Gov. Dunleavy withdraws plan to split Alaska Department of Health and Social Services

JUNEAU — Alaska Gov. Mike Dunleavy is withdrawing a plan to split the state Department of Health and Social Services into two agencies, citing “technical issues” with the executive order that set out the plan.

Legislative hearings over the past week have exposed potential legal problems with the governor’s proposal, and lawmakers have grown increasingly wary of the idea.

“I think that (order) had in concept broad support, but we’ve found a few action items that need addressing over the next several months, maybe over the summer,” said Sen. Click Bishop, R-Fairbanks, during a Thursday afternoon hearing about the proposal.

The Department of Health and Social Services is the state’s largest agency, accounting for more than a third of the entire budget of state government. The department’s biggest job is to oversee Medicaid, which provides medical coverage to one in three Alaskans, but it also handles programs and services as varied as the Office of Children’s Services, Pioneer Homes and public assistance.

Prior governors have considered breaking up the agency in an attempt to make it more efficient, and Dunleavy issued an executive order in January to do so. That order would have gone into effect March 21 unless rejected by a joint session of the Alaska Legislature.

Health and Social Services Commissioner Adam Crum said the split would cost more up front, but the state would make up that cost in efficiency gains. Critics, including groups served by Crum’s agency, said they weren’t consulted about the idea until after the plan was rolled out.

In hearings, they identified some technical flaws, and last weekend, a legislative attorney said the executive order authorizing the split was so broad that it could infringe upon the Legislature’s constitutional rights.

“There certainly were unintentional errors in the drafting of the executive order that would be helpful to fix,” said Stacie Kraly, an attorney with the Department of Law.

But because the split was proposed by executive order, rather than in legislation, it couldn’t be changed. Lawmakers could only vote it down or take no action, allowing the split to take place.

On Tuesday, a House committee passed a resolution that represented the first step toward voting down the split.

Rep. Tiffany Zulkosky, D-Bethel and the committee’s co-chair, said that vote “was pretty telling. There was bipartisan support and questions and concerns that remained. And so while not speculating, I think that was a good indication of concern that was felt throughout the (Capitol).”

In a written statement, the governor’s office said, “While there is widespread recognition within the legislature, Alaska’s health care industry, DHSS and stakeholders that the largest department in state government needs to be reorganized, there were some technical issues identified that merit revisions to the order. A detailed review is underway and a revised executive order will be submitted for legislative review as soon as possible.”

That kind of withdrawal and resubmission has precedent. In 1983, the Alaska Legislature turned down an order by then-Gov. Bill Sheffield, who had proposed to split the state’s prison system from the Department of Health and Social Services. Sheffield re-proposed the idea, and the Department of Corrections remains an independent agency today.