Legislature(2017 - 2018)HOUSE FINANCE 519

02/28/2017 01:30 PM FINANCE

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Audio Topic
01:35:37 PM Start
01:36:45 PM HB57 || HB59
01:36:45 PM Non-agency: Fund Capitalization Amendments
02:16:26 PM Non-agency: Fund Transfer Amendments
02:45:40 PM Non-agency: State Retirement Payments Amendments
03:15:43 PM Non-agency: Special Appropriations Amendments
05:49:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 57 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 59 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ Subcommittee Reports & Amendments: TELECONFERENCED
-Language: Fund Capitalization; Fund Transfer;
State Retirement Payments; Special Appropriations
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 57                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     supplemental  appropriations and  reappropriations, and                                                                    
     making  appropriations  under   art.  IX,  sec.  17(c),                                                                    
     Constitution  of   the  State   of  Alaska,   from  the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
HOUSE BILL NO. 59                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
1:36:45 PM                                                                                                                    
                                                                                                                                
^NON-AGENCY: FUND CAPITALIZATION AMENDMENTS                                                                                   
                                                                                                                                
1:36:45 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H FND 1 (copy on file):                                                                        
                                                                                                                                
     Fund Capitalization (no approps out)                                                                                       
     Oil and Gas Tax Credit Fund FND 1 - Reduce deposit to                                                                      
     the Oil and Gas Tax Credit Fund by 50% (from $74                                                                           
     million to $37 million)                                                                                                    
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.12, Wallace, 1-31-17.                                                                                       
     This amends sec. 21(f) in HB 57, version J.                                                                                
                                                                                                                                
     Due to budget constraints, the Governor's requested                                                                        
     deposit of an estimated $74 million unrestricted                                                                           
     general fund is reduced by 50% to $37 million.                                                                             
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Wilson  understood there  was a  formula that                                                                    
determined the amount going into the fund.                                                                                      
                                                                                                                                
Co-Chair Seaton responded there was a current formula.                                                                          
                                                                                                                                
Representative  Wilson asked  how  much  would be  deposited                                                                    
into the fund if the formula were used.                                                                                         
                                                                                                                                
Co-Chair Seaton  responded that if the  formula were correct                                                                    
the amount would be $74 million.                                                                                                
                                                                                                                                
Representative  Wilson  asked  about   the  arrival  of  the                                                                    
formula. She wondered if the  formula was in statute. If so,                                                                    
she queried whether the state  had not abided by the statute                                                                    
in previous times.                                                                                                              
                                                                                                                                
Co-Chair Seaton  responded that it  removed an  amount equal                                                                    
to  15  percent of  all  revenue  from  taxes levied  by  AS                                                                    
43.55.011  that was  not  required to  be  deposited in  the                                                                    
Constitutional  Budget Reserve  (CBR). He  also referred  to                                                                    
the  Alaska  Constitution,  Article   9,  Section  17a.  The                                                                    
constitution contained  "estimated to be" language.  A fixed                                                                    
amount of $37 million was appropriated presently.                                                                               
                                                                                                                                
Representative  Wilson did  not feel  like her  question was                                                                    
answered. She indicated that there  was a statute that had a                                                                    
formula that determined an amount  per barrel that went into                                                                    
the fund.  The legislature  had instituted tax  credits that                                                                    
would  benefit  the  state  with royalty  oil.  A  fund  was                                                                    
established  to pay  out tax  credits. She  did not  want to                                                                    
have a  debate on  the amount. However,  it appeared  to her                                                                    
that the amendment would break statute.                                                                                         
                                                                                                                                
Co-Chair  Seaton  responded  that  funds  appropriated  were                                                                    
subject to  appropriation by  the legislature.  He suggested                                                                    
having someone  from the Legislative Finance  Division (LFD)                                                                    
provide additional information.                                                                                                 
                                                                                                                                
Representative  Wilson agreed.  She was  already aware  that                                                                    
the legislature could use all  funds. She asked if there was                                                                    
currently statute  in place designating  what went  into the                                                                    
fund. If the  answer was affirmative, she wanted  to know if                                                                    
there had been  another time the legislature  decided not to                                                                    
follow statute having to do with the fund.                                                                                      
                                                                                                                                
1:41:02 PM                                                                                                                    
                                                                                                                                
ALEXEI   PAINTER,   FISCAL  ANALYST,   LEGISLATIVE   FINANCE                                                                    
DIVISION, responded  that statute  AS 43.55.028 set  out the                                                                    
calculation.  The legislature  had not  always followed  the                                                                    
statute. He reported that for  several years the legislature                                                                    
appropriated  the amount  necessary to  pay all  the credits                                                                    
that were redeemed in a  particular year. In some years, the                                                                    
amount was less than the statutory deposit.                                                                                     
                                                                                                                                
Representative   Wilson    remarked   that    although   the                                                                    
legislature did not  put as much into the  fund as specified                                                                    
in statute,  the state met  its obligations.  Therefore, the                                                                    
state would have had money  in the fund unused. Whereas, the                                                                    
legislature would  have unpaid  credits outstanding,  if the                                                                    
proposed  amendment  was  adopted.  She  wondered  what  the                                                                    
balance would be if the  state only paid $37 million towards                                                                    
outstanding tax credits.                                                                                                        
                                                                                                                                
Mr. Painter thought  it was about $800  million. However, he                                                                    
would have to get the exact amount later.                                                                                       
                                                                                                                                
Representative  Wilson noted  that  the  state's tax  credit                                                                    
obligations  could  be  paid   off.  She  noted  the  Higher                                                                    
Education  Fund and  the Power  Cost Equalization  Fund. She                                                                    
disagreed with  the state being  in debt to such  an extent.                                                                    
Companies had done  what the state had asked them  to do. In                                                                    
the previous few years, the  state had indicated that it did                                                                    
not have  to pay its  obligations according to  statute. She                                                                    
thought it was a hard  reality. Currently, the state was not                                                                    
going pay  its obligations because  it was short  money. She                                                                    
relayed  that if  the state  moved  all its  funds into  the                                                                    
general fund the balance would  be more than $1 billion. She                                                                    
was  not including  the Permanent  Fund corpus  or earnings.                                                                    
She did not agree with  having a debt obligation, having the                                                                    
money  to pay  for  it, but  wanting to  use  the money  for                                                                    
something else. She was disappointed.                                                                                           
                                                                                                                                
1:44:35 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton clarified  that the  state did  not have  a                                                                    
debt and the payments were  not specifically owed. The state                                                                    
was  required  to issue  a  certificate  based on  a  credit                                                                    
amount that  could be written off  against future production                                                                    
tax  liability. There  was an  additional provision  that if                                                                    
the  state had  the money,  it could  buy back  credits with                                                                    
cash subject  to an appropriation. The  item being discussed                                                                    
was the amount the  legislature would appropriate for paying                                                                    
credits. The  credits were not  a debt  to the state  and no                                                                    
interest  was owed  on  them.  He continued  that  it was  a                                                                    
secondary  method of  redeeming tax  credits. The  state was                                                                    
not  obligated  to  fund  them  at  any  certain  time.  The                                                                    
obligation was  truly satisfied by  issuing a  credit, which                                                                    
could be used  against future production taxes.  He spoke to                                                                    
having done  things in  the past when  the state  had excess                                                                    
money.  Past legislatures  had established  a  fund to  make                                                                    
deposits  and  payments.  The   obligation  of  the  current                                                                    
legislature was  to appropriate funds  in the  best interest                                                                    
of the  state. The amendment  was offered with a  50 percent                                                                    
reduction  to   the  amount.  It  equaled   the  50  percent                                                                    
reduction    the    legislature     voted    on    regarding                                                                    
municipalities'  bond   debt  reimbursement.  It   was  very                                                                    
difficult to  tell the school  districts that the  state was                                                                    
only  going  to   provide  50  percent  of   the  bond  debt                                                                    
reimbursement. He  noted that the  state would  be providing                                                                    
100 percent  of the amount  to the 028 fund.  The reductions                                                                    
were equivalent.                                                                                                                
                                                                                                                                
1:47:15 PM                                                                                                                    
                                                                                                                                
Representative   Neuman  objected   to  the   amendment.  He                                                                    
commented that  a portion  of the  credits pertained  to the                                                                    
Cook Inlet  Recovery Act. The  program was effective  due to                                                                    
the  resulting information  about having  12 years  of known                                                                    
reserves in  Cook Inlet. The  credits assisted  companies in                                                                    
finding  additional oil.  He reported  that the  formula was                                                                    
based on the amount of oil  coming down the pipeline and oil                                                                    
prices. One  component gave the  proportion due  in statute.                                                                    
He  recalled  that  last  year  the  legislature  used  $430                                                                    
million left over from the  FY 15 budget. The state received                                                                    
$500  million of  appropriation authority  to pull  from the                                                                    
CBR for  oil and  gas related issues.  The state  thought it                                                                    
was headed into some gas  pipeline discussions and was aware                                                                    
that the oil  and gas tax credits existed. In  the spring at                                                                    
the  Legislative   Information  Office  in   Anchorage,  the                                                                    
committee  knew  there would  not  be  time to  address  the                                                                    
credits issue.  Members wanted to  make sure that  the state                                                                    
had the  money that  would be due.  The committee  used $430                                                                    
million out  of $500 million; the  rest went to the  oil and                                                                    
gas  fund  ($57 million)  for  the  gas pipeline  and  other                                                                    
related  issues.  He continued  that  the  $430 million  was                                                                    
vetoed by Governor  Walker in the prior  year, which brought                                                                    
up the  total debt  on the  credits to  over $1  billion. He                                                                    
believed the  amount of outstanding  tax credits was  a debt                                                                    
owed by  the State  of Alaska. He  was adamantly  opposed to                                                                    
the  amendment. He  believed the  state was  in its  current                                                                    
fiscal situation because the  government's primary source of                                                                    
revenue  came  from  oil.  He  spoke  to  the  necessity  of                                                                    
diversifying the  economy. He believed the  business climate                                                                    
of Alaska was due to  regulations. He thought certain policy                                                                    
decisions  discouraged investments,  such as  the one  being                                                                    
discussed. He thought  it was important to  send the message                                                                    
that  Alaska  was open  for  business.  He believed  it  was                                                                    
important for the state to  stand behind its obligations. He                                                                    
opined that the state  breaking its agreements with investor                                                                    
companies  did  not  help  create  jobs  in  the  state.  He                                                                    
reiterated his strong opposition to the amendment.                                                                              
                                                                                                                                
1:51:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Gara commented  that  the  amendment raised  the                                                                    
bigger issue of who should get  in line and the state having                                                                    
the  ability  to fund  the  things  it  needed to  fund.  He                                                                    
respected  the previous  speaker's comments  that the  state                                                                    
should  fund oil  and gas  tax credits.  He wondered  if oil                                                                    
companies should  come before children  or seniors  in need.                                                                    
Until there  was a fiscal  plan in place, people  would have                                                                    
to get in line. It was unusual  for the state to ask the oil                                                                    
and gas  industry to get  in line. He suggested  that almost                                                                    
everything was being cut. He  thought that if the tax credit                                                                    
system paid out  more than the state  received in production                                                                    
taxes, there would  be a problem. If the state  was going to                                                                    
start  funding things,  including  oil and  gas tax  credits                                                                    
that were  owed, the state needed  to come up with  a fiscal                                                                    
plan. He  was concerned about  how long the  recession would                                                                    
last.                                                                                                                           
                                                                                                                                
Co-Chair Foster  acknowledged Representative Saddler  in the                                                                    
audience.                                                                                                                       
                                                                                                                                
Representative   Thompson  viewed   the  amendment   as  job                                                                    
killing.   He   expressed   his  concerns   about   stifling                                                                    
investments to  get oil  in the line.  The tax  credits were                                                                    
given out to incentivize  investment. He recognized that the                                                                    
tax credits were  a large investment, but  the returns would                                                                    
be worth it in the future. He did not favor the amendment.                                                                      
                                                                                                                                
1:54:41 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  remarked  that  the  formula  was  a                                                                    
little different.  It was put  together when  the incentives                                                                    
went out  to the companies.  The legislature was  not asking                                                                    
for more  undesignated general funds  (UGF), which  had been                                                                    
done in  the past. During  the rough patches,  companies had                                                                    
come back  to the state in  the prior year asking  the state                                                                    
to make good on its  promises. The state's response was that                                                                    
there was a  formula in statute and to  expect anything over                                                                    
the formula  was the fault  of the companies. The  money was                                                                    
used to incentivize further  investment. She emphasized that                                                                    
oil investment was the reason  the state had the services it                                                                    
had. She  was concerned that  the legislature was  not going                                                                    
to  follow statute.  The  majority of  what  Alaska had  was                                                                    
because people believed in the State of Alaska.                                                                                 
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara,   Guttenberg,   Kawasaki,   Ortiz,   Foster,                                                                    
Seaton.                                                                                                                         
OPPOSED: Thompson, Tilton, Wilson, Grenn, Newman                                                                                
                                                                                                                                
The MOTION PASSED (6/5).                                                                                                        
                                                                                                                                
Amendment L H FND 1 was ADOPTED.                                                                                                
                                                                                                                                
1:58:22 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H FND 2 (copy on file):                                                                        
                                                                                                                                
     Fund Capitalization (no approps out)                                                                                       
    Regional Education Attendance Area School Fund 1222                                                                         
     L H FND 2 - Reduce deposit into the REAA Fund from                                                                         
     $40.64 million to $23.58 million                                                                                           
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.27, Wallace, 2-7-17.                                                                                        
                                                                                                                                
     The deposit into  the REAA Fund is reduced  by 42% from                                                                    
     $40,640.0 to  $23,579.4, the same  percentage reduction                                                                    
     that  is proposed  for  the  school debt  reimbursement                                                                    
     program.                                                                                                                   
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative  Wilson  did not  believe  it  was the  same.                                                                    
Although  the percentage  was the  same, the  impact to  the                                                                    
districts was  different. She elaborated that  what had been                                                                    
passed earlier caused boroughs to  have to pay more money to                                                                    
fulfill the  obligations of the  communities. She  wanted to                                                                    
clarify that  with a 42  percent reduction  certain upgrades                                                                    
would not  be met.  However, district communities  would not                                                                    
incur additional obligations. She asked if she was correct.                                                                     
                                                                                                                                
Co-Chair Seaton  responded in the affirmative.  The Regional                                                                    
Educational Attendance  Area (REAA) funds were  state funds.                                                                    
The   formula   was  set   to   balance   the  school   debt                                                                    
reimbursement with the REAA fund  deposit, which would allow                                                                    
the completion of the next  school on the list - Shishmaref.                                                                    
The renovation and addition cost  were estimated at a little                                                                    
over $16  million and would  leave approximately  $4 million                                                                    
in the fund.                                                                                                                    
                                                                                                                                
Representative Wilson asked how  many students were enrolled                                                                    
in  the school  and about  any  upgrades that  would not  be                                                                    
completed without the money being available.                                                                                    
                                                                                                                                
Co-Chair  Seaton did  not have  the details  on the  school.                                                                    
There was  a list of  schools, Shishmaref being at  the top.                                                                    
There was money in the  account to complete the project with                                                                    
$4 million left in the fund.                                                                                                    
                                                                                                                                
Representative Wilson MOVED to  ADOPT Amendment to Amendment                                                                    
L H FND 2 changing the amount to $40,640,000.                                                                                   
                                                                                                                                
Vice-Chair Gara OBJECTED for discussion.                                                                                        
                                                                                                                                
Representative Wilson  argued that  the money was  not going                                                                    
to be  paid back.  In Fairbanks,  a bond  was passed  in the                                                                    
previous year. The community was  paying back 100 percent of                                                                    
the  money. The  state would  be paying  100 percent  of the                                                                    
project. She did  not believe it was a  fair comparison. She                                                                    
supposed that if the legislature  was not going to allow the                                                                    
districts  to bond  then no  one else  should be  allowed to                                                                    
receive a percentage.                                                                                                           
                                                                                                                                
Co-Chair Seaton asked LFD to come to the table.                                                                                 
                                                                                                                                
2:03:52 PM                                                                                                                    
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
explained that  the amendment  was essentially  a conforming                                                                    
amendment. The  statutes required a certain  amount of money                                                                    
(determined  with  a long  and  complicated  formula) to  be                                                                    
deposited  into  the REAA  Fund.  The  formula included  the                                                                    
amount  of  debt  service reimbursement  that  was  paid  to                                                                    
municipalities.  He   continued  that   it  would   be  very                                                                    
difficult to reduce the amount  to zero because the case was                                                                    
affected not only  by the statutory guidelines  but was also                                                                    
associated  with the  Kasayulie case.  The case  stated that                                                                    
Alaska would  build five rural schools  and would contribute                                                                    
to the  REAA fund  in accordance  with what  the legislature                                                                    
chose to pay for debt  service. The amount was determined by                                                                    
the  reduction  and debt  service.  He  could not  say,  for                                                                    
certain,  that the  state would  be sued  if it  reduced the                                                                    
amount to zero, but the lawsuit could be reopened.                                                                              
                                                                                                                                
Vice-Chair Gara  asked if  he was  correct that  the state's                                                                    
funding of  rural schools was  based on the  state's funding                                                                    
of school debt reimbursement.                                                                                                   
                                                                                                                                
Mr. Teal responded affirmatively.                                                                                               
                                                                                                                                
Vice-Chair  Gara  clarified  that by  passing  the  previous                                                                    
amendment,  the state  would deposit  $17 million  less into                                                                    
the REAA Fund.                                                                                                                  
                                                                                                                                
Mr. Teal responded that he was correct.                                                                                         
                                                                                                                                
Vice-Chair  Gara asked  about  the ramifications  of a  full                                                                    
reduction.  He  understood  the effects  of  a  $23  million                                                                    
reduction.  He wanted  to  know the  consequences  of a  $40                                                                    
million reduction.                                                                                                              
                                                                                                                                
Mr.  Teal explained  that it  was  not to  fund anything  in                                                                    
particular.  It was  a fund  for the  construction of  rural                                                                    
schools and was done to  keep parody between urban and rural                                                                    
school  construction. The  urban schools  received the  debt                                                                    
service  reimbursement,   whereas,  rural  schools   had  no                                                                    
ability to  issue debt. Therefore,  the state paid  the full                                                                    
cost  of  construction  of rural  schools.  He  noted  three                                                                    
schools were in  line for funding. The  amount would provide                                                                    
sufficient funding for  one of the school and  portions of a                                                                    
second school.  The following year's funding  would continue                                                                    
to fund the schools currently in  line. The state had no way                                                                    
of knowing  what additional schools  would be placed  on the                                                                    
list in the future.                                                                                                             
                                                                                                                                
Co-Chair  Foster relayed  that  Shishmaref  was eligible  to                                                                    
receive $16.5 million. The second  school on the list was in                                                                    
the Lower Kuskokwim  area eligible for $44  million, and the                                                                    
third on the list was  another school in the Lower Kuskokwim                                                                    
area for  $31 million.  There were approximately  15 schools                                                                    
on the list.                                                                                                                    
                                                                                                                                
2:08:29 PM                                                                                                                    
                                                                                                                                
Vice-Chair Gara opposed the amendment.  He relayed that when                                                                    
he moved  to Alaska  he believed  he was  moving to  a great                                                                    
place. He  was aware  that there had  been people  in Alaska                                                                    
10,000 years  prior. In many  of the communities,  there was                                                                    
not  much of  a tax  base  or a  way to  build and  maintain                                                                    
schools. Under the state constitution,  Alaska had a unified                                                                    
school system and  an obligation to all  schools. He opposed                                                                    
taking  more money  away from  school districts  where there                                                                    
was  very little  tax base  to help  urban school  districts                                                                    
with  a  larger  tax  base.  He  opposed  the  amendment  to                                                                    
eliminate $23.5 million.                                                                                                        
                                                                                                                                
Representative  Wilson indicated  she  would be  withdrawing                                                                    
her  amendment to  the amendment.  However, she  asked about                                                                    
the  impact of  the sunset  clause  on the  amount of  money                                                                    
going towards schools. She thought  Mr. Teal was saying that                                                                    
the  statute was  based on  debt level.  She wondered  if it                                                                    
would go down  to zero if the state decided  not to fund the                                                                    
debt level for municipalities all together.                                                                                     
                                                                                                                                
Mr. Teal  responded that it  would, but it would  take about                                                                    
15 years. He elaborated that  school debt was usually issued                                                                    
for  a 20-year  period.  There was  a  5-year moratorium  in                                                                    
place, but  the state  continued to  make deposits  into the                                                                    
REAA  Fund. The  Regional Educational  Attendance Area  Fund                                                                    
was  not based  on  the urban  school that  was  built in  a                                                                    
certain year.  Rather, it  was based on  the amount  of debt                                                                    
service being  reimbursed. The  debt services  payment would                                                                    
continue over 15 years.                                                                                                         
                                                                                                                                
Representative  Wilson  emphasized  that it  would  take  20                                                                    
years or  30 years to reach  zero. It was based  on the debt                                                                    
rather than  when a school  was built. She remarked  that it                                                                    
was  interesting that  the committee  was talking  about not                                                                    
breaking  statute when  it had  broken it  previously during                                                                    
the meeting.                                                                                                                    
                                                                                                                                
Representative Wilson WITHDREW her  AMENDMENT to Amendment L                                                                    
H FND 2.                                                                                                                        
                                                                                                                                
Vice-Chair Gara asked if the amendment could be rolled.                                                                         
                                                                                                                                
2:12:21 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:14:29 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Foster brought the meeting to order.                                                                                   
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
Vice-Chair Gara  OBJECTED. He  suggested that  the amendment                                                                    
might  be appropriate;  he had  not  seen it  in the  online                                                                    
system. He might revisit it later.                                                                                              
                                                                                                                                
Vice-Chair Gara WITHDREW his OBJECTION.                                                                                         
                                                                                                                                
There being NO OBJECTION Amendment L H FND 2 was ADOPTED.                                                                       
                                                                                                                                
2:15:35 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:16:26 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^NON-AGENCY: FUND TRANSFER AMENDMENTS                                                                                         
                                                                                                                                
2:16:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster indicated the  committee would be addressing                                                                    
the fund transfer amendment packet.                                                                                             
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H XFR 1 (copy on file):                                                                        
                                                                                                                                
     OpSys DGF Transfers (non-add)                                                                                              
     Civil Legal Services Fund                                                                                                  
          H XFR 1 - FY18 capitalization of the Civil Legal                                                                      
          Services Fund                                                                                                         
                                                                                                                                
          Offered by Representative Seaton                                                                                      
          See 30-GH1855J.42, Wallace, 2-16-17.                                                                                  
                                                                                                                                
          This  amends  sec. 22  in  HB  57, version  J,  by                                                                    
          adding a  new subsection  to capitalize  the Civil                                                                    
          Legal Services  Fund with an  amount equal  to 50%                                                                    
          of  punitive damages  deposited  into the  general                                                                    
          fund during FY17 (per AS 09.17.020(j).                                                                                
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Neuman  asked if there  was a reason  for the                                                                    
amendment.                                                                                                                      
                                                                                                                                
Co-Chair  Seaton   responded  that  an  amount   was  to  be                                                                    
transferred  to capitalize  the Civil  Legal Services  Fund.                                                                    
Often the funds were variable  and every few years needed to                                                                    
be  pulled forward.  He furthered  that  when the  committee                                                                    
took up  the supplemental  bill he anticipated  an amendment                                                                    
to capitalize  the fund  with the  FY 14  to FY  16 punitive                                                                    
damages awards in the amount of approximately $10,000.                                                                          
                                                                                                                                
Representative   Neuman   asked   whether   the   fund   was                                                                    
underutilized or there were draws  on the fund that exceeded                                                                    
its balance.                                                                                                                    
                                                                                                                                
Co-Chair Seaton asked LFD to come forward.                                                                                      
                                                                                                                                
Mr. Teal relayed that the action  did not have to be carried                                                                    
out.  It was  a  fund  created ten  years  prior by  Senator                                                                    
McGuire. No  money was put  into the  fund until FY  12. All                                                                    
Civil penalties  per AS 09.17.020(j)  from FY 08  through FY                                                                    
11 were  scooped into the  fund in  FY 12. He  noted another                                                                    
provision that took FY 13  through FY 17 money and deposited                                                                    
it into  the fund.  The amount  of money  was 50  percent of                                                                    
punitive  damages  ranging  from  zero  to  a  few  thousand                                                                    
dollars per  year. It  had not been  viewed as  necessary to                                                                    
implement every  year. However, it was  something that could                                                                    
or should  go in  statute each year.  He explained  that the                                                                    
money  went  from the  general  fund  into the  Civil  Legal                                                                    
Services Fund,  which then made grants  for low-income legal                                                                    
services civil cases.                                                                                                           
                                                                                                                                
Representative  Neuman  wondered if  there  was  a need  for                                                                    
additional funds in the account.                                                                                                
                                                                                                                                
Mr.  Teal  answered  that  a   grant  of  $1,000  would  not                                                                    
necessarily make  a lot of  difference. However,  to someone                                                                    
that needed legal services, it  could make a big difference.                                                                    
He did not want to say anything definitively.                                                                                   
                                                                                                                                
2:21:43 PM                                                                                                                    
                                                                                                                                
Representative  Wilson asked  if Legal  Services was  funded                                                                    
through a general fund appropriation.                                                                                           
                                                                                                                                
Mr.  Teal responded  that the  state  funded Legal  Services                                                                    
from  the Office  of the  public Defender  to the  Office of                                                                    
Public Advocacy in many ways.  The amendment was a different                                                                    
proposal: It  was a way  to take punitive damages  and issue                                                                    
grants  to an  entity that  offered legal  services to  low-                                                                    
income people. He  could not recall the name  of the entity.                                                                    
He  continued that  they were  typically awarded  the grant.                                                                    
There were at least three ways Legal Services was funded.                                                                       
                                                                                                                                
Representative Wilson  commented that another fund  would be                                                                    
started because the  state did not have  enough. The general                                                                    
fund  money would  be taken  away from  somewhere else.  She                                                                    
thought the  state had enough  funds. She suggested  that if                                                                    
the state wanted to fund the  grants or the entity the state                                                                    
should just fund  it rather than creating  another fund. She                                                                    
was not in favor of starting another fund.                                                                                      
                                                                                                                                
Mr. Teal  clarified that  the amendment  was not  creating a                                                                    
new fund,  as the fund  was created several years  prior. It                                                                    
was the appropriation following the funding mechanism.                                                                          
                                                                                                                                
Vice-Chair Gara guaranteed there would  not be a huge amount                                                                    
of money  going into Alaska  Legal Services. The  state used                                                                    
to  fund Alaska  Legal  Services, civil  legal services  for                                                                    
people in  abusive relationships and other  civil cases. The                                                                    
state  used to  support  Alaska  Legal Services  Corporation                                                                    
substantially.  It barely  supported it  anymore. There  had                                                                    
been  attempts in  the past  to put  50 percent  of punitive                                                                    
damages into a  state fund that would go  to Legal Services.                                                                    
However, when lawyers  settle cases to avoid  the 50 percent                                                                    
rule, they  settled the cases  stating that all  the damages                                                                    
were  compensatory  rather  than   punitive  damages.  As  a                                                                    
result,  there was  no money  to  go to  Legal Services  and                                                                    
other entities. He supposed there would  have to be a way to                                                                    
fund Legal Services.                                                                                                            
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara, Grenn, Guttenberg, Ortiz, Seaton, Foster                                                                        
OPPOSED: Tilton, Wilson Neuman, Thompson                                                                                        
                                                                                                                                
The MOTION PASSED (6/4).                                                                                                        
                                                                                                                                
Amendment L H XFR 1 was ADOPTED.                                                                                                
                                                                                                                                
2:26:09 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H XFR 2 (copy on file):                                                                        
                                                                                                                                
     OpSys DGF Transfers (non-add)                                                                                              
     Oil and Hazardous Substance Release Prevention Account                                                                     
     H XFR 2 - Amend year and amount of surcharge deposited                                                                     
     into the oil and haz. waste prevention account                                                                             
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH188J55, Wallace, 2-18-17.                                                                                         
                                                                                                                                
     This  is a  Governor's  amendment to  sec. 22(c)(3)  to                                                                    
     base  the  deposit into  the  oil  and hazardous  waste                                                                    
     prevention  account  in  the oil  and  hazardous  waste                                                                    
     prevention and response fund  from the surcharge levied                                                                    
     under AS 43.40.005 on actual collections instead of                                                                        
     prospective estimates.                                                                                                     
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Wilson  suggested not transferring  the money                                                                    
at present  and utilizing  it for  UGF, since  the amendment                                                                    
reflected general  funds and the  state was short  of money.                                                                    
It  was her  understanding  that the  fund  was doing  quite                                                                    
well, and  it was  not necessary to  fulfill its  mission at                                                                    
the current time.                                                                                                               
                                                                                                                                
Co-Chair Seaton  informed members that the  amount was going                                                                    
to actual  collections instead of prospective  estimates. It                                                                    
reflected  a   realistic  dollar   deposit  instead   of  an                                                                    
estimate.                                                                                                                       
                                                                                                                                
Representative  Wilson remarked  that the  legislature could                                                                    
keep the money  if it wanted to. She  understood the payment                                                                    
was an exact amount. The  money could be put towards schools                                                                    
or other programs. The legislature  was not obligated to put                                                                    
the money into the fund. She asked if she was accurate.                                                                         
                                                                                                                                
Co-Chair Seaton relayed that the  surcharge was a per dollar                                                                    
surcharge  with  a  designated deposit  into  the  fund.  He                                                                    
thought LFD could give further clarification.                                                                                   
                                                                                                                                
Representative Wilson  did not  need to  hear from  LFD. She                                                                    
argued  that  the  amendment  was   no  different  from  the                                                                    
previous fund discussed for tax  credits. She suggested that                                                                    
during  the  current  meeting   the  committee  had  already                                                                    
established  that  the  legislature  could  do  anything  it                                                                    
wanted with  state money. She  reported that  $400,000 could                                                                    
be used  for an attorney discussed  by Representative Grenn.                                                                    
She  continued  that  the  money   could  go  towards  other                                                                    
programs  where TVEP  funding was  no longer  available. She                                                                    
understood the  money was collected based  on clean-up fees.                                                                    
She  continued to  provide examples  of money  set aside  in                                                                    
funds.  She thought  it would  be  better to  put the  money                                                                    
towards the state's deficit.                                                                                                    
                                                                                                                                
2:30:13 PM                                                                                                                    
                                                                                                                                
Representative Neuman wanted to hear  from LFD. He asked who                                                                    
the  beneficiary was  of the  $400,000. He  wondered if  the                                                                    
money went  to the Department of  Environmental Conservation                                                                    
(DEC). He  thought the  money was  funded with  1 cent  or 2                                                                    
cents  collected on  every barrel  of oil.  He was  confused                                                                    
about the fund source.                                                                                                          
                                                                                                                                
Mr.  Painter  answered that  the  money  went to  the  spill                                                                    
response fund,  which funded the  division of the  same name                                                                    
within DEC. The  fund was solely funded by  the surcharge on                                                                    
oil until 2  years prior when the legislature  passed a bill                                                                    
that  placed a  95-cent tax  on motor  fuels. The  amendment                                                                    
helped  to  create  a  time  lag  so  that  there  would  be                                                                    
certainty  in  the  amount.  The  fund  went  to  the  Spill                                                                    
Prevention and Response Division in DEC.                                                                                        
                                                                                                                                
Representative Neuman  believed the answer was  yes that the                                                                    
funds went to DEC.                                                                                                              
                                                                                                                                
Representative Kawasaki  was unclear  why it looked  like it                                                                    
was UGF. He  thought that if the funds were  meant for spill                                                                    
prevention and response they should be designated as DGF.                                                                       
                                                                                                                                
Mr. Painter  relayed that, by  the constitution,  taxes were                                                                    
UGF.  In other  words, the  money came  in as  UGF and  then                                                                    
deposited into a fund, which then was spent as DGF.                                                                             
                                                                                                                                
Representative Wilson MAINTAINED  her OBJECTION. She thought                                                                    
the $400,000 could be spent elsewhere.                                                                                          
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Foster, Seaton                                                                     
OPPOSED: Wilson, Ortiz, Neuman, Thompson, Tilton                                                                                
                                                                                                                                
The MOTION PASSED (6/5).                                                                                                        
                                                                                                                                
2:33:27 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:45:40 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^NON-AGENCY: STATE RETIREMENT PAYMENTS AMENDMENTS                                                                             
                                                                                                                                
2:45:40 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAR 1 and L H SAR 2                                                                          
(copies on file):                                                                                                               
                                                                                                                                
     PERS State Assistance                                                                                                      
     All Other PERS                                                                                                             
     H SAR 1 - Eliminate use of the Alaska                                                                                      
     Higher   Education  Investment   Fund  for   retirement                                                                    
     assistance and replace it with UGF                                                                                         
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.15, Wallace, 1-31-17.                                                                                       
                                                                                                                                
     The use of the Alaska  Higher Education Investment Fund                                                                    
     in  the  FY17  budget  for  retirement  assistance  was                                                                    
     expected  to   be  a  one-time  item.   This  amendment                                                                    
     eliminates  the  use  of the  Alaska  Higher  Education                                                                    
     Investment   Fund  and   replaces  it   with  UGF   for                                                                    
     retirement assistance in FY18.                                                                                             
                                                                                                                                
                                                                                                                                
     TRS State Assistance                                                                                                       
     School District TRS                                                                                                        
     H SAR 2 - Eliminate use of the Alaska                                                                                      
     Higher   Education  Investment   Fund  for   retirement                                                                    
     assistance and replace it with UGF                                                                                         
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-HG1855J.16, Wallace, 1-31-17                                                                                        
                                                                                                                                
     The use of the Alaska  Higher Education Investment Fund                                                                    
     in  the  FY17  budget  for  retirement  assistance  was                                                                    
     expected  to   be  a  one-time  item.   This  amendment                                                                    
     eliminates  the  use  of the  Alaska  Higher  Education                                                                    
     Investment   Fund  and   replaces  it   with  UGF   for                                                                    
     retirement assistance in FY18.                                                                                             
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair  Seaton   read  the  amendments  (see   above).  He                                                                    
indicated  that  the  first   amendment  affected  PERS  and                                                                    
replaced  $37,852,900 appropriated  from  the Alaska  Higher                                                                    
Education  Investment  Fund.  The second  affected  TRS  and                                                                    
replaced  $20,434,100 appropriated  from  the Alaska  Higher                                                                    
Education Fund.                                                                                                                 
                                                                                                                                
Representative Neuman asked if there was an objection.                                                                          
                                                                                                                                
Co-Chair Foster confirmed there was an objection.                                                                               
                                                                                                                                
Representative Wilson  asked how  much was currently  in the                                                                    
fund. She  also inquired  about how much  money was  made in                                                                    
interest.                                                                                                                       
                                                                                                                                
Co-Chair Seaton  responded that the total  UGF appropriation                                                                    
was $111,757,000.                                                                                                               
                                                                                                                                
Representative  Wilson asked  if she  was correct  in saying                                                                    
that there was $111,757,000  million in the Higher Education                                                                    
Fund prior to the amendment.                                                                                                    
                                                                                                                                
Co-Chair    Seaton   requested    that   LFD    respond   to                                                                    
Representative Wilson's question.                                                                                               
                                                                                                                                
Mr.  Teal  informed the  committee  that  the FY  17  ending                                                                    
balance was $349 million.                                                                                                       
                                                                                                                                
Representative Wilson asked if  the amount took into account                                                                    
what  was used  in  the Department  of  Education and  Early                                                                    
Development (DEED).  The legislature  used funds  to replace                                                                    
general funds.                                                                                                                  
                                                                                                                                
Mr.  Teal answered  that he  had provided  the FY  17 ending                                                                    
balance. The  FY 18 appropriations  from the  fund included;                                                                    
about $12  million for scholarships; $6  million for grants;                                                                    
$6  million  for  museums,   libraries,  OWL  programs,  and                                                                    
various  other programs;  and $58  million  for the  current                                                                    
appropriation  being discussed  [PERS/TRS State  Assistance]                                                                    
for a total of about $82 million.                                                                                               
                                                                                                                                
Representative  Wilson  wondered  about an  interest  amount                                                                    
made  in the  previous year.  She  noted that  the fund  had                                                                    
$400,000,000 before the legislature dipped into the fund.                                                                       
                                                                                                                                
Mr. Teal relayed  that interest earnings on the  fund were a                                                                    
little less  than $3 million in  FY 16. In FY  17, they were                                                                    
expected  to  be about  $23  million.  Interests varied.  He                                                                    
added that the interest earnings  for FY 18 was projected to                                                                    
be about $19 million.                                                                                                           
                                                                                                                                
2:51:04 PM                                                                                                                    
                                                                                                                                
Representative   Wilson   wondered    about   the   interest                                                                    
projections if  the budget passed  in its current  form. She                                                                    
asked about the  basis of the projection.  Mr. Teal answered                                                                    
that the starting balance for  FY 18 was about $350 million.                                                                    
At the end of FY 18  the balance would be approximately $286                                                                    
million  -  an  anticipated   $82  million  of  expenditures                                                                    
including the $58 million and  about $19 million in interest                                                                    
earnings.                                                                                                                       
                                                                                                                                
Vice-Chair   Gara    asked   whether   the    numbers   were                                                                    
approximately  the same  as the  amount appropriated  out of                                                                    
the Higher Education Fund to  pay for the retirement debt in                                                                    
FY 17.                                                                                                                          
                                                                                                                                
Mr.  Teal  responded  that  they   were  not  the  same.  He                                                                    
explained that  in FY  17 the  state paid  approximately $90                                                                    
million. In the  previous year, the money used  was based on                                                                    
projections  provided  by  the  state's  actuaries.  It  was                                                                    
determined that the FY 18  contributions would fall by about                                                                    
$90 million which was the reason  it was presented as a one-                                                                    
time  use of  money. In  FY 18,  the legislature  planned to                                                                    
return  to  using  general   fund  monies.  The  projections                                                                    
changed. The  state did not  get a reduction of  $90 million                                                                    
as  the legislature  had  been  told. In  June,  just a  few                                                                    
months  after the  projection  was  received, the  valuation                                                                    
came out  showing that the  reduction was about  $30 million                                                                    
rather  than  $90  million.  Therefore,  about  $60  million                                                                    
remained in the  budget from the Higher  Education Fund. The                                                                    
appropriation was  expected to be a  one-time appropriation.                                                                    
Under the circumstances, with several  parties trying to cut                                                                    
the budget, there was an  unexpected $60 million increase in                                                                    
UGF spending.  The governor turned in  the budget indicating                                                                    
he  did  not  want  to  absorb  the  reduction,  instead  he                                                                    
suggested continuing to use the  Higher Education Fund in FY                                                                    
18.  He thought  the  chairman stated  that the  legislature                                                                    
needed to true-up the circumstance  even though it could not                                                                    
continue this  course in the  future. It was better  to true                                                                    
it  up presently.  However,  he  thought it  was  up to  the                                                                    
chairman to explain the situation.                                                                                              
                                                                                                                                
Vice-Chair Gara  supported the  amendment. He  remarked that                                                                    
for some things the legislature  was using UGF, and for some                                                                    
expenditures that  were normally  UGF it  was using  DGF. He                                                                    
thought  it  would  be  best to  combine  all  general  fund                                                                    
spending to  compare FY 17 to  FY 18. In his  view, it would                                                                    
keep  people from  making false  comparisons between  budget                                                                    
years. He  opined that  the expenditures  should go  back to                                                                    
UGF. In the  meantime, he thought the  legislature should be                                                                    
comparing  all general  expenditures,  whether  UGF or  DGF,                                                                    
from one year to the next.  He thought it would be closer to                                                                    
transparent budgeting.                                                                                                          
                                                                                                                                
2:55:56 PM                                                                                                                    
                                                                                                                                
Representative Neuman  asked about  the year-end  balance in                                                                    
the previous year.                                                                                                              
                                                                                                                                
Mr. Teal responded, "About $350 million."                                                                                       
                                                                                                                                
Representative  Neuman wondered  how the  fund performed  in                                                                    
the current year.                                                                                                               
                                                                                                                                
Mr.  Teal  replied that  in  FY  17  he expected  about  $23                                                                    
million in investment returns.                                                                                                  
                                                                                                                                
Representative  Neuman  remarked  that the  fund  containing                                                                    
$360  million  was  performing  well  and  had  produced  an                                                                    
additional $23 million.  The state had $19  million from the                                                                    
$11  million requested  for the  Higher  Education Fund.  He                                                                    
thought it  would be better  to use  funds from some  of the                                                                    
funds that performed  well. He wondered why  the state would                                                                    
take  money out  of  the CBR  when it  had  funds that  were                                                                    
performing  well, meeting  their constitutional  obligations                                                                    
with  funds left  over. He  thought it  would be  prudent to                                                                    
increase the  balance of the  funds with the  leftover funds                                                                    
or use  them to pay  the state's debts instead  of borrowing                                                                    
additional  money from  the  CBR. He  thought  it made  more                                                                    
sense. The  fund had been doing  okay, as it could  hold its                                                                    
own and  added to  revenue that could  be put  towards state                                                                    
services.  He mentioned  the time  value of  the dollar.  He                                                                    
provided a hypothetical scenario about re-roofing his home.                                                                     
                                                                                                                                
2:58:26 PM                                                                                                                    
                                                                                                                                
Representative  Ortiz  asked  when  and  why  the  fund  was                                                                    
started.                                                                                                                        
                                                                                                                                
Mr. Teal responded that the  fund was a priority of Governor                                                                    
Sean Parnell. He  had worked on the  legislation for several                                                                    
years with it  eventually passing in 2014 or  2015. The fund                                                                    
was a $400  million endowment established to  pay for grants                                                                    
and scholarships for Alaska high  school graduates to attend                                                                    
universities.  The  fund  was  expected  to  produce  larger                                                                    
payouts than it  had. He reported that a $30  million or $40                                                                    
million  return was  expected per  year. The  fund had  only                                                                    
produced about a  $20 million in payouts  annually. The $400                                                                    
million balance  was more  than required  to make  the grant                                                                    
and  scholarship   payments.  He   suggested  that   if  the                                                                    
legislature was  to fund retirement  funding in  the current                                                                    
year it would drop the  balance to about $280 million, which                                                                    
was sufficient to  spin off investment revenue  of about $18                                                                    
million  per   year;  roughly  equal   to  the   grants  and                                                                    
scholarships  combined. However,  the  legislature was  also                                                                    
using about  $6 million per  year from  the fund to  pay for                                                                    
other  educational   items.  He   reiterated  that   if  the                                                                    
legislature was to use the  fund in the current year, grants                                                                    
and scholarships could  be funded on an  endowment basis. He                                                                    
reported  that   there  was  a  small   negative  cash  flow                                                                    
expected. He suggested that the  legislature could reduce $6                                                                    
million  or backfill  it with  UGF. The  program could  fund                                                                    
itself  if   the  committee  accepted  the   amendment.  The                                                                    
governor submitted  the budget  using these  funds. However,                                                                    
the  governor's Office  of Management  and Budget  (OMB) was                                                                    
clear that it  would have to be the last  year for using the                                                                    
funding,   as  there   would  not   be  investment   returns                                                                    
sufficient to  pay for even  the scholarships and  grants if                                                                    
the amount was used in FY 19.                                                                                                   
                                                                                                                                
Co-Chair   Seaton   added   that  the   Alaska   Performance                                                                    
Scholarship Fund was one of  the basic initiatives to give a                                                                    
draw  through middle  school and  high school  to have  kids                                                                    
take higher education classes and  more math classes. It was                                                                    
one of  the few  very successful  programs that  had changed                                                                    
student  behavior  in  high schools  across  the  state.  He                                                                    
expressed his  concern about continuing to  deplete the fund                                                                    
for non-designated uses and sending  the message to students                                                                    
that there might not be funds  available in 4 or 5 years. He                                                                    
thought  it was  important for  students to  understand that                                                                    
the  legislature was  fully committed  to making  sure there                                                                    
were  scholarships available  to students  who took  certain                                                                    
actions   and   performed   well.  He   relayed   that   the                                                                    
scholarships  could be  used for  certification programs  in                                                                    
workforce  development.   He  thought  the  fund   was  very                                                                    
valuable to maintain long-term and  did not want to send the                                                                    
wrong  message to  students.  He wanted  to  keep UGF  draws                                                                    
down, so  the budget looked  better. He thought  the payment                                                                    
for the  retirement fund  should come  from UGF  rather than                                                                    
the  education fund,  as it  would be  more truthful  in the                                                                    
budgeting  process. By  using UGF  funds  to pay  retirement                                                                    
obligations  a strong  Alaska  Performance Scholarship  Fund                                                                    
would be maintained as well.                                                                                                    
                                                                                                                                
3:04:48 PM                                                                                                                    
                                                                                                                                
Representative  Neuman asked  if the  Higher Education  Fund                                                                    
was used  to fund anything  other than higher  education. He                                                                    
specifically asked if  it had been used to  fund Online with                                                                    
Libraries (OWL).                                                                                                                
                                                                                                                                
Co-Chair  Seaton  replied  that   there  were  a  few  other                                                                    
education  programs  paid for  with  the  fund but  not  for                                                                    
funding  PERS  and  TRS  or  anything  that  was  a  general                                                                    
government expense.                                                                                                             
                                                                                                                                
Representative  Neuman  thought   he  heard  an  affirmative                                                                    
response from the  Co-Chair. He asked Co-Chair  Seaton if he                                                                    
was saying it  was okay to use the Higher  Education Fund to                                                                    
fund  OWL and  other  grant  programs in  the  amount of  $6                                                                    
million but not  okay to use excess funds to  reduce the UGF                                                                    
draw. He asked if he heard incorrectly.                                                                                         
                                                                                                                                
Representative  Ortiz   referred  to   his  last   years  of                                                                    
teaching. He remembered the  AK Performance Scholarship Fund                                                                    
being a powerful program for  his students. He supported the                                                                    
amendment.                                                                                                                      
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
Representative  Neuman  clarified   that  members  would  be                                                                    
voting on both amendments.                                                                                                      
                                                                                                                                
Co-Chair Foster responded in the positive.                                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Grenn, Guttenberg, Kawasaki,  Ortiz, Gara, Seaton,                                                                    
Foster                                                                                                                          
OPPOSED: Neuman, Tilton, Wilson                                                                                                 
                                                                                                                                
The MOTION PASSED (7/3).                                                                                                        
                                                                                                                                
Amendment L H SAR 1 and Amendment L H SAR 2 were ADOPTED.                                                                       
                                                                                                                                
3:08:28 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAR 3 (copy on file):                                                                        
                                                                                                                                
    Unlicensed Vessel Personnel Annuity Retirement Plan                                                                         
     H SAR 3 - Reduce estimated cost for the Unlicensed                                                                         
     Vessel Personnel Annuity Retirement Plan                                                                                   
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.19, Wallace, 1-31-17.                                                                                       
                                                                                                                                
     This  new  language  reduces  the   $25.0  cost  to  an                                                                    
     estimate  of zero.  The  Department of  Administration,                                                                    
     Division of  Retirement and  Benefits is  searching for                                                                    
     eligible participants.                                                                                                     
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative  Wilson  asked  about having  to  search  for                                                                    
someone.                                                                                                                        
                                                                                                                                
Co-Chair  Seaton responded  that state  had been  depositing                                                                    
$25,000 into  a retirement  fund account. Currently,  no one                                                                    
was  still eligible  for the  benefit. It  was a  retirement                                                                    
plan that would be taken to zero.                                                                                               
                                                                                                                                
Representative Wilson asked how much was in the fund.                                                                           
                                                                                                                                
Co-Chair Seaton  answered that  there was  zero in  the fund                                                                    
presently. The  amendment would put  $25,000 in the  fund in                                                                    
case someone was found eligible.                                                                                                
                                                                                                                                
Representative Wilson  asked if it was  a subtraction rather                                                                    
than an addition.  She wanted to verify that  nothing was in                                                                    
the fund.                                                                                                                       
                                                                                                                                
Co-Chair Foster invited LFD to the table.                                                                                       
                                                                                                                                
Mr. Teal  informed the  committee that it  was a  very small                                                                    
retirement   program,   which   functioned   like   military                                                                    
retirement.  There  was  no balance  in  the  fund.  Rather,                                                                    
benefits were paid when due.  The governor requested $25,000                                                                    
be  placed in  the  fund in  case  the administration  found                                                                    
someone  eligible  for  the  small  payment.  The  amendment                                                                    
clarified that  the money did  not need to  be appropriated.                                                                    
If  the administration  found an  eligible party,  the funds                                                                    
would be available.  He continued that the  $25,000 that was                                                                    
appropriated did not need to  be appropriated. The amendment                                                                    
reversed the appropriation.                                                                                                     
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION Amendment L H SAR 3 was ADOPTED.                                                                       
                                                                                                                                
3:12:32 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:15:43 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^NON-AGENCY: SPECIAL APPROPRIATIONS AMENDMENTS                                                                                
                                                                                                                                
3:15:43 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster indicated the  committee would be addressing                                                                    
the special appropriations amendment packet.                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 1 (copy on file):                                                                        
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 1 - Add intent language regarding supplemental                                                                     
     requests                                                                                                                   
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.1, Wallace, 1-30-17.                                                                                        
     This amends sec. 4 in HB57, version J.                                                                                     
                                                                                                                                
     The amendment expands the section title (from "cost of                                                                     
     job reclassifications") and restores typical intent                                                                        
    language relating to supplemental budget requests.                                                                          
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative   Neuman   asked   why  the   amendment   was                                                                    
necessary.                                                                                                                      
                                                                                                                                
Mr. Teal answered  that the committee did not  have to offer                                                                    
the amendment.  He elaborated  that the  amendment contained                                                                    
intent  language that  had been  in the  budget for  several                                                                    
years.  It  conveyed  to  the   executive  branch  what  the                                                                    
legislature  expected  the   administration  to  spend.  The                                                                    
legislature did  not expect the administration  to come back                                                                    
with  a   supplemental  request  unless  there   were  truly                                                                    
unforeseen  circumstances.   It  was  intent   language  and                                                                    
unenforceable. It directed the  administration to manage the                                                                    
money appropriated by the legislature.                                                                                          
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION Amendment H SAP 1 was ADOPTED.                                                                         
                                                                                                                                
3:18:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT H SAP 2 (copy on file):                                                                          
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 2 - The  FY18 AHFC Dividend (net of debt issued                                                                    
     on behalf of  the State) is deposited  into the General                                                                    
     Fund                                                                                                                       
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.2, Wallace, 1-30-17.                                                                                        
     This  amendment changes  the lead-in  language of  sec.                                                                    
     6(b) and (c) in HB 57, version J.                                                                                          
                                                                                                                                
     The   amendment   effectively  deactivates   the   AHFC                                                                    
     dividend fund  code (1139, which is  classified as UGF)                                                                    
     so the net dividend is  spent as UGF (code 1004). There                                                                    
     is  no   impact  on  UGF   spending  and  no   loss  of                                                                    
     information caused by this amendment.                                                                                      
                                                                                                                                
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Kawasaki read the  related text. He asked LFD                                                                    
if any information would be lost.                                                                                               
                                                                                                                                
Mr. Teal  responded that the  bill stated the amount  of the                                                                    
dividend. The  state had  records of  the dividends  paid by                                                                    
Alaska  Housing   Finance  Corporation  (AHFC)   and  Alaska                                                                    
Industrial  Development  and  Export Authority  (AIDEA).  He                                                                    
continued  that  the amount  of  money  that was  spent  was                                                                    
somewhat  confusing  because,  in  the case  of  AHFC,  they                                                                    
retained some of their dividend  for debt they had issued on                                                                    
behalf  of the  state.  The remaining  funds were  typically                                                                    
spent in the  capital budget with the  dividend codes noted.                                                                    
There  was also  a provision  that looped  back around  that                                                                    
stated whatever  was not  spent in  the capital  budget went                                                                    
somewhere else.  He explained that  a dividend code  was not                                                                    
necessary because it  was a UGF code. It  made no difference                                                                    
which  code was  used  because  they were  both  in the  UGF                                                                    
group.  There was  no loss  of information.  All that  would                                                                    
likely happen  would be  that the  capital budget  would use                                                                    
the UGF code rather than the AFHC or AIDEA dividend code.                                                                       
                                                                                                                                
Representative Wilson WITHDREW his OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION Amendment L H SAP 2 was ADOPTED.                                                                       
                                                                                                                                
3:21:40 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT H SAP 3 (copy on file):                                                                          
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 3 - The FY18 AIDEA Dividend is increased and                                                                       
     is deposited into the General Fund                                                                                         
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J56, Wallace, 2-20-17.                                                                                        
     This amends sec. 8 in HB 57, version J.                                                                                    
                                                                                                                                
     This amendment  increases the  estimated amount  of the                                                                    
     AIDEA  dividend from  $9.5 million  to $12,883,000  and                                                                    
     also deactivates  the AIDEA  dividend fund  code (1140,                                                                    
     which is  classified as UGF)  so the dividend  is spent                                                                    
     as UGF (code 1004). There  is no impact on UGF spending                                                                    
     and no loss of information caused by this amendment.                                                                       
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment description.                                                                                 
                                                                                                                                
Representative Neuman  asked if the AIDEA  Board decided the                                                                    
amount of the dividend.                                                                                                         
                                                                                                                                
Co-Chair Seaton redirected the question to LFD.                                                                                 
                                                                                                                                
Mr. Teal responded  that they did. He relayed  that the AHFC                                                                    
board, the AIDEA board, and  the student loan board all paid                                                                    
dividends in 2018. The AIDEA  and AHFC boards determined the                                                                    
amount  based on  a statutory  formula tied  to profit.  The                                                                    
dividend  changed   substantially  from   year-to-year.  The                                                                    
dividends  had been  relatively low  in recent  years. There                                                                    
was  a  time  when  the  AHFC  dividend  was  $100  million.                                                                    
Presently,  it  was  less  than   $20  million.  The  boards                                                                    
determined the dividend amounts.                                                                                                
                                                                                                                                
Representative Neuman wondered about  the discrepancy in the                                                                    
payout numbers for AIDEA.                                                                                                       
                                                                                                                                
Mr.  Teal responded  that there  was a  governor's amendment                                                                    
truing  up  the  amount.  The  amendment  did  not  set  the                                                                    
dividend in anyway. It simply  stated that whatever dividend                                                                    
AIDEA declared would be deposited  straight into the general                                                                    
fund. It would  then be spent as code 1004,  the generic UGF                                                                    
code, instead of the code  for dividends, which did not need                                                                    
to be tracked.                                                                                                                  
                                                                                                                                
Representative Neuman did  not have a problem  with the fund                                                                    
code. He  thought he had  heard two different  answers about                                                                    
the board  deciding how much  money they could  afford after                                                                    
expenses.  He wondered  if the  board determined  the amount                                                                    
was $9.5 million or $12.8 million.                                                                                              
                                                                                                                                
Mr.  Teal   was  unsure  the   reason  for   the  governor's                                                                    
amendment.  The board  decided that  the dividend  was $12.8                                                                    
million. There  was a  bill in which  AIDEA had  requested a                                                                    
change in the  way they computed their  dividends. There was                                                                    
a  zero-impact  fiscal note  associated  with  it. A  statue                                                                    
change was required to change  the way it was calculated. He                                                                    
suggested Representative  Neuman direct the question  to Pat                                                                    
Pitney from OMB.                                                                                                                
                                                                                                                                
3:26:21 PM                                                                                                                    
                                                                                                                                
Representative Neuman thought if  there was legislation, the                                                                    
amendment would have  to specify that it was  subject to the                                                                    
passing of  legislation. He  did not  see such  language. He                                                                    
asked if  the amendment  was an increase  or whether  it was                                                                    
addressing authority pending a piece of legislation.                                                                            
                                                                                                                                
Mr.  Teal   reported  that  it   was  not   legislation.  No                                                                    
legislation  was  needed.   The  appropriation  bill  simply                                                                    
stated that  whatever dividend was  declared by  AIDEA would                                                                    
be  deposited into  the general  fund. It  was an  estimated                                                                    
amount. Technically,  it did  not matter  if the  amount was                                                                    
$9.5  million  or  $12.8 million.  Either  amount  would  be                                                                    
deposited. The  amendment tried to  get the right  amount of                                                                    
money in the estimate. The amount was just an estimate.                                                                         
                                                                                                                                
Representative Neuman  asked for clarification.  He relayed,                                                                    
"This is  an estimate  on the appropriation  authority based                                                                    
on the dividend that is approved by AIDEA's board."                                                                             
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION Amendment H SAP 3 was ADOPTED.                                                                         
                                                                                                                                
3:28:07 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT H SAP 4 (copy on file):                                                                          
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 4 - Appropriations involving the Permanent                                                                         
     Fund, the ERA, the PEF, the Dividend Fund and the                                                                          
     general fund                                                                                                               
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J70, Wallace, 2-21-17.                                                                                        
                                                                                                                                
     See supporting documentation offering an explanation                                                                       
     of appropriations related to the permanent fund                                                                            
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton  read the amendment (see  above). He invited                                                                    
Mr. Teal to walk through the amendment.                                                                                         
                                                                                                                                
Representative  Wilson thought  the amendment  was really  a                                                                    
bill. She  thought most  of the amendment  was already  in a                                                                    
bill. She  queried the reason  it was being included  in the                                                                    
budget.                                                                                                                         
                                                                                                                                
Co-Chair  Seaton responded  that  the language  corresponded                                                                    
with  the bill  currently in  finance. The  budget bill  was                                                                    
proceeding  at  its  own  speed   and  the  other  bill  was                                                                    
proceeding  at its  own speed.  The committee  would proceed                                                                    
with both.                                                                                                                      
                                                                                                                                
Representative Wilson  asked if it  was like the  motor fuel                                                                    
surcharge  in   that  the   legislature  would   be  putting                                                                    
something  in  the budget  anticipating  that  a bill  would                                                                    
pass.                                                                                                                           
                                                                                                                                
Co-Chair  Seaton answered  that  the  committee was  putting                                                                    
direction lines of where deposits were made.                                                                                    
                                                                                                                                
3:30:01 PM                                                                                                                    
                                                                                                                                
Representative  Wilson wondered  whether the  language would                                                                    
change in  the budget  bill if any  other related  bills did                                                                    
not pass.                                                                                                                       
                                                                                                                                
Co-Chair Seaton asked her to repeat her question.                                                                               
                                                                                                                                
Representative  Wilson  asked  if  the  amendment  would  be                                                                    
impacted if the amendment passed and the bill did not.                                                                          
                                                                                                                                
Co-Chair Seaton responded, "No."                                                                                                
                                                                                                                                
Mr.  Teal   directed  the   committee's  attention   to  the                                                                    
supporting documents for  ASAP 4, page 1 of  5. The document                                                                    
provided an  explanation of the  amendment, which  had seven                                                                    
parts.  He pointed  out  a "typo"  on page  2,  line 1.  The                                                                    
amount shown  was $1.69 million  and should have  been $1.69                                                                    
billion. Another  typo on page  1, line 2 was  $2.41 million                                                                    
and should have  been $2.41 billion. He also  pointed to the                                                                    
amount $1.62 million listed under  Part 5, which should have                                                                    
been  $1.62  billion.  He suggested  looking  at  the  Legal                                                                    
Services  version  of the  amendment  on  page  4 or  5.  He                                                                    
advised  members   to  follow  the  chart   that  began  the                                                                    
explanation. He  pointed to Part  1 of the  amendment, which                                                                    
reduced the  royalty payments that  currently went  into the                                                                    
Permanent  Fund  -  25  percent   minimum  mandated  by  the                                                                    
constitution.  There  was  a  law that  put  in  another  25                                                                    
percent  of  royalties  from new  fields  (fields  put  into                                                                    
production after  1980) into  the Permanent  Fund. Currently                                                                    
the amount  was about $55  million per year. The  25 percent                                                                    
coming from  the legacy  fields was  about $244  million per                                                                    
year. The  amendment would leave  money in the  general fund                                                                    
rather than placing  it in the Permanent fund  in the amount                                                                    
of $55 million  in the current year. The amount  would go up                                                                    
to about  $70 million based  on the revenue  projection over                                                                    
the  following 6  years. The  second part  of the  amendment                                                                    
replaced  the $55  million that  would stay  in the  general                                                                    
fund  with  annual  inflation  proofing  from  the  earnings                                                                    
reserve  account (ERA).  The inflation  proofing calculation                                                                    
was .25 percent  of the average 5-year  balance. It amounted                                                                    
to about  $120 million  in the current  year. He  pointed to                                                                    
page 3 of the amendment,  which showed a chart that provided                                                                    
the average  balance of the  Permanent Fund,  an explanation                                                                    
of  the computations,  and the  actual  amended amounts.  He                                                                    
explained  that when  he stated  $1.69  billion, the  actual                                                                    
carried out to more decimal places.  He added that in Part 1                                                                    
and  2,  the  principal  of  the  Permanent  Fund  got  more                                                                    
inflation proofing than it did presently.                                                                                       
                                                                                                                                
3:35:23 PM                                                                                                                    
                                                                                                                                
Representative Wilson asked about  inflation proofing in the                                                                    
past 5  years. She asked if  the amount was lower  than $120                                                                    
million for inflation proofing.                                                                                                 
                                                                                                                                
Mr. Teal responded, "Typically not."  He elaborated that the                                                                    
full inflation  proofing, based on the  Consumer Price Index                                                                    
(CPI) and the  current balance had been,  on occasion, about                                                                    
$900 million. The legislature did  not inflation proof in FY                                                                    
16 or  FY 17. There was  no CPI based inflation  proofing in                                                                    
the  bill  for  FY  18.  The  amendment  was  the  inflation                                                                    
proofing for  FY 18. He reported  that the bill in  front of                                                                    
members  had   additional  inflation  proofing   that  would                                                                    
unlikely take effect in FY 19. It would come later.                                                                             
                                                                                                                                
Representative Wilson  suggested that  when Mr.  Teal stated                                                                    
it  was more  than the  legislature had  been doing,  it was                                                                    
because they had  been doing nothing. She asked  if it would                                                                    
go  back  to 5  years  and  the  dividend.  Part of  it  was                                                                    
inflation  proofing.  She  suggested  that  the  methodology                                                                    
generating $120 million was very  different than the one set                                                                    
at approximately $900 million.                                                                                                  
                                                                                                                                
Mr. Teal responded, "Absolutely."  He elaborated that in the                                                                    
past the  Permanent Fund was  fully inflation  proofed. Some                                                                    
people  thought  it  had been  over-inflation  proofed.  The                                                                    
current  CPI or  anticipated inflation  rate was  about 2.25                                                                    
percent.  The  amendment  used  .25  percent  or  one-eighth                                                                    
inflation proofing.                                                                                                             
                                                                                                                                
                                                                                                                                
Mr. Teal explained  that Part 3 was an FY  17 deposit to the                                                                    
Public Education  Fund. The amount was  determined by taking                                                                    
the  balances  between FY  11  and  FY  15, a  5.25  percent                                                                    
payout, and reducing that amount  by the dividends that were                                                                    
paid out  leaving a $1.69  billion to $1.7  billion deposit.                                                                    
In the governor's  bill, that money would go  to the general                                                                    
fund.  In the  current  bill,  the amount  would  go to  the                                                                    
Public Education Fund.                                                                                                          
                                                                                                                                
Representative  Wilson asked  to confirm  both were  general                                                                    
fund monies, whether deposited into  the general fund or the                                                                    
Public Education Fund.                                                                                                          
                                                                                                                                
Mr.  Teal  replied,  "That's  correct."  He  noted  that  by                                                                    
putting  it in  the Public  Education Fund  Part 4  would be                                                                    
allowed. Part  4 deleted  the FY 18  deposit of  about $1.25                                                                    
billion  that,  in  the governor's  bill,  flowed  into  the                                                                    
Public  Education   Fund  to  fund   K-12  in  FY   18.  The                                                                    
legislature would not  need to do so because  there would be                                                                    
$1.7  billion  in  the  account  sufficient  to  fund  pupil                                                                    
transportation and  the foundation formula for  FY 18. There                                                                    
would be a balance of about $400 million in the fund.                                                                           
                                                                                                                                
Mr. Teal  discussed the FY  18 payout  in Part 5,  which was                                                                    
based  on a  5-year average.  A  payout of  5 percent  would                                                                    
provide $1.6  billion from the  ERA to the general  fund. He                                                                    
relayed that  the state's deficit was  roughly $2.9 billion.                                                                    
Between  the payout  of $1.6  billion and  $1.3 billion  not                                                                    
placed into  the Public  Education Fund,  the FY  18 deficit                                                                    
would be  eliminated. It  also depended  on oil  prices, and                                                                    
additions  to and  subtractions from  the budget.  The state                                                                    
would be close to balancing the budget in FY 18.                                                                                
                                                                                                                                
3:40:35 PM                                                                                                                    
                                                                                                                                
Representative   Wilson   asked   for   clarification.   She                                                                    
suggested  that the  state would  be taking  a $1.6  billion                                                                    
payout. She wondered if a  second amount would be taken from                                                                    
the ERA.                                                                                                                        
                                                                                                                                
Mr. Teal  replied in the  affirmative. He detailed  that the                                                                    
legislature  would  be  taking  a  payout  for  FY  17.  The                                                                    
governor  implemented a  portion of  the bill  that did  not                                                                    
pass  in the  previous year  by vetoing  dividends. He  then                                                                    
came back in the FY  18 bill and effectively implemented the                                                                    
other  major  piece  of  the  prior  year's  Permanent  Fund                                                                    
Protection Act, which was to pay  money out in FY 17. It did                                                                    
not happen.  Presently, the governor was  implementing it in                                                                    
his  budget with  a supplemental  payout.  He recapped  that                                                                    
there  was a  FY 17  payout  of $1.7  billion and  an FY  18                                                                    
payout  of  $1.6 billion.  The  FY  18  payout went  to  the                                                                    
general fund rather than the Public Education Fund.                                                                             
                                                                                                                                
Representative Wilson  spoke to the $1.6  billion that would                                                                    
go  to the  Public  Education Fund.  She  surmised that  the                                                                    
legislature was forward funding  education. She asked if the                                                                    
second $1.6 would go into the general fund.                                                                                     
                                                                                                                                
Mr. Teal replied in the affirmative.                                                                                            
                                                                                                                                
Representative  Wilson  believed  that the  state  had  $3.2                                                                    
billion  coming  out  of  the  ERA. She  asked  if  she  was                                                                    
correct.                                                                                                                        
                                                                                                                                
Mr. Teal answered in the affirmative.                                                                                           
                                                                                                                                
Representative  Wilson  asked  about   the  impact  of  $3.2                                                                    
billion being  taken out of  the ERA.  She thought it  was a                                                                    
substantial amount of money to take out in one year.                                                                            
                                                                                                                                
3:43:20 PM                                                                                                                    
                                                                                                                                
Representative   Thompson  was   trying  to   determine  the                                                                    
numbers.  According to  his addition,  it looked  like there                                                                    
would be  a $4.2 billion  draw from  the ERA in  the current                                                                    
year. He wondered if he was accurate.                                                                                           
                                                                                                                                
Mr.   Teal  answered   that  inflation   proofing  was   not                                                                    
considered a  draw - it  was a  transfer within a  fund. The                                                                    
payout from the ERA was  $1.7 billion plus $1.6 billion. The                                                                    
dividend  was another  $790 million.  Adding  all the  items                                                                    
equaled over  $4 billion.  The amount that  would go  to the                                                                    
general fund would  be $3.3 billion. It depended  on what to                                                                    
include or exclude from the calculation.                                                                                        
                                                                                                                                
Co-Chair Seaton clarified that the $1.7  was a draw in FY 17                                                                    
and deposited  in the education fund.  It was not a  draw in                                                                    
FY 18. He asked if he was correct.                                                                                              
                                                                                                                                
Mr. Teal replied in the affirmative.                                                                                            
                                                                                                                                
Representative  Neuman  did not  know  how  to look  at  the                                                                    
amendment,   besides  observing   the   changes  were   very                                                                    
substantive. He had not heard  anything about the use of the                                                                    
ERA to fund any of the  items yet. He believed the amendment                                                                    
represented a huge  policy change. He asked about  a draw on                                                                    
the CBR.                                                                                                                        
                                                                                                                                
Mr. Teal  replied that  it depended on  oil prices  and what                                                                    
actions the  legislature decided to  take on the  budget. He                                                                    
reviewed the rough  estimates. He relayed a  deficit of $2.9                                                                    
billion  being  filled with  a  $1.6  billion payout  and  a                                                                    
deletion  of $1.3  billion FY  18 would  lead to  a balanced                                                                    
budget. A balanced budget would not  require a CBR draw or a                                                                    
super majority vote associated with it.                                                                                         
                                                                                                                                
Representative Neuman  thought that avoiding  the discussion                                                                    
might  be a  big  reason  for the  amendment.  He heard  the                                                                    
committee   talking  about   clarity  in   the  budget.   He                                                                    
guaranteed  the  public  did not  know  anything  about  the                                                                    
amendment. He did  not support the process.  He thought that                                                                    
there would  be a funding  source already allocated.  He did                                                                    
not believe it was good policy.                                                                                                 
                                                                                                                                
3:48:08 PM                                                                                                                    
                                                                                                                                
Representative  Ortiz  asked  if  the  impact  of  the  $1.7                                                                    
billion for FY  17 lessened the draw for FY  18 to below the                                                                    
$4 billion mark.                                                                                                                
                                                                                                                                
Mr. Teal replied, "That's correct."                                                                                             
                                                                                                                                
Vice-Chair Gara asked  about remaining funds in  the CBR and                                                                    
Statutory Budget  Reserve (SBR).  He inquired what  would be                                                                    
left in savings  at the end of  FY 18 if the  state paid for                                                                    
its projected deficit out of the SBR and the CBR.                                                                               
                                                                                                                                
Mr.  Teal  replied  there  would   be  $2.5  billion  or  so                                                                    
remaining at the end of FY  18, which could possibly get the                                                                    
state through FY 19 at which time the CBR would be gone.                                                                        
                                                                                                                                
Vice-Chair  Gara  asked if  the  savings  accounts would  be                                                                    
empty by FY 19.                                                                                                                 
                                                                                                                                
Mr.  Teal replied  the  CBR would  be  empty. The  Statutory                                                                    
Budget Reserve  balance would depend  on oil prices  and the                                                                    
budget. The amount was about  $300 million. It would provide                                                                    
some   headroom   in   terms   of   budget   deficits.   The                                                                    
Constitutional Budget  Reserve and Statutory  Budget Reserve                                                                    
were  referred  to as  the  reserve  accounts. The  earnings                                                                    
reserve account was  not a true reserve account  but was far                                                                    
larger at $10 billion.                                                                                                          
                                                                                                                                
Vice-Chair Gara  wondered what would  be left at the  end of                                                                    
FY 19  if the legislature  funded the budget with  those two                                                                    
savings accounts.                                                                                                               
                                                                                                                                
Mr.  Teal  answered  that  he  did  not  recall  the  number                                                                    
specifically.  The balance  would depend  on which  bill was                                                                    
used - whether the legislature drew  from the ERA or the CBR                                                                    
to fill the  deficit. He suggested that there  was about $10                                                                    
billion  in earnings  reserves that  continually replenished                                                                    
itself by  about $3  billion annually.  It was  difficult to                                                                    
provide a figure without looking at his model.                                                                                  
                                                                                                                                
Vice-Chair  Gara asked  that  assuming  the state  continued                                                                    
just drawing [Representative Wilson interjected].                                                                               
                                                                                                                                
Representative  Wilson  called for  a  point  of order.  She                                                                    
thought the discussion was going way beyond the amendment.                                                                      
                                                                                                                                
Vice-Chair Gara responded  that he was trying  to figure out                                                                    
the  impacts of  drawing  on  the CBR  and  the  SBR as  the                                                                    
legislature had  done without the  amendment [Representative                                                                    
Wilson interrupted Vice-Chair Gara].                                                                                            
                                                                                                                                
Representative Wilson  countered the conversation  was about                                                                    
the current amendment and its effects on the budget.                                                                            
                                                                                                                                
Vice-Chair Gara believed he was  entitled to understand what                                                                    
would happen  if the committee  did not adopt  the amendment                                                                    
and spent from the remaining budget reserves.                                                                                   
                                                                                                                                
3:52:48 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:53:15 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair  Gara  restated  his  question to  Mr.  Teal.  He                                                                    
suggested that if the state  continued to fund its budget by                                                                    
using  the CBR  and  SBR  the state  would  have about  $2.7                                                                    
billion  left  at  the  end of  the  following  fiscal  year                                                                    
[Representative Wilson interjected].                                                                                            
                                                                                                                                
Representative Wilson requested an "At Ease."                                                                                   
                                                                                                                                
3:53:40 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:54:16 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Gara  commented that  the state  would be  out of                                                                    
savings  in two  years if  the  legislature did  not make  a                                                                    
change the way it did things.                                                                                                   
                                                                                                                                
Co-Chair   Seaton   referred   to  a   question   posed   by                                                                    
Representative Neuman  about the  structure of the  bill and                                                                    
the distribution. He  pointed out that the  governor had the                                                                    
exact structure  in his version  of the budget. There  was a                                                                    
5.25 percent draw to be  deposited directly into the general                                                                    
fund.  One of  the problems  was that  the governor  did not                                                                    
subtract the  dividends paid  in 2017.  The amendment  had a                                                                    
draw  of 5.25  percent  and subtracted  the actual  dividend                                                                    
payment that was  made which provided $1.7  billion into the                                                                    
Public  Education  Fund.  Although depositing  $1.7  Billion                                                                    
into the Public Education Fund,  a general fund account, the                                                                    
reduction  made in  the amendment  was  sounder than  double                                                                    
pulling the amount of the dividend for FY 17 from the ERA.                                                                      
                                                                                                                                
Representative Thompson  wanted to return to  the subject of                                                                    
inflation proofing. He was  uncomfortable with the inflation                                                                    
proofing percentage  of 2.5 percent.  In reviewing  the 2014                                                                    
actual value of the Permanent  Fund compared to its value in                                                                    
2016 after  not having inflation  proofed for two  years, it                                                                    
had  gone  from  $45  billion  down  to  $44.4  billion.  He                                                                    
furthered that  2.5 percent was  not an adequate  amount for                                                                    
inflation proofing.  He thought  it made the  Permanent Fund                                                                    
into  a   semi-permanent  fund.   He  emphasized   that  the                                                                    
legislature  would  be  cheating Alaska's  children  in  the                                                                    
future.  He wanted  to ensure  the growth  of the  fund. The                                                                    
value would  not grow without  inflation proofing  the fund.                                                                    
Inflation  would  otherwise  eat  up  the  fund's  spendable                                                                    
value.  He referred  to legislators  with  children. He  was                                                                    
concerned  for   his  son's   future.  He   highlighted  the                                                                    
importance  of   keeping  up  with  inflation   by  properly                                                                    
inflation  proofing  the  Permanent  Fund  to  maintain  its                                                                    
growth. Currently,  the legislature was taking  money out of                                                                    
the ERA, which would  potentially decrease future dividends.                                                                    
The  legislature was  taking  $4.2 billion  out  of the  ERA                                                                    
presently  and  would reduce  the  Percent  of Market  Value                                                                    
(POMV)  in the  future. He  asked  Mr. Teal  to address  his                                                                    
statements.                                                                                                                     
                                                                                                                                
Mr.   Teal   responded   that  inflation   proofing   simply                                                                    
transferred  money  from  the   ERA  to  the  principle.  He                                                                    
continued that the Permanent  Fund's [Corporation's] view of                                                                    
safety was  having the money  in the principle of  the fund.                                                                    
The job  of the board  was to  protect the fund.  Mr. Teal's                                                                    
job was  different. He was  trying to protect  the treasury,                                                                    
which to him meant  that it was not a bad  idea to leave the                                                                    
money in  the ERA.  If the  money was in  the corpus  of the                                                                    
fund, it could not be spent.  He was concerned the ERA would                                                                    
be  gone,  the payout  to  the  general  fund would  not  be                                                                    
available because it  was in the corpus, and  there would be                                                                    
no other reserves  available. He would rather  see the funds                                                                    
left  in  the ERA.  The  corpus  and  the  ERA made  up  the                                                                    
Permanent  Fund.   He  indicated  that  whether   an  actual                                                                    
inflation  proofing  transfer  was   made  mattered  in  the                                                                    
political  sense  and  spending-wise.  It was  a  matter  of                                                                    
deciding whether  the money  should be  in the  principle of                                                                    
the  fund  and unavailable  for  spending,  or available  by                                                                    
having it in the  ERA as a safety to the  treasury. It was a                                                                    
political and philosophical question.                                                                                           
                                                                                                                                
4:00:47 PM                                                                                                                    
                                                                                                                                
Representative Neuman asked if the  ERA was available to use                                                                    
for expenditures. Mr. Teal responded  in the affirmative. He                                                                    
specified  that a  simple majority  vote of  the legislature                                                                    
was necessary.                                                                                                                  
                                                                                                                                
Representative  Neuman  asked  if   there  was  about  $10.5                                                                    
billion in reserves. Mr. Teal replied, "That's correct."                                                                        
                                                                                                                                
Representative  Neuman asked  if there  was $3.5  billion in                                                                    
the CBR. Mr. Teal responded positively.                                                                                         
                                                                                                                                
Representative  Neuman suggested  that  there  was over  $14                                                                    
billion in reserves  presently between the CBR  and the ERA.                                                                    
He opined that the state was  not in crisis, as its deficits                                                                    
were running $3 billion and  the legislature had the ability                                                                    
to use  the ERA  for appropriations.  He suggested  that the                                                                    
amendment made  significant changes to how  the state funded                                                                    
its budget.  He thought  it was inaccurate  to say  that the                                                                    
state would run  out of money in the  following year because                                                                    
it  did not  have money  in reserves.  The legislature  knew                                                                    
that  the  ERA  could  be   spent.  He  continued  that  the                                                                    
complexity  of the  amendment and  the fund  source changes,                                                                    
without the  opportunity to weigh  in on the  process, would                                                                    
cause a  huge backlash. He suggested  that it was a  ploy to                                                                    
make it  so the  Majority would not  have to  negotiate with                                                                    
the  Minority  in  the  House.   He  adamantly  opposed  the                                                                    
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Seaton  relayed that the committee  had already had                                                                    
several  presentations   including  economic  presentations,                                                                    
fiscal   analysis,  POMV   calculation  presentations,   and                                                                    
several others.  He was sorry Representative  Neuman had not                                                                    
been present  for the presentations.  However, he  felt that                                                                    
the issues had been broadly  discussed in the committee. The                                                                    
amendment came  after public  testimony on  issues involving                                                                    
POMV distributions. It  was not as if the  committee had not                                                                    
been dealing with  the issue from the start  of session. The                                                                    
amendment was  strictly in  the budgetary  context not  in a                                                                    
separate  ongoing law.  If the  amendment  was adopted,  the                                                                    
public  would   have  an  opportunity  to   comment  on  the                                                                    
following   Thursday,   Friday,   and  Saturday.   All   the                                                                    
supporting documents could be found  online. He did not want                                                                    
the  statement left  hanging  that the  issue  had not  been                                                                    
discussed in committee.                                                                                                         
                                                                                                                                
4:05:33 PM                                                                                                                    
                                                                                                                                
Mr.  Teal explained  item 6,  payment of  dividends, on  the                                                                    
supporting documentation. In the  appropriation bill, it did                                                                    
not mention  precisely how the  amount was computed  but was                                                                    
based on market  value and a percentage  payout. Instead, it                                                                    
was a generic $794  million appropriated to dividends, which                                                                    
corresponded to  the 30  percent split of  a 5  percent POMV                                                                    
payout.                                                                                                                         
                                                                                                                                
Co-Chair Seaton clarified  that it was 33  percent. Mr. Teal                                                                    
agreed. In  the appropriation  bill, it stated  $794 million                                                                    
was appropriated for dividends from  the ERA to the dividend                                                                    
fund.                                                                                                                           
                                                                                                                                
Mr. Teal  continued that  in Part  7 it  stated that  it was                                                                    
deleted, unlike  the governor's bill that  appropriated some                                                                    
royalty  proceeds to  the dividend.  The dividends  would be                                                                    
comprised of  only the  appropriations from  the ERA  to the                                                                    
dividend fund.                                                                                                                  
                                                                                                                                
Vice-Chair Gara  asked if  it was  accurate that  instead of                                                                    
last year's  dividend in  the amount  of $1020,  the current                                                                    
provision would  allow for  a dividend  of about  $1150. Mr.                                                                    
Teal replied in the affirmative.                                                                                                
                                                                                                                                
Representative  Wilson wanted  to  bring Ms.  Rodell to  the                                                                    
table for questions regarding the impacts of a draw.                                                                            
                                                                                                                                
4:07:50 PM                                                                                                                    
                                                                                                                                
ANGELA  RODELL, EXECUTIVE  DIRECTOR,  ALASKA PERMANENT  FUND                                                                    
CORPORATION, responded that $120  million going from the ERA                                                                    
to the corpus only required  an accounting entry. There were                                                                    
no  changes  to  the   investment  strategy  regarding  that                                                                    
portion.  She continued  that about  $4.09 billion  would be                                                                    
drawn.  The   Permanent  Fund  Corporation  (PFC)   had  the                                                                    
capacity   to  create   the  liquidity   and  to   make  the                                                                    
adjustments  for that  type of  draw. The  corporation would                                                                    
not adjust  any of its long-term  investment strategies. The                                                                    
corporation  would   start  to   plan  for   liquidity.  The                                                                    
corporation would work with the  Department of Revenue (DOR)                                                                    
and  the  Division  of  Finance  within  the  Department  of                                                                    
Administration  (DOA) as  to  the timing  of  when the  full                                                                    
$4.09 million would  be needed. Generally, there  was a cash                                                                    
management plan  in place as  to how  it would roll  out. It                                                                    
was unlikely that one check on  July 1st would be needed. It                                                                    
was more likely there would be  a series of transfers to the                                                                    
state general fund for cash  purposes, which would allow the                                                                    
corporation to manage the liquidity more effectively.                                                                           
                                                                                                                                
Representative  Wilson asked  if the  state would  take $1.6                                                                    
billion out  and place  it into  the Public  Education Fund.                                                                    
She  asked  if it  would  be  done immediately.  Ms.  Rodell                                                                    
responded that  it was possible  that the  reimbursement for                                                                    
FY 17,  $1.7 billion, would  be done first, which  would not                                                                    
be  a problem.  It  would  be similar  to  when  PFC made  a                                                                    
dividend  transfer. The  transfer to  the dividend  fund was                                                                    
made in August.  The corporation started planning  it out in                                                                    
conjunction  with DOR  as to  how it  would take  place. She                                                                    
continued that the following $1.6  billion for UGF for FY 18                                                                    
might  have  more  flexibility   with  a  longer  period  to                                                                    
transfer the funds.                                                                                                             
                                                                                                                                
Representative Wilson asked which  fund made more money: the                                                                    
ERA  or the  CBR.  Ms.  Rodell explained  that  the CBR  was                                                                    
restricted  on the  type and  duration  of investments.  The                                                                    
Earnings Reserve Account had a higher return than the CBR.                                                                      
                                                                                                                                
Representative Wilson was aware  that the $120.7 million for                                                                    
inflation  proofing was  just a  fund  source change  except                                                                    
that  it protected  the  fund  in the  long  run unless  the                                                                    
realized earnings came out depleting  the fund. She wondered                                                                    
about  the impact  of  lowering the  amount  from over  $900                                                                    
million to $120 million.                                                                                                        
                                                                                                                                
Ms. Rodell responded that it  would not have the same impact                                                                    
as  if  the statutory  formula  for  inflation proofing  was                                                                    
being funded  in its entirety.  She clarified that  the 2016                                                                    
amount that  was zeroed out  was estimated to be  about $900                                                                    
million  based on  an inflation  rate of  2.25 percent.  The                                                                    
actual inflation  rate and the  amount that would  have gone                                                                    
in, had the language  and appropriation remained, would have                                                                    
been $47 million because inflation  was flat. Currently, for                                                                    
FY 17 the inflation-proofing amount  would be just over $450                                                                    
million. The rate  was at about 1.6 percent  to 1.7 percent.                                                                    
Historically, inflation moved around  from high inflation to                                                                    
low inflation. She thought the  $120 million recognized that                                                                    
the statutory formula was still  in place and that there was                                                                    
at least some appropriation towards the formula.                                                                                
                                                                                                                                
Representative Wilson commented that it  was a huge thing to                                                                    
expect  people   to  understand.  She  suggested   that  the                                                                    
committee  would be  hearing 2-minute  testimonies from  the                                                                    
public on Thursday, Friday, and  Saturday on the entirety of                                                                    
the  bill including  the  current  amendment. The  amendment                                                                    
would take  $1.7 billion from  the ERA  and put it  into the                                                                    
Public  Education Fund  and another  $1.6  billion would  be                                                                    
placed  into  the general  fund.  She  thought another  $400                                                                    
would be withdraw but was  unclear of its use. The amendment                                                                    
would also  set the dividend  at $1150  for 1 year  taking a                                                                    
total  of $4  million  out of  the fund.  There  had been  a                                                                    
similar piece  of legislation introduced  a couple  of years                                                                    
prior. However,  she remembered a  group of  people opposing                                                                    
the legislation  wanting to put the  issue to a vote  of the                                                                    
people. She  was trying  to figure out  what had  changed in                                                                    
two years. She  also did not understand  why the legislature                                                                    
would  take from  the  highest earning  pool  of funds.  She                                                                    
suggested taking out  only what was needed. She  did not see                                                                    
what  revenue would  be lost  by transferring  money into  a                                                                    
fund that did  not make as much money. There  was no way she                                                                    
could support the  bill. It was not fair to  the public. She                                                                    
hoped that people  were taking good notes. She  asked if any                                                                    
of  the other  bills would  be  needed if  the transfer  was                                                                    
made. The  only difference she  could see was  the amendment                                                                    
would only apply for one year.  She thought the ERA would be                                                                    
placed in jeopardy.                                                                                                             
                                                                                                                                
4:18:18 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton  referred to the $794  million for dividends                                                                    
for FY 18. He wondered  when the funds were transferred from                                                                    
the  corporation. Ms.  Rodell  responded  that the  dividend                                                                    
requirement  was typically  moved  in August  in advance  of                                                                    
September. The payout  came out of the dividend  fund in the                                                                    
first week of October.                                                                                                          
                                                                                                                                
Co-Chair Seaton  asked if she  would anticipate  any changes                                                                    
with the adoption of the  amendment. Ms. Rodell indicated it                                                                    
would not change.                                                                                                               
                                                                                                                                
Representative  Thompson  asked  Co-Chair Seaton  about  the                                                                    
removal  of the  draw limit.  He squired  how volatility  of                                                                    
revenues would  be addressed if  the state suddenly  were to                                                                    
bring in large oil revenues. He  asked if the annual draw on                                                                    
the ERA  would be reduced.  Co-Chair Seaton stated  that the                                                                    
amendment  only applied  to FY  17 and  FY 18.  He explained                                                                    
that the  draw of $1.7 billion  applied to FY 17.  The other                                                                    
draw would  apply to FY 18.  The first would be  drawn in FY                                                                    
17 and  the second would be  drawn in FY 18  rather than one                                                                    
draw at one time.                                                                                                               
                                                                                                                                
Mr.  Teal wanted  to address  concerns about  cash flow.  He                                                                    
explained that  $1.7 billion would  be paid from the  ERA on                                                                    
June 30,  2017. In August,  the dividends would be  paid out                                                                    
from the ERA. During the  year, the other $1.6 billion would                                                                    
be borrowed  from the CBR  on a short-term  basis throughout                                                                    
the  year.   The  Permanent  Fund  Corporation   would  make                                                                    
payments throughout the  year to repay money to  the CBR. He                                                                    
clarified  that the  CBR would  be  used to  ensure that  PF                                                                    
investment decisions  were affected. He suggested  that if a                                                                    
draw was taken all at once in  FY 18 the PFC might be forced                                                                    
to sell investments at an  inopportune time. It provided PFC                                                                    
a full year to repay $1.6 billion.                                                                                              
                                                                                                                                
Mr. Teal addressed  Representative Thompson's question about                                                                    
the  volatility of  oil  revenue. The  current  bill was  an                                                                    
appropriation.  However, the  bill  affecting the  PF had  a                                                                    
revenue  limit that  would reduce  the  draw. Such  language                                                                    
could be added  to the appropriation bill. It  was not added                                                                    
to keep  things as  simple as possible.  Under HB  115 there                                                                    
might not  be a $1.6 billion  payout in FY 18  if oil prices                                                                    
were over $70 per barrel - the POMV draw would be reduced.                                                                      
                                                                                                                                
Representative Tilton  was very  concerned with  the ability                                                                    
of the  public to  understand the  amendment. She  was aware                                                                    
that the amendment  was posted on Basis on  the previous day                                                                    
and that there was an opportunity  for people to look at it.                                                                    
The committee had  had the opportunity to  look at modeling.                                                                    
Even with  that opportunity,  she thought the  amendment was                                                                    
very  involved   and  difficult  to  follow.   She  was  not                                                                    
comfortable supporting it.                                                                                                      
                                                                                                                                
4:24:20 PM                                                                                                                    
                                                                                                                                
Representative Neuman  remarked that he was  uncertain about                                                                    
the legality of the intent  language. The amendment would be                                                                    
setting the  value of the PFD  using a POMV. He  wondered if                                                                    
substantive changes  could be added  that was  essentially a                                                                    
piece of  legislation as an  amendment in a budget  bill. He                                                                    
wanted to  see a  legal opinion on  the issue.  He suggested                                                                    
that several members had asked about the process.                                                                               
                                                                                                                                
Co-Chair  Foster thought  the committee  might need  to talk                                                                    
with Legislative Legal Services.                                                                                                
                                                                                                                                
Mr. Teal  referred to  page 4  of the  supporting documents,                                                                    
which was the Legislative  Legal Services amendment that had                                                                    
been  prepared. It  did  not mention  the  term POMV,  count                                                                    
years, or  indicate a percent.  Instead, it stated  that the                                                                    
sum of "X"  was appropriated. It did  not change substantive                                                                    
law.                                                                                                                            
                                                                                                                                
Representative  Neuman read  from page  1 of  the supporting                                                                    
documents:                                                                                                                      
                                                                                                                                
     Part 2  of this  amendment adds  a new  subsection that                                                                    
     appropriates  $120.27  million  (.25%  of  the  average                                                                    
     five-year market value of the  permanent fund) from the                                                                    
     earnings  reserve   account  to  inflation   proof  the                                                                    
     permanent   fund.   In  terms   of   inflation-proofing                                                                    
     permanent  fund  principal, this  annual  appropriation                                                                    
     more  than offsets  the impact  of redirecting  royalty                                                                    
     revenue from the permanent fund to the general fund as                                                                     
     is done in part 1 of this amendment.                                                                                       
                                                                                                                                
Representative  Neuman  did  not  feel he  had  received  an                                                                    
answer to  his question. Mr.  Teal responded that  there was                                                                    
an  explanation  included  in the  description  of  how  the                                                                    
number was  derived. The bill  did not mention  5.25 percent                                                                    
and  .25 percent.  It only  stated that  the sum  of $120.27                                                                    
billion  was appropriated  from  the ERA  to the  principle.                                                                    
There was  no mention of  how the amount was  calculated. He                                                                    
clarified that the information regarding  the POMV, the rate                                                                    
that was applied, and how  the market value was computed was                                                                    
only information, not part of the appropriation bill.                                                                           
                                                                                                                                
Representative  Neuman interjected  that in  the explanation                                                                    
of  the  amendment  it  clearly stated  the  intent  of  the                                                                    
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Foster  suggested that the alternative  would be to                                                                    
get someone  from Legislative Legal Services  to respond. He                                                                    
conveyed that Megan Wallace would be online shortly.                                                                            
                                                                                                                                
4:28:42 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
4:43:55 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
                                                                                                                                
Co-Chair  Foster indicated  that Meagan  Wallace was  online                                                                    
from Legislative Legal to answer questions.                                                                                     
                                                                                                                                
MEGAN  WALLACE, ATTORNEY,  LEGISLATIVE  LEGAL SERVICES  (via                                                                    
teleconference), asked that the question be repeated.                                                                           
                                                                                                                                
Representative Neuman  restated his question  concerning the                                                                    
legality of  the substantive changes  in the  amendment. Ms.                                                                    
Wallace  responded that  the proposed  appropriation in  the                                                                    
amendment (J.7) from the ERA  to the various funds including                                                                    
the  Public  Education  Fund,  the  general  fund,  and  the                                                                    
dividend fund,  did not present a  consignment clause issue,                                                                    
in in  her opinion.  She continued to  explain that  the ERA                                                                    
was always  available for appropriation by  the legislature.                                                                    
She  relayed  that  from  the Hickel  vs.  Cooper  case  the                                                                    
Supreme  Court  stated  that  the   ERA  was  available  for                                                                    
appropriation  to the  legislature.  There were  substantive                                                                    
provisions in  Title 37 and  Title 37.13, which  stated that                                                                    
the ERA  was to be  used for specific purposes.  The state's                                                                    
prohibition against  dedicated funds meant  that essentially                                                                    
those   substantive  provisions   were  always   subject  to                                                                    
appropriation.   Therefore,  if   the  legislature   or  the                                                                    
committee decided they wanted  to transfer the funds outside                                                                    
of the ERA  to the other funds mentioned, as  long as it was                                                                    
for a  public purpose, there  was no legal  prohibition from                                                                    
the  legislature  doing  so.  She  reiterated  that  in  her                                                                    
opinion, the amendment did not  prevent a consignment clause                                                                    
issue.                                                                                                                          
                                                                                                                                
4:47:35 PM                                                                                                                    
                                                                                                                                
Representative Neuman asked  about forward funding education                                                                    
by an  additional year. Ms. Wallace  reported having forward                                                                    
funded education  in prior  years from  the general  fund or                                                                    
other funds. The money in  the Public Education Fund did not                                                                    
lapse.  The  substantive   provision  governing  the  Public                                                                    
Education Fund  dictated how the  funds could be  spent. She                                                                    
did not see  any legal issue with depositing  the money from                                                                    
the ERA  into the Public  Education Fund  so long as  it was                                                                    
spent in accordance with the provisions in AS.14.17.300.                                                                        
                                                                                                                                
Representative Neuman was unfamiliar  with the provisions in                                                                    
statute.  Ms.  Wallace  clarified  she  had  referenced  the                                                                    
statute  that  governs  the   Public  Education  Fund  which                                                                    
dictated that the money in  the Public Education Fund was to                                                                    
be   spent   on   state  aide   for   public   schools   and                                                                    
transportation.                                                                                                                 
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Guttenberg, Kawasaki, Ortiz,  Gara, Grenn, Foster,                                                                    
Seaton                                                                                                                          
OPPOSED: Neuman, Thompson, Tilton, Wilson                                                                                       
                                                                                                                                
The MOTION PASSED (7/4).                                                                                                        
                                                                                                                                
Amendment L H SAP 4 was ADOPTED.                                                                                                
                                                                                                                                
4:50:06 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 5:                                                                                       
                                                                                                                                
     Language Amendments                                                                                                        
     L H  SAP 5 -  Increase the  amount that may  be scooped                                                                    
     from  lapsing balances  to the  Group  Health and  Life                                                                    
     Benefit Fund                                                                                                               
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.21, Wallace, 1-31-17.                                                                                       
     This amends sec. 9(d) in HB 57, version J.                                                                                 
                                                                                                                                
     The  Governor's budget  requested  up to  a $5  million                                                                    
     unobligated  balance  in  the  Group  Health  and  Life                                                                    
     Benefits Fund after  scooping lapsing appropriations at                                                                    
     the end of FY18.                                                                                                           
                                                                                                                                
     This  amendment  increases  the  potential  unobligated                                                                    
     balance to $10 million.  The Governor requested an FY17                                                                    
     deposit  of $20  million. The  legislature appropriated                                                                    
     $7.5  million. The  fund pays  health  claim costs  for                                                                    
     state  employees  and has  a  balance  that is  low  by                                                                    
     historical standards.                                                                                                      
                                                                                                                                
     The fund  pays about  $130 million in  claims annually.                                                                    
     This amendment provides roughly one month of reserves.                                                                     
                                                                                                                                
     Using lapsing balances to fill  the fund avoids general                                                                    
     fund appropriations and stabilizes contribution rates.                                                                     
                                                                                                                                
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative  Neuman understood  the  state  did not  have                                                                    
enough funding to cover the  same item in the previous year.                                                                    
He thought  there were  left over funds.  He wondered  if he                                                                    
was accurate.                                                                                                                   
                                                                                                                                
Co-Chair Seaton deferred to OMB.                                                                                                
                                                                                                                                
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF THE  GOVERNOR, reported that in  the previous year                                                                    
the administration had requested  a $15 million amendment to                                                                    
cover  FY  17  because  the reserve  balance  was  low.  The                                                                    
administration  had presented  its  request in  2 ways.  The                                                                    
first was  a cash deposit  into the reserve fund  or funding                                                                    
for a  rate increase. Half of  it was funded in  the reserve                                                                    
fund.  The other  half, the  general fund  portion, was  not                                                                    
funded. In  May of  the prior  year, the  administration had                                                                    
communicated   that  without   the   remaining  funding   it                                                                    
anticipated   a  supplemental   request.  Subsequently,   it                                                                    
submitted a supplemental  request for FY 17  because the low                                                                    
reserve balance in the health  fund. In conjunction with the                                                                    
rate  increase  and  the supplemental  request,  they  would                                                                    
allow the  administration to backfill the  reserve. It would                                                                    
also allow  the department to moderate  any future increases                                                                    
by using a lapse balance.                                                                                                       
                                                                                                                                
Representative  Neuman  recalled  the  discussion  from  the                                                                    
previous year. He  reported that there had  been an increase                                                                    
in  the cost  of insurance.  Some members  thought that  the                                                                    
increase  in insurance  costs  should be  passed  on to  the                                                                    
insurance recipients rather than  the state. The increase to                                                                    
the  reserve  fund would  be  used  to  cover the  costs  of                                                                    
increases  to health  insurance for  state employees  rather                                                                    
than  passing  on  the  costs. Ms.  Pitney  noted  that  the                                                                    
administration  was also  passing on  some of  the costs  to                                                                    
employees. It would be increasing in FY 17 and FY 18.                                                                           
                                                                                                                                
Representative  Neuman thought  the  answer was  a "Yes"  to                                                                    
subsidizing  increased   payments.  Ms.   Pitney  responded,                                                                    
"Yes."                                                                                                                          
                                                                                                                                
Representative Neuman  asked how fair it  was to appropriate                                                                    
the additional  money. He opined  that everyone  should have                                                                    
to share in  the burden. He recalled  conversations with DOA                                                                    
about union contracts  being held to zero  increases for the                                                                    
following 3  years. Last year  the department  had committed                                                                    
to  reducing   the  cost  to   the  state.   Presently,  the                                                                    
legislature  was being  asked  to put  general fund  dollars                                                                    
back in to cover insurance costs. He opposed the amendment.                                                                     
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kawasaki, Ortiz, Gara,  Grenn, Guttenberg, Seaton,                                                                    
Foster                                                                                                                          
OPPOSED: Neuman, Thompson, Tilton, Wilson                                                                                       
                                                                                                                                
The MOTION PASSED (7/4).                                                                                                        
                                                                                                                                
Amendment L H SAP 5 was ADOPTED.                                                                                                
                                                                                                                                
4:57:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 6:                                                                                       
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 6 - FY17 lapse balance to be used in FY18 to                                                                       
     eliminate backlog in DHSS, public assistance field                                                                         
     services                                                                                                                   
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J68, Wallace, 2-20-17.                                                                                        
                                                                                                                                
     This  amendment  appropriates   to  the  Department  of                                                                    
     Health and Social  Services up to $500,000  of any FY17                                                                    
     lapsing  funds  for use  in  FY18  in the  Division  of                                                                    
     Public Assistance, Public  Assistance Field Services to                                                                    
     eliminate the backlog in eligibility determinations.                                                                       
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton  read the amendment (see  above). He further                                                                    
explained that  in FY 16  the Division of  Public Assistance                                                                    
was cut  by $1.1  million in  UGF. It  was a  combination of                                                                    
reduced funding and positions,  which eliminated the ability                                                                    
to  fund overtime.  An increased  caseload  had resulted  in                                                                    
Public  Assistance  experiencing  a significant  backlog  in                                                                    
eligibility determinations. Although the  office was able to                                                                    
keep up  with new  cases, it was  struggling to  address the                                                                    
backlog.  The   one-time  funding  would  be   matched  with                                                                    
approximately $500 thousand in  federal funds and would help                                                                    
with addressing  the backlog.  There was  sufficient federal                                                                    
receipt authority in the existing budget.                                                                                       
                                                                                                                                
Representative Wilson  asked how  many vacancies  there were                                                                    
in the division.                                                                                                                
                                                                                                                                
Co-Chair Seaton deferred to Vice-Chair Gara.                                                                                    
                                                                                                                                
Vice-Chair  Gara responded  that the  amendment came  out of                                                                    
the  Health and  Social Services  Finance Subcommittee.  The                                                                    
division  planned on  using overtime.  If  overtime did  not                                                                    
cover the  need, part-time workers  would be used  but would                                                                    
not be  retained for  more than  1 year.  There was  a major                                                                    
backlog of  food stamp applicants  and other  public benefit                                                                    
applicants.  If a  person qualified  for food  stamps, which                                                                    
were fully  federally funded,  it took a  month or  more for                                                                    
those who qualified to receive  an interview. An application                                                                    
approval  took  additional  time.   The  committee  saw  the                                                                    
timeline as a  problem for families that were  living on the                                                                    
edge. A way  to try to fix the issue  without increasing the                                                                    
budget was the amendment. It  stated that if the traditional                                                                    
amount of  money lapsed at the  end of the year,  up to $500                                                                    
thousand  could  be  used  as   a  one-time  increment.  The                                                                    
department  believed   that  it   only  needed   a  one-time                                                                    
appropriation to get through the backlog.                                                                                       
                                                                                                                                
5:01:20 PM                                                                                                                    
                                                                                                                                
Representative Wilson  asked how  many vacancies  existed in                                                                    
the division. Vice-Chair Gara  responded that the department                                                                    
testified that  they did  not have the  funding to  add more                                                                    
positions and could not clear the backlog.                                                                                      
                                                                                                                                
Representative Wilson asked how many  PCN's were open in the                                                                    
division. Vice-Chair  Gara responded  they did not  have any                                                                    
funded vacancies at present.                                                                                                    
                                                                                                                                
Representative  Wilson asked  how  often  recipients had  to                                                                    
renew their  application. Vice-Chair  Gara replied  that the                                                                    
eligibility staff  tended to work  on more than one  kind of                                                                    
public benefit.  For instance, those  folks who  applied for                                                                    
food  stamps  also  applied  for   other  benefits.  He  was                                                                    
uncertain of the  rules for each of the  benefit programs in                                                                    
terms of recipients having to prove eligibility.                                                                                
                                                                                                                                
Representative Wilson  was aware that for  some programs the                                                                    
state  had a  tedious method  for recipients  to prove  that                                                                    
their  income  had  not  changed.   She  remarked  that  the                                                                    
amendment would  add to the  budget. She was  concerned with                                                                    
another  backlog occurring  based on  the inefficiencies  of                                                                    
the  system.  She  knew  of several  people  that  had  been                                                                    
affected by  the backlog.  She would  not be  supporting the                                                                    
amendment without knowing how the backlog came to be.                                                                           
                                                                                                                                
Representative Neuman  asked where  the lapse in  funds came                                                                    
from. Vice-Chair  Gara answered  that the amendment  did not                                                                    
change or increase  the FY 18 budget. If  there were lapsing                                                                    
funds within  DHSS and only  in the non-Medicaid  portion at                                                                    
the end of FY 17, they would be able to use up to $500,000.                                                                     
                                                                                                                                
5:05:33 PM                                                                                                                    
                                                                                                                                
Representative Neuman  asked where  the lapse in  funds came                                                                    
from. He asked what money  was left unspent. Vice-Chair Gara                                                                    
was unsure  if there would be  any lapsing funds by  the end                                                                    
of FY  17 (June 30, 2017).  If there were lapsing  funds, up                                                                    
to $500.000 could  be used to reduce the  backlog for people                                                                    
who  were  qualified for  food  stamps  and other  benefits,                                                                    
rather than the money going back into the general fund.                                                                         
                                                                                                                                
Representative  Neuman wondered  which appropriations  would                                                                    
unlikely be  spent. He remarked that  the commissioner could                                                                    
move  the  funds   around.  He  wanted  to   hear  from  the                                                                    
department.   He  suggested   that  it   was  possible   the                                                                    
department would  intentionally not  spend certain  funds so                                                                    
that  they could  be moved  to OCS.  He was  confused. Vice-                                                                    
Chair  Gara   thought  Representative  Neuman  had   a  good                                                                    
question. He  did not  think the  department would  take the                                                                    
action  without legislative  approval. They  would not  move                                                                    
money over from FY 17  to FY 18 without legislative approval                                                                    
to spend it in the  following fiscal year. Certainly, within                                                                    
one fiscal  year a  department could  move funds  around. If                                                                    
there were no  left-over funds, the amendment  would have no                                                                    
effect.                                                                                                                         
                                                                                                                                
Representative  Neuman  wanted  to  have  a  report  of  any                                                                    
unspent funds in each department.                                                                                               
                                                                                                                                
5:09:28 PM                                                                                                                    
                                                                                                                                
Representative Tilton believed  the department divisions had                                                                    
testified they  were all  in need  of funding.  She reported                                                                    
there  were excess  funds of  $3.6 million  in Adult  Public                                                                    
Assistance  that was  moved  over to  OCS.  She thought  the                                                                    
divisions would  have identified  funds that could  be moved                                                                    
around.  The  commissioner had  the  ability  to move  funds                                                                    
around  with  certain  guidelines  in  place.  Some  of  the                                                                    
reasons  for the  backlog was  because of  people not  being                                                                    
able  to  come  to  their appointments  due  to  their  work                                                                    
obligations or  because of a  lack of  childcare. Therefore,                                                                    
the backlog was  not entirely because of a  lack of staffing                                                                    
but  because of  commitments made  by the  people requesting                                                                    
the funds.                                                                                                                      
                                                                                                                                
Representative  Grenn asked  for  clarification regarding  a                                                                    
federal match.  Vice-Chair Gara responded  that many  of the                                                                    
benefits  qualified  for  a federal  match.  The  department                                                                    
estimated that the  funds would bring in  about $530 million                                                                    
in  federal matching  dollars. He  confirmed that  there was                                                                    
enough receipt authority in the budget for that amount.                                                                         
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Ortiz, Gara, Grenn, Guttenberg, Kawasaki, Foster,                                                                     
Seaton                                                                                                                          
OPPOSED: Neuman, Thompson, Tilton, Wilson                                                                                       
                                                                                                                                
The MOTION PASSED (7/4).                                                                                                        
                                                                                                                                
Amendment L H SAP 6 was ADOPTED.                                                                                                
                                                                                                                                
5:12:17 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 7, L H SAP 8, and L                                                                      
H SAP 9:                                                                                                                        
                                                                                                                                
     Language Amendments                                                                                                        
     L H  SAP 7 -  Reduce appropriation to the  Crime Victim                                                                    
     Compensation Fund by $400.0                                                                                                
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.47, Wallace, 2-15-17.                                                                                       
                                                                                                                                
     This amends  sec. 21(p) by reducing  the capitalization                                                                    
     of the crime victim  compensation fund from $1,422.5 to                                                                    
     $1,022.5 with the PFD Crime funds.                                                                                         
                                                                                                                                
     Another  amendment  will  reduce  unrestricted  general                                                                    
     funds in  the Department  of Corrections by  $400.0 and                                                                    
     increase the PFD Crime funds by $400.0.                                                                                    
                                                                                                                                
     Another  amendment will  decrease the  authorization of                                                                    
     the Violent Crime Compensation  Board in the Department                                                                    
     of  Administration  by  $400.0 from  the  crime  victim                                                                    
     compensation fund.                                                                                                         
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 8 -  Reduce appropriation from the Crime Victim                                                                    
     Compensation Fund to $1,022.5                                                                                              
     Offered by Representative Seaton                                                                                           
                                                                                                                                
     PF felon  funds (code 1171) are  typically appropriated                                                                    
     to the  CVCF. With  the reduction  in FY17  PFD amount,                                                                    
     the   amount  of   PF  felon   funds  was   reduced  by                                                                    
     approximately  50%. A  language  amendment reduces  the                                                                    
     deposit   to  the   CVCF  by   approximately  30%--from                                                                    
     $1,422.5  to  $1,022.5.   This  amendment  reduces  the                                                                    
     appropriation  from   the  CVCF  to  the   Board  by  a                                                                    
     corresponding amount.                                                                                                      
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 9  - Reduce use of UGF in  DOC and replace with                                                                    
     PF Crime Fund                                                                                                              
     Offered by Representative Seaton                                                                                           
                                                                                                                                
     Another  amendment  reduces   the  $1,422.5  PFD  Crime                                                                    
     deposit  into the  crime  victim  compensation fund  by                                                                    
     $400.0.                                                                                                                    
                                                                                                                                
     This amendment reduces the  use of unrestricted general                                                                    
     funds in  the Department  of Corrections  and increases                                                                    
    the appropriation of PFD Crime by that same $400.0.                                                                         
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton  explained that the amendments  were linked.                                                                    
He read the amendments.                                                                                                         
                                                                                                                                
Representative Wilson  asked about  the $400  thousand being                                                                    
taken out of  L H SAP 7 and  L H SAP 8. She  wondered if the                                                                    
funds  were  not  available  because   of  the  cut  to  the                                                                    
dividend.                                                                                                                       
                                                                                                                                
Co-Chair Seaton invited Mr. Teal to respond.                                                                                    
                                                                                                                                
Mr. Teal explained  that it was not that the  funds were not                                                                    
available. The  funds available through the  PFD Felon Funds                                                                    
- dividends that  would have otherwise gone to  felons - was                                                                    
reduced by  50 percent because  the dividend was  reduced 50                                                                    
percent. There was much less  money available. The money was                                                                    
typically split between the  Department of Corrections (DOC)                                                                    
and the  Crime Victim Compensation Fund  (CVCF). Rather than                                                                    
giving  them both  a 50  percent reduction  in PFD  criminal                                                                    
funding, the chairman wanted to  reduce the CVCF by about 30                                                                    
percent instead of 50 percent and have DOC absorb the rest.                                                                     
                                                                                                                                
Representative   Wilson  asked   about  the   $400  thousand                                                                    
decrement in both amendments. Mr.  Teal replied that the PFD                                                                    
criminal funds were deposited into  the CVCF. It was created                                                                    
in such  a way because  the money  did not lapse.  The money                                                                    
was  then appropriated  from the  CVCF to  the board,  which                                                                    
made grant awards to victims  of crimes. Less money would be                                                                    
placed into  the fund  and less  money would  be transferred                                                                    
from the fund  over to DOA. He suggested  that by depositing                                                                    
less  money  ($400,000) into  the  fund  it made  the  money                                                                    
available to DOC, offsetting UGF.                                                                                               
                                                                                                                                
5:16:55 PM                                                                                                                    
                                                                                                                                
Representative  Wilson suggested  that Amendment  L H  SAP 9                                                                    
reflected  another  $400,000  transfer  where  general  fund                                                                    
money was being replaced with  money from the PF Felon Fund.                                                                    
She wondered if the extra  $400,000 was available because of                                                                    
the  subtractions taken  from the  other two  organizations,                                                                    
which  allowed  the other  $400,000  to  be transferred  for                                                                    
general  funds.  Mr.  Teal responded,  "Through  the  chair,                                                                    
that's correct."                                                                                                                
                                                                                                                                
Representative Neuman  asked if  all three  amendments would                                                                    
be voted  on together  in one  vote. Co-Chair  Foster stated                                                                    
that they would be voted on  as they were moved by the maker                                                                    
of the motion.                                                                                                                  
                                                                                                                                
Representative Neuman  wondered if  it was because  the same                                                                    
$400,000  was  affected.  He  asked  if  when  the  governor                                                                    
reduced the amount  of the PFD it  automatically reduced the                                                                    
amount going  into the compensation  fund. He  remarked that                                                                    
the inmates' dividend was already reduced.                                                                                      
                                                                                                                                
Co-Chair  Seaton responded  that  the  linked deposits  were                                                                    
compensation  for  the reduction.  He  invited  Mr. Teal  to                                                                    
comment.                                                                                                                        
                                                                                                                                
Mr. Teal added that there  was no automatic reduction. There                                                                    
was  $1.4 million  appropriated  in FY  17.  The amount  was                                                                    
about the  same in  FY 16. However,  there was  no automatic                                                                    
reduction  for them,  as they  had to  be adjusted  manually                                                                    
each year. That is the purpose of the amendment.                                                                                
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
Representative Neuman OBJECTED. He thought if there was                                                                         
$400,000 left, it should be used to reduce the budget                                                                           
overall.                                                                                                                        
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Thompson, Wilson, Gara, Grenn, Guttenberg, Ortiz,                                                                     
Seaton, Foster                                                                                                                  
OPPOSED: Neuman, Tilton                                                                                                         
                                                                                                                                
The MOTION PASSED (8/2).                                                                                                        
                                                                                                                                
Representative Kawasaki was absent from the vote.                                                                               
                                                                                                                                
Amendments L H SAP 7, L H SAP 8, and L H SAP 9 were                                                                             
ADOPTED.                                                                                                                        
                                                                                                                                
5:20:03 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 10:                                                                                      
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP  10 - Remove reference to  the Alaska Aerospace                                                                    
     Corporation  from   the  Federal  and   Other  Receipts                                                                    
     section                                                                                                                    
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.22, Wallace, 1-31-17.                                                                                       
                                                                                                                                
     This  amends  sec.  20(a)  in  HB  57,  version  J,  by                                                                    
     deleting the  reference to the  receipts of  the Alaska                                                                    
     Aerospace   Corporation   because   the   language   is                                                                    
     redundant.  Sec. 5  in HB  57, version  J, appropriates                                                                    
     unanticipated  federal  and  other  corporate  receipts                                                                    
     directly to the Corporation.                                                                                               
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION, Amendment L H SAP 10 was ADOPTED.                                                                     
                                                                                                                                
5:20:57 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 11:                                                                                      
                                                                                                                                
     Language Amendments                                                                                                        
     H  SAP 11  - Reverse  Governor's Unallocated  Reduction                                                                    
     for Merit Freeze Legislation                                                                                               
                                                                                                                                
     Offered by Representative Seaton                                                                                           
                                                                                                                                
     This  amendment   reverses  an   unallocated  reduction                                                                    
     submitted as a placeholder  for savings associated with                                                                    
     legislation  regarding an  Executive Branch  Exempt and                                                                    
     Partially  Exempt  Pay  Freeze. The  projected  savings                                                                    
     should be reflected in a fiscal note.                                                                                      
                                                                                                                                
     This amendment directs  Legislative Finance Division to                                                                    
     reverse   the  entire   unallocated  appropriation   as                                                                    
     submitted by the Governor's Office.                                                                                        
     $1,817.9 TOTAL                                                                                                             
     $1,005.2 UGF                                                                                                               
     $157.0 DGF                                                                                                                 
     $612.4 Other                                                                                                               
     $43.3 Fed                                                                                                                  
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Wilson asked why  the amendment was different                                                                    
from other amendments that were  attached to other pieces of                                                                    
legislation.  Co-Chair Seaton  explained that  the amendment                                                                    
reversed   an   unallocated   reduction   submitted   as   a                                                                    
placeholder. She  was free to  disagree with  the amendment.                                                                    
Disregarding other  amendments, the  amendment stood  on its                                                                    
own.                                                                                                                            
                                                                                                                                
Representative Wilson requested an "at ease."                                                                                   
                                                                                                                                
5:22:58 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:24:58 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative  Wilson wanted  to make  sure she  understood                                                                    
the amendment. She wondered exactly  what the amendment did.                                                                    
Co-Chair Seaton responded that the  amendment was asking LFD                                                                    
to reverse  the unallocated appropriations as  submitted. It                                                                    
was  unallocated  and  was  in  a  bill  coming  before  the                                                                    
committee. It  would reverse  the appropriations  because he                                                                    
did not like them where they were.                                                                                              
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION, Amendment L H SAP 11 was ADOPTED.                                                                     
                                                                                                                                
5:26:19 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 12:                                                                                      
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP  12 - Contingency related to HB  60, Motor Fuel                                                                    
     Taxes                                                                                                                      
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J.48, Wallace, 2-17-17.                                                                                       
                                                                                                                                
     The Governor's budget redirects  $64.8 million of motor                                                                    
     fuel tax  receipts from  the unrestricted  general fund                                                                    
     (UGF) to  the new Transportation Maintenance  Fund that                                                                    
     would  be  created by  the  passage  of  HB 60.  HB  60                                                                    
     reclassifies  motor  fuel  tax receipts  as  designated                                                                    
     general funds  (DGF) and  appropriations from  the fund                                                                    
     would be DGF as well.                                                                                                      
                                                                                                                                
                                                                                                                                
     Similarly,  HB  60  would reclassify  $4.5  million  of                                                                    
     Aviation Fuel Tax receipts as DGF.                                                                                         
                                                                                                                                
     If  HB  60 is  not  enacted  into law,  this  amendment                                                                    
     changes  the  DGF  appropriations  of  motor  fuel  and                                                                    
     aviation fuel tax receipts to UGF code 1004.                                                                               
                                                                                                                                
     Without this  amendment, failure  to adopt HB  60 would                                                                    
     leave DOT&PF with $70 million  of appropriations from a                                                                    
     fund source that does not exist.                                                                                           
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Vice-Chair Gara commented that Representative Wilson used a                                                                     
new phrase that he liked that he hoped to use also, which                                                                       
was, "I take my objection back."                                                                                                
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION, Amendment L H SAP 12 was ADOPTED.                                                                     
                                                                                                                                
5:28:06 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 13:                                                                                      
                                                                                                                                
     Language Amendments                                                                                                        
     H SAP 13 - Technical and vocational education program                                                                      
     (TVEP) funding contingency                                                                                                 
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J50, Wallace, 2-18-17.                                                                                        
                                                                                                                                
     The TVEP funding distribution  formula expires June 30,                                                                    
     2017.   The  Governor's   FY18  budget   contains  TVEP                                                                    
     funding.  This  amendment   makes  that  budgeted  TVEP                                                                    
     funding   contingent   upon  passage   of   legislation                                                                    
     extending  the  distribution  formula beyond  June  30,                                                                    
     2017.                                                                                                                      
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Wilson asked if  all the corrections that had                                                                    
been made  to the TVEP  funding was in anticipation  of what                                                                    
would be going into the  fund. She thought the amendment was                                                                    
saying that  it would not matter  if the bill did  not pass.                                                                    
She  suggested that  the  figures would  not  change but  if                                                                    
there  were not  a bill,  the amounts  would be  zeroed. She                                                                    
asked if she  was correct. Co-Chair Seaton  responded in the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Representative Neuman  asked why  the amendment  was needed.                                                                    
Co-Chair   Seaton   responded   that  there   were   amounts                                                                    
throughout the budget.  He wanted to make sure,  that if the                                                                    
bill  did  not pass  a  contingency  would  be in  place  to                                                                    
reverse them.                                                                                                                   
                                                                                                                                
Representative  Neuman   further  queried  about   the  TVEP                                                                    
funding and a sunset  clause. Co-Chair Seaton explained that                                                                    
the  legislature had  to authorize  the spending,  which was                                                                    
authorized   in   the   bill.   If   the   bill   sunsetted,                                                                    
authorization would not continue. The amendment provided                                                                        
contingency language removing the amounts if the bill did                                                                       
not pass.                                                                                                                       
                                                                                                                                
Representative Neuman wanted to make sure that point was                                                                        
very clear.                                                                                                                     
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION, Amendment L H SAP 13 was ADOPTED.                                                                     
                                                                                                                                
5:31:33 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 14 and L H SAP 15:                                                                       
                                                                                                                                
     Language Amendments                                                                                                        
     L  H  SAP 14  -  Add  bargaining  units to  Salary  and                                                                    
     Benefits section 8 in HB 59                                                                                                
                                                                                                                                
     Offered  by  Representative   Seaton  See  30-GH1856D1,                                                                    
     Wallace, 2-20-17                                                                                                           
                                                                                                                                
     The Governor  submitted the amendment to  add the names                                                                    
     of seven bargaining  units to the listing  in section 8                                                                    
     of the Mental Health budget bill.                                                                                          
                                                                                                                                
     Language Amendments                                                                                                        
     L H  SAP 15 -  Add bargaining  units to the  Salary and                                                                    
     Benefits section 24 in HB 57                                                                                               
                                                                                                                                
     Offered by Representative Seaton                                                                                           
     See 30-GH1855J51, Wallace, 2-18-17.                                                                                        
                                                                                                                                
     This amends section  24, Salary and Benefits,  in HB 57                                                                    
     by  adding  the  names  of seven  bargaining  units  as                                                                    
     requested by the Governor.                                                                                                 
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendments.                                                                                            
                                                                                                                                
Representative Wilson asked  if the groups were  out for the                                                                    
current year. If  so, she wondered if  the state anticipated                                                                    
bringing the  contracts back during the  current session for                                                                    
comparison purposes.                                                                                                            
                                                                                                                                
Co-Chair  Seaton asked  Ms. Pitney  to come  forward with  a                                                                    
response.                                                                                                                       
                                                                                                                                
Ms. Pitney requested that the question be restated.                                                                             
                                                                                                                                
Co-Chair Seaton  responded that the committee  was reviewing                                                                    
Amendment L H SAP 14 and Amendment L H SAP 15 on page 6.                                                                        
                                                                                                                                
Representative  Wilson referred  to page  6 that  listed all                                                                    
the bargaining  units. She asked  if Ms.  Pitney anticipated                                                                    
the negotiations  to be  done while  the legislature  was in                                                                    
session. If  so, she wondered  if she would bring  them back                                                                    
to the  legislature to compare  them to the  previous year's                                                                    
negotiations. Ms. Pitney replied that  the ones added in the                                                                    
amendment   were   only   those  where   negotiations   were                                                                    
completed.  If there  were additional  units that  completed                                                                    
negotiations  prior to  the end  of session  the information                                                                    
would be  brought to the legislature.  Otherwise, they would                                                                    
not be added to the language.                                                                                                   
                                                                                                                                
Vice-Chair Gara  asked how  the bargaining  contracts agreed                                                                    
upon  after  the end  of  session  were funded.  Ms.  Pitney                                                                    
replied, "Through the supplemental process."                                                                                    
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There being NO OBJECTION, Amendments L  H SAP 14 and L H SAP                                                                    
15 were ADOPTED.                                                                                                                
                                                                                                                                
5:34:57 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton MOVED to ADOPT L H SAP 16:                                                                                      
                                                                                                                                
     Language Amendments                                                                                                        
     L H SAP 16 - Remove CBR section related to filling the                                                                     
     FY18 budget deficit                                                                                                        
                                                                                                                                
     Offered by Representative Seaton See 30-GH1855J41,                                                                         
     Wallace, 2-15-17                                                                                                           
                                                                                                                                
     This deletes sec. 27(b) which would fund the FY18                                                                          
     deficit from the CBR.                                                                                                      
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Seaton read the amendment (see above).                                                                                 
                                                                                                                                
Representative Wilson was disappointed  that the CBR was the                                                                    
fund that  was being  proposed to fill  the budget  gap. She                                                                    
believed that  in the  present day  the committee  had taken                                                                    
its  most valuable  asset and  moved it  into accounts  that                                                                    
would  not be  making  much money.  She  thought the  motive                                                                    
behind the  amendment had  to do with  avoiding a  CBR vote.                                                                    
She thought the  action sent a strong message  to the public                                                                    
that the  legislature was maintaining or  enlarging the size                                                                    
of  government  rather  than  reducing   it.  She  would  be                                                                    
maintaining her objection.                                                                                                      
                                                                                                                                
Representative  Neuman  asked  if  the option  to  fund  the                                                                    
budget with the CBR was off the table.                                                                                          
                                                                                                                                
Co-Chair Seaton deferred to LFD.                                                                                                
                                                                                                                                
5:37:08 PM                                                                                                                    
                                                                                                                                
Mr. Teal would  not say the amendment was  taking the option                                                                    
of  using  the CBR  off  the  table.  There would  be  other                                                                    
opportunities  to put  the language  back in  either in  the                                                                    
Senate  or  in the  capital  bill.  The amendment  took  the                                                                    
option out of the operating bill in the House.                                                                                  
                                                                                                                                
Representative   Neuman   clarified   that   he   heard   an                                                                    
affirmative response. It was  his impression that everything                                                                    
was on the table. He  supposed that the amendment was taking                                                                    
the use  of the  CBR off  the table.  He suspected  that the                                                                    
reason  for doing  so was  to keep  the House  minority from                                                                    
having  the ability  to negotiate  on the  budget. He  asked                                                                    
what he was missing.                                                                                                            
                                                                                                                                
Co-Chair  Seaton  thought  the point  Representative  Neuman                                                                    
missed was  that with  the amendments  adopted and  the plan                                                                    
going forward the budget was  fully funded. Therefore, a CBR                                                                    
was not needed.                                                                                                                 
                                                                                                                                
Representative Neuman thought  it was a heck  of a statement                                                                    
to make  at the current  point in  the process. He  was left                                                                    
without words  as to why things  would be handled in  such a                                                                    
way.  He thought  the  legislature  was a  long  way from  a                                                                    
balanced budget.  He thought all  options as to how  to fund                                                                    
state  government should  stay  on the  table. He  adamantly                                                                    
opposed the amendment.                                                                                                          
                                                                                                                                
Representative  Tilton   was  deeply  disappointed   in  the                                                                    
process. She commented that her  constituents and others had                                                                    
not had the  opportunity to have a voice on  the budget. She                                                                    
believed  that   the  public  felt   there  would   be  more                                                                    
transparency and that  their voices would be  heard. She did                                                                    
not  believe  there  was transparency  in  the  process  and                                                                    
strongly objected to the amendment.                                                                                             
                                                                                                                                
Co-Chair  Seaton  thought  the  process had  been  the  most                                                                    
transparent process  he had seen.  Every amendment  that had                                                                    
been put  forward to change  the governor's budget  had been                                                                    
brought forward  as an  amendment and voted  on by  the full                                                                    
House Finance Committee. The public  would see the budget as                                                                    
it was  proposed and would  have an opportunity  to comment.                                                                    
If  members of  the public  decided to  comment and  did not                                                                    
want the  state to  have a balanced  budget requiring  a CBR                                                                    
vote, the legislature  would have the option to  put it back                                                                    
in  during the  second  round of  amendments. He  reiterated                                                                    
that every  amendment was put  forward and voted up  or down                                                                    
in  the  House Finance  Committee.  He  noted that  all  the                                                                    
subcommittee  meetings were  broadcast and  recorded on  web                                                                    
television. He could not quite  understand how someone could                                                                    
argue that the process was not transparent.                                                                                     
                                                                                                                                
5:42:49 PM                                                                                                                    
                                                                                                                                
Representative  Wilson assumed  that  the SBR  was still  in                                                                    
play.  She  asked  about all  the  available  accounts.  She                                                                    
indicated that  the budget was  not balanced because  it was                                                                    
being  paid  for, in  part,  with  savings. Co-Chair  Seaton                                                                    
responded that the CBR would need a three-quarter vote.                                                                         
                                                                                                                                
Representative  Wilson wondered  if taking  the CBR  off the                                                                    
table had any impact  because without having a three-quarter                                                                    
vote  on a  specific amount,  it  would not  have been  used                                                                    
anyway. Co-Chair Seaton responded in the affirmative.                                                                           
                                                                                                                                
Vice-Chair Gara commented  that a few years  prior the state                                                                    
had  roughly $17  billion in  savings. Through  the previous                                                                    
year, the  legislature had spent most  of it. By the  end of                                                                    
the current fiscal  year, if the legislature  kept using the                                                                    
savings  account, the  balance  would be  $2.7 billion.  The                                                                    
remainder of  savings would be  gone by the  subtenant year.                                                                    
He did  not want to  be at  the point where  the legislature                                                                    
was rearranging the  chairs on the Titanic.  He supposed the                                                                    
legislature  could  decide  to  keep  spending  out  of  the                                                                    
savings account until it was  gone. He also pointed out that                                                                    
he  did  not  know  how the  new  subcommittee  and  finance                                                                    
process would  work. He thought  it was worth a  try because                                                                    
the old method had not worked.                                                                                                  
                                                                                                                                
Representative  Neuman called  for a  point of  order asking                                                                    
that the  amendment be discussed. Vice-Chair  Gara explained                                                                    
that he was addressing a point that had been made.                                                                              
                                                                                                                                
Co-Chair  Foster  asked  Vice-Chair   Gara  to  address  the                                                                    
amendment. Vice-Chair  Gara commented  that the  process had                                                                    
been the most transparent that he had been through.                                                                             
                                                                                                                                
Representative Wilson commented that  the state was draining                                                                    
its savings. She MAINTAINED her OBJECTION.                                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara, Grenn, Guttenberg, Ortiz, Foster, Seaton                                                                        
OPPOSED: Thompson, Tilton, Wilson, Neuman                                                                                       
                                                                                                                                
The MOTION PASSED (6/4).                                                                                                        
                                                                                                                                
Representative Kawasaki was absent from the vote.                                                                               
                                                                                                                                
Amendment L H SAP 16 was ADOPTED.                                                                                               
                                                                                                                                
Co-Chair  Seaton reported  that  Legislative Legal  Services                                                                    
and  LFD would  be preparing  the new  committee substitutes                                                                    
for HB 57 and HB 59.                                                                                                            
                                                                                                                                
Co-Chair  Foster MOVED  to give  Legislative Legal  Services                                                                    
and  the Legislative  Finance Division  the ability  to make                                                                    
conforming and technical corrections to HB 57.                                                                                  
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Co-Chair  Foster MOVED  to give  Legislative Legal  Services                                                                    
and  the Legislative  Finance Division  the ability  to make                                                                    
conforming and technical corrections to HB 59.                                                                                  
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Co-Chair Foster reviewed the agenda for the following day.                                                                      
                                                                                                                                

Document Name Date/Time Subjects
DNR-Subcommittee Packet HFIN.pdf HFIN 2/28/2017 1:30:00 PM
HB 57
DBT Service-Subcommittee Packet.pdf HFIN 2/28/2017 1:30:00 PM
HB 57
FND Capitilization-Subcommittee Packet.pdf HFIN 2/28/2017 1:30:00 PM
HB 57
Fund Tansfer-Subc Packet.pdf HFIN 2/28/2017 1:30:00 PM
HB 57
SP Approp Amendments-Subc Packet.pdf HFIN 2/28/2017 1:30:00 PM
HB 57
State Retirement Amendments-Subcommittee Packet.pdf HFIN 2/28/2017 1:30:00 PM
HB 57