House stalemate headlines first half of session

Forty-four days have passed since the Legislature started work in Juneau. That’s two days short of the half-way mark for the 90-day session limit set out in state law and more than a third of the way to the 120-day limit set out in the state Constitution.

No bills have passed the House or Senate and few committee hearings on bills have been held.

The state House suffered a long stalemate over its organization, which is now resolved, and committees in the state House are now formed and getting down to work.

The state Senate has meanwhile been at work mainly with hearings in the Senate Finance committee on Gov. Mike Dunleavy’s proposed state budget and draconian cuts to spending. Legislators are still coming to grips with the implications of Dunleavy’s budget, which wasn’t released to the Legislature or the public until Feb. 13.

Dunleavy has argued that the state has been in fiscal imbalance for years and the resulting deficits are draining state ready cash reserves. A shock to the system is needed to get spending in line with revenues, he argues, painful as it is in the short-term.

Painful it would be. To reduce state general fund spending by about $1.6 billion, or one-fourth, the governor is proposing a $333 million cut, or 25 percent, to state support for school districts, with about half of this in the Anchorage School District); a $310 million reduction in state health and social service spending, or about 30 percent, that would include $271 million cut from state support for Medicaid, a state-federal health care program for low-income Alaskans and children.

There would also be a $154 million reduction in state funds for the University of Alaska, or 40 percent, and a $60 million reduction in funds for state ferries. After Oct. 1 the ferries would be tied up, state transportation officials told the Senate Finance committee last week. Options for privatizing the system are also being explored.

One aspect of the cut in Medicaid and other state health and social service funding is that it would also result in a loss of about $510 million in federal dollars for Medicaid and other health services. The federal money is a match to state funds and if those are cut the federal money Is lost.

The total of forgone federal funds may actually reach $700 million including the $510 million for health and social services. When combined with $1.6 billion in state funds cut, the total lost to the economy, the combined state and federal money, could be $2.3 billion.

Earlier last week senators on the finance committee asked Donna Arduin, director of the Office of Management and Budget, if the administration has considered the adverse economic effects of the proposed reductions. Arduin said her office is developing a study on the impacts.

Meanwhile, the effect of the Medicaid cuts, which would reduce both state and federal dollars for medical services, could be delayed the Senate committee was told last Friday. Sana Efird, the health and social service department’s administrative services director, said the agency will apply to the federal government for a waiver of federal rules that would give it flexibility in reorganizing the program to achieve efficiencies.

The department is still working on its Medicaid reorganization plan, she said. Since it will take about two years for the waiver to be approved, the administration proposes to tap a state savings account, the Statutory Budget Reserve, or SBR, to supplement reduced general fund dollars, Efird told the senators. The SBR now holds about $172 million, which is enough to fund reduced general fund dollars for Medicaid through 2020.

Sen. Donny Olson, D-Nome, a member of Senate Finance, said he is concerned about reduced Medicaid services and its effect in undercutting economically-fragile critical care hospitals in small communities. “I’ve seen a report that six critical care hospitals are on the verge of closing,” Olson said. If Medicaid is cut further it will push these facilities over the edge.

The reductions hit a lot of politically-sensitive areas, including senior citizens. Within the Department of Health and Social Services, the new budget cuts $19 million from the Pioneer Homes and would impose fee increases on new residents in the homes; senior benefit payments, a small monthly stipend for senior citizens who meet certain low-income criteria, will be terminated.

When Gov. Frank Murkowski cut the original senior citizen payments, which were not then linked to needs, a political firestorm resulted among seniors that contributed substantially to Murkowski’s defeat in his reelection bid in 2006.

In Dunleavy’s budget, Adult Public Assistance is reduced by $14.7 million, and the Temporary Assistance for Needy Families, or TANF, is cut $16.9 million. Sen. Click Bishop, R-Fairbanks, another finance committee member, said the TANF assistance helps school districts provide subsidized breakfasts and lunches for low-income children.

“In some schools in my district have 50 percent of their students in TANF. How are we ever going to improve education outcomes if children come to school hungry?” he asked.

The youth detention and treatment center in Nome will be closed, with a $2 million saving, and troubled youths now In residence there will be transferred to facilities In Bethel, Fairbanks or Anchorage. The public health nurse program is being eliminated, the senate committee was told.

Dunleavy’s critics will have plenty of ammunition: Over half of the governor’s $1.6 billion in cuts is being done to free up dollars for a larger Permanent Fund dividend Dunleavy promised in his campaign. The larger dividend will cost about $900 million.

Sen. Bill Wielechowski, D-Anch, said Dunleavy may also have broken laws in awarding a sole source contract to the private company to operate the Alaska Psychiatric Institute in Anchorage, the state’s sole mental hospital for acute-care patients.

Administration officials acknowleged that a contract has been signed with Wellpath, a company hired to provide emergency short-term management at the state hospital, which also has an option for a long-term contract.

Wielechowski challenged this: “It looks like a very clear violation of state procurement rules,” he said. State law requires an economic feasibility study, also called a termination study, before a state facility or function is privatized. This was not done at API.

Sen. Bert Stedman, R-Sitka, who cochairs the senate committee, said he is very interested in seeing a study of API privatization as well as one for the state ferry system, which is important to Stedman’s southern Southeast Alaska district.