid etc. and we can give you that.
2. Longterm facilities in Anchorage, Bethel and ?? With help of legislature weʻve given these facilities capital monies.

Austerman: Iʻm not out to take anything away from anyone at this time. But if I understand Janetʻs presentation. Partly set on how we set the eligibility. At one time we fixed it at 175% of poverty level and then it drove back down, but then it generated more kids coming into the system. It behooves us in the long term to look at price of oil and dribble coming out of oil pipeline, somewhere weʻre going to have to figure how these two points cross. Not going to do it in this budget cycle.

Hawker: this conversation is a recurring theme. Iʻm musing philosophically on the record, always dangerous, within the stte budget, we the leg were having the biggest difficulty with University for a number of reason. Way to address that was to restructure the subcommittee and have those sessions directly without being filtered. Iʻd be telling this committe to comtemplate doing the same and looking at this as a committee as a whole since it has great economic challenges.

Hogan. With you, it helps that you understand our budget. We have confidence we can do something about this, not helpless. We can bend the curve. We arenʻt helpless. We can insure people get quality services, but bring this under control. There will be painful decisions and we need to work together. The Gov. is absolutely committed.

Hawker: No bearing at all on Rep. Jouleʻs handling of that subcommittee.

Fairclough: Bending the curve. Invest truly in what is harming Alaskans in many ways. Some are duplicated. They access as many services as possible to find help, and not in a very cost effective way. Trying to find relieve. Housing and everything else. Suggest to Austermann. Instead of bending the curve, maybe we throw everything out of the box onto the floor to produce a totally different curve. Bending the curve doesnʻt work for me. Waiting on prevention only costs us more dollars exponentially.

Hogan: Echo Rep. Faircloughʻs comments on prevention. A challenge. Medicaid doesnʻt pay for prevention. Have to think of other ways to affect number of people eligible for medicaid.

[NOTE:  THESE ARE VERY ROUGH NOTES.  LISTEN TO THE AUDIO (ABOVE) FOR A WORD FOR WORD ACCOUNT.]