Legislature(2019 - 2020)ADAMS ROOM 519

03/28/2019 01:30 PM FINANCE

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01:33:59 PM Start
01:34:39 PM HB39 || HB40
02:43:11 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Adopt New Committee Substitute
+ CS Overview by David Teal, Director, Leg. TELECONFERENCED
Finance Div.
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 39                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  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. 40                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive   mental    health   program,   including                                                                    
     supplemental  appropriations;  and   providing  for  an                                                                    
     effective date."                                                                                                           
1:34:39 PM                                                                                                                    
Co-Chair  Foster  relayed   the  committee  substitute  (CS)                                                                    
included  subcommittee changes.  He reported  his intent  to                                                                    
adopt  the CS  during  the current  meeting.  He noted  that                                                                    
amendments would be considered the following week.                                                                              
Co-Chair  Wilson  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute    for   HB    39,    Work   Draft    31-GH1905\R                                                                    
(Caouette/Bruce, 3/28/19) (copy on file).                                                                                       
Representative Tilton OBJECTED for discussion.                                                                                  
Co-Chair Wilson clarified that the  adoption of the CS would                                                                    
give the committee a document to write amendments to.                                                                           
Representative Tilton WITHDREW her OBJECTION.                                                                                   
Representative  Josephson asked  if  the amendment  deadline                                                                    
was the following Monday at 3:00 p.m.                                                                                           
Co-Chair  Wilson confirmed  the amendment  deadline was  the                                                                    
following Monday at 3:00 p.m. to Co-Chair Foster's office.                                                                      
Vice-Chair  Ortiz  asked for  verification  the  CS did  not                                                                    
reflect the recommendation  language portion of subcommittee                                                                    
reports.  For example,  he could  think  of one  significant                                                                    
recommendation that  would amount  to a cost  reduction that                                                                    
he  had put  forward.  He asked  for  verification that  the                                                                    
recommendation was not a part of the CS.                                                                                        
1:37:42 PM                                                                                                                    
AT EASE                                                                                                                         
1:37:57 PM                                                                                                                    
Co-Chair  Foster clarified  that the  current motion  was to                                                                    
adopt the CS.  He would invite staff to the  table to review                                                                    
what  was  included  in the  bill.  He  believed  Vice-Chair                                                                    
Ortiz's question had been answered.                                                                                             
There  being NO  further OBJECTION,  Work Draft  31-GH1905\R                                                                    
was ADOPTED.                                                                                                                    
1:39:04 PM                                                                                                                    
AT EASE                                                                                                                         
1:39:23 PM                                                                                                                    
Co-Chair  Wilson  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for  HB  40,   Work  Draft  31-GH1901\S  (Bruce,                                                                    
3/28/19). There being NO OBJECTION, it was so ordered.                                                                          
Co-Chair Foster asked his staff  and the Legislative Finance                                                                    
Division (LFD) to explain the two work drafts.                                                                                  
Representative Knopp  asked for  the work draft  version for                                                                    
HB 40.                                                                                                                          
1:40:43 PM                                                                                                                    
AT EASE                                                                                                                         
1:41:36 PM                                                                                                                    
Co-Chair  Foster clarified  the work  draft numbers  were as                                                                    
follows: Work  Draft 31-GH1905\R  for HB  39 and  Work Draft                                                                    
31-GH1901\S for HB 40.                                                                                                          
Co-Chair Wilson restated  her motion to adopt the  CS for HB
40. There being NO OBJECTION, it was so ordered.                                                                                
1:42:32 PM                                                                                                                    
BRODIE   ANDERSON,   STAFF,  REPRESENTATIVE   NEAL   FOSTER,                                                                    
addressed the  changes in  the bills  that reflected  all of                                                                    
the subcommittee  actions and changes  made to  the language                                                                    
section   compared  to   the   governor's  proposed   budget                                                                    
introduced on  February 13. The  House Finance  Committee CS                                                                    
reflected an  agency operations budget of  $7,581,400,400 as                                                                    
shown  in the  Legislative Finance  Division Agency  Summary                                                                    
labeled "N1"  and dated March  28, 2019 (copy on  file). The                                                                    
budget   included    $2,671,870,800   in    federal   funds,                                                                    
$1,508,227,800  in other  funds, $758,683,600  in designated                                                                    
general  funds  (DGF),  and $2,642,618,200  in  unrestricted                                                                    
general funds (UGF).                                                                                                            
Mr.  Anderson  reported  that  the  UGF  spend  reflected  a                                                                    
reduction of $28,761,500  from the FY 20  adjusted base. The                                                                    
only difference  between the House subcommittee  reports and                                                                    
the CS were in the  salary adjustments added to each agency,                                                                    
which  included  the  February 13th  governor's  request  of                                                                    
$45.1 million;  the March 14th governor's  amendments, which                                                                    
included   $11.2   million;   and   the   Judiciary   salary                                                                    
adjustments  to  match  cost  of  living  adjustment  (COLA)                                                                    
increases  received to  match  the  General Government  Unit                                                                    
(GGU)  of  $1.7  million.  The total  difference  was  $12.9                                                                    
million as shown in the  Legislative Finance Division Agency                                                                    
Summary  labeled "SA1"  and dated  March 28,  2019 (copy  on                                                                    
Mr. Anderson  directed attention to the  Legislative Finance                                                                    
Division Agency  Summary labeled  "NL1" and dated  March 28,                                                                    
2019 (copy  on file).  He reported  $10.45 billion  in total                                                                    
funds,  which included  $4.5 billion  UGF. He  turned to  as                                                                    
shown  in the  Legislative Finance  Division Agency  Summary                                                                    
labeled "NL2"  and dated March  28, 2019 (copy on  file) and                                                                    
detailed  that general  funds  (both  numbers and  language)                                                                    
totaled $5.4 billion.                                                                                                           
1:46:17 PM                                                                                                                    
Mr. Anderson  addressed a  redlined comparison  document for                                                                    
HB 39  (copy on file).  He reviewed the language  section of                                                                    
the bill beginning on page 2.                                                                                                   
1:46:47 PM                                                                                                                    
AT EASE                                                                                                                         
1:47:12 PM                                                                                                                    
Mr.  Anderson addressed  item 1  on page  2, Section  4 that                                                                    
added intent  to clarify the  amounts appropriated  were for                                                                    
the full amounts that would be appropriated in FY 20.                                                                           
Co-Chair Wilson asked to hear about  the change on page 1 of                                                                    
HB 39.                                                                                                                          
AMANDA   RYDER,  ANALYST,   LEGISLATIVE  FINANCE   DIVISION,                                                                    
answered  that  the  change  on the  first  page  added  the                                                                    
Constitutional  Budget Reserve  (CBR) language  to the  bill                                                                    
title; it  was not included  in the previous version  of the                                                                    
CS. She explained that the  occurrence of CBR language later                                                                    
in the bill required it to be added to the title.                                                                               
Co-Chair Wilson  asked if the  language section of  the bill                                                                    
would take funding from the CBR.                                                                                                
Ms. Ryder  replied there  was a reverse  sweep later  in the                                                                    
bill, which  was standard language  even if  the legislature                                                                    
did not draw any money from the CBR.                                                                                            
Co-Chair Wilson  clarified she had been  trying to determine                                                                    
whether the  bill took funds  from the CBR. She  thanked Ms.                                                                    
Ryder for her explanation.                                                                                                      
Co-Chair Foster explained the reverse  sweep process for the                                                                    
committee. He detailed there were  myriad accounts that were                                                                    
typically populated with  funds. At the end of  the year the                                                                    
money  needed to  go  back into  the CBR,  but  then it  was                                                                    
necessary  to repopulate  the accounts.  He elaborated  that                                                                    
the  situation turned  into an  accounting nightmare  if the                                                                    
reverse sweep was not done. He  expounded that at the end of                                                                    
the fiscal  year (midnight  on June 30th)  all of  the money                                                                    
went back into the CBR  per statutory requirement. The funds                                                                    
were  then repopulated  back into  the  other accounts  just                                                                    
after midnight on July 1.                                                                                                       
1:49:52 PM                                                                                                                    
Ms. Ryder agreed with the explanation.                                                                                          
Co-Chair  Foster remarked  that  the  subject was  confusing                                                                    
every year.                                                                                                                     
Mr. Anderson  continued with changes  in the  bill beginning                                                                    
on  page   3,  item   2,  Section   8  that   deposited  the                                                                    
constitutionally  required 25  percent of  royalties to  the                                                                    
Permanent Fund.  He explained  that the  governor's language                                                                    
had appropriated  an additional $71.3 million;  the CS would                                                                    
deposit the  non-constitutionally required portion  into the                                                                    
General  Fund. He  moved to  page 3,  item 3a,  Section 8(c)                                                                    
that appropriated the percent  of market value (POMV) payout                                                                    
to  the  General Fund.  The  Permanent  Fund Dividend  (PFD)                                                                    
would  be appropriated  from the  General Fund  in the  same                                                                    
manner as the  preceding year. He explained that  in item 3b                                                                    
represented a  deletion of the governor's  language that had                                                                    
appropriated the  non-PFD amount of  the POMV payout  to the                                                                    
General Fund.                                                                                                                   
Mr.  Anderson moved  to page  6,  line 27,  item 4,  Section                                                                    
10(f)  that used  Power  Cost  Equalization (PCE)  endowment                                                                    
funding  for   the  PCE  program.  He   explained  that  the                                                                    
governor's request had funded the program with UGF.                                                                             
1:51:48 PM                                                                                                                    
Co-Chair  Wilson clarified  that  PCE stood  for Power  Cost                                                                    
Mr. Anderson agreed.                                                                                                            
Co-Chair  Foster   asked  Mr.   Anderson  to   describe  the                                                                    
governor's proposal  for PCE compared  to what  the governor                                                                    
had proposed to do with PCE versus the bill.                                                                                    
Mr.  Anderson answered  that the  governor's proposal  would                                                                    
sweep the  PCE endowment fund  and would replace the  use of                                                                    
the funds  with general  funds. The  change would  allow the                                                                    
funds  to  go  elsewhere, essentially  making  them  general                                                                    
Co-Chair  Foster agreed.  He explained  that the  governor's                                                                    
proposal would have transferred  the $1 billion balance from                                                                    
the PCE fund to the General  Fund. The change would mean the                                                                    
funds  could  be used  for  everything  (e.g. education  and                                                                    
public safety);  however, the payments  for the  PCE program                                                                    
would still be made and would be funded with general funds.                                                                     
Representative Josephson  returned to page  3 of the  CS. He                                                                    
stated  that the  governor's February  13th  version of  the                                                                    
bill had established  a split to comply with  the formula of                                                                    
the PFD. He asked for  verification that the CS would delete                                                                    
that action pending some later disposition.                                                                                     
Ms.  Ryder  answered  in  the  affirmative.  The  governor's                                                                    
request included the entire POMV  amount but directed almost                                                                    
$2 billion to  the PFD fund with the remainder  going to the                                                                    
General Fund. Whereas, the CS  would deposit the entire POMV                                                                    
payout to the  General Fund, which would  later be deposited                                                                    
into the PFD fund.                                                                                                              
1:54:28 PM                                                                                                                    
Mr.  Anderson advanced  to page  7, line  6, Section  10(h),                                                                    
item  5  that would  appropriate  $309,090  from the  Alaska                                                                    
Legal  Services   Fund  to   the  Department   of  Commerce,                                                                    
Community  and  Economic  Development  for a  grant  to  the                                                                    
Alaska Legal  Services Corporation. He noted  the action was                                                                    
consistent with statute.                                                                                                        
Co-Chair Wilson thought the fund  balance had been $10,000 a                                                                    
couple of  weeks earlier. She wondered  where the additional                                                                    
money had come from.                                                                                                            
Ms. Ryder answered that the  FY 20 appropriation would occur                                                                    
on July 1. She detailed  that regardless of the current fund                                                                    
balance, there would be another  $309,090 deposited into the                                                                    
fund  on  July 1,  2019  to  pay the  grant  in  FY 20.  She                                                                    
explained the  $309,090 was the  total filing  fees received                                                                    
by the court system in FY 18.                                                                                                   
Co-Chair Wilson  surmised that the  paid fees had  gone into                                                                    
the  General Fund  and based  on statute  the $309,090  went                                                                    
"over here" [to  the Alaska Legal Services  fund]. She asked                                                                    
if it shortchanged the court system in any way.                                                                                 
Ms.  Ryder answered  that the  action would  not shortchange                                                                    
the  court system.  She  explained that  10  percent of  the                                                                    
filing fees  that went into  the General Fund would  be used                                                                    
for  the  identified  purpose. She  stated  that  the  court                                                                    
system was funded through a different mechanism.                                                                                
Co-Chair  Wilson asked  for  verification  that because  the                                                                    
fund currently  held $10,000, the balance  would be $319,090                                                                    
[once the $309,090 was deposited on July 1].                                                                                    
Ms.  Ryder  replied  that  she  did  not  know  the  current                                                                    
balance. She  explained that by  June 30 the $10,000  may be                                                                    
fully expended. She elaborated that  even if the funding was                                                                    
spent,  $309,090 would  be deposited  into the  fund at  the                                                                    
beginning of the new fiscal year.                                                                                               
Co-Chair Wilson asked  how that $10,000 would  be spent. She                                                                    
reasoned that the grant had  already been paid from the fund                                                                    
to Alaska Legal Services [for  the current fiscal year]. She                                                                    
asked who else could use the fund.                                                                                              
Ms.  Ryder  answered that  the  funding  could not  be  used                                                                    
unless  appropriated.  She  explained that  the  legislature                                                                    
could  increase  the  appropriation  to  $319,090  to  fully                                                                    
expend the fund balance.                                                                                                        
Co-Chair Foster  asked for verification  that 10  percent of                                                                    
the filing fees went towards Alaska Legal Services.                                                                             
Ms. Ryder agreed.                                                                                                               
1:58:03 PM                                                                                                                    
Representative Josephson  recalled that  Representative Matt                                                                    
Claman had  carried a  standalone bill  that would  have put                                                                    
the issue in  statute; however, he did not  believe the bill                                                                    
had passed. He asked for  verification that because the item                                                                    
was  not  in statute  it  was  funded annually  through  the                                                                    
budget process.                                                                                                                 
Mr. Anderson  was uncertain about previous  legislation that                                                                    
may not  have passed. He reported  that item 21 on  page 21,                                                                    
line 15  authorized the  funding with  10 percent  of filing                                                                    
fees in accordance with AS 37.05.590.                                                                                           
Ms. Ryder  added that  a bill had  passed the  previous year                                                                    
and the appropriation related to that bill.                                                                                     
Mr. Anderson moved  to the next three changes  shown on page                                                                    
8  (shown  in   the  right  margin).  Item   6  removed  the                                                                    
governor's  request for  a lapse  extension  for the  Alaska                                                                    
Psychiatric Institute appropriation that  was approved in FY                                                                    
18. Item 7 removed the  governor's request for an open-ended                                                                    
appropriation of  federal receipts to the  Medicaid program.                                                                    
Item  8 removed  the governor's  FY 19  supplemental request                                                                    
for $172.4  million from the Statutory  Budget Reserve (SBR)                                                                    
to pay for any shortfalls in  Medicaid for FY 19, FY 20, and                                                                    
FY 21.                                                                                                                          
Vice-Chair  Ortiz referenced  item  6 on  page  8 and  asked                                                                    
about the impact of the deletion.                                                                                               
Ms.  Ryder answered  that LFD  deemed  the item  to be  more                                                                    
appropriate  in the  supplemental budget  as opposed  to the                                                                    
operating budget.                                                                                                               
Representative Josephson  asked for an explanation  of items                                                                    
7 and 8.                                                                                                                        
Ms. Ryder  replied that item  7 provided  open-ended federal                                                                    
receipt  authorization   to  the  department   for  Medicaid                                                                    
services. The decision  had been made to remove  the item so                                                                    
the legislature had authority  to approve additional federal                                                                    
receipts that  the department may  need. She  explained that                                                                    
the  legislature  had  the  ability  to  approve  additional                                                                    
federal receipts  through the  Legislative Budget  and Audit                                                                    
(LB&A)  Committee  if  needed. The  legislature  could  also                                                                    
request  additional  federal   authority  in  the  following                                                                    
session.   The  removal   of   the   language  allowed   the                                                                    
legislature to  see more clearly  what was happening  in the                                                                    
Department of Health and Social  Services (DHSS) budget. She                                                                    
explained  that  if  the   department  needed  more  federal                                                                    
receipts, the legislature would understand why.                                                                                 
2:01:50 PM                                                                                                                    
Mr.   Anderson  responded   to  Representative   Josephson's                                                                    
question about  item 8. He  explained that the  governor had                                                                    
requested a multiyear  appropriation from the SBR  in the FY                                                                    
19 supplemental. The CS removed  the language and denied the                                                                    
request to use the SBR.                                                                                                         
Representative Josephson asked  why the administration would                                                                    
need  a multiyear  appropriation. It  was his  understanding                                                                    
that  if  the  waiver  did  not happen  for  phase  II,  the                                                                    
entirety of the SBR would be needed.                                                                                            
Mr.   Anderson  declined   to  speak   on   behalf  of   the                                                                    
Ms.  Ryder  replied  that  LFD   believed  there  were  more                                                                    
transparent  ways  to  fund  Medicaid in  FY  20.  Based  on                                                                    
testimony from  DHSS, the department had  sufficient funding                                                                    
for  FY   19;  the   $15  million  supplemental   should  be                                                                    
sufficient  for   FY  19.  She  explained   that  under  the                                                                    
governor's  proposal, $172  million  appropriated  in FY  19                                                                    
would also be  available in FY 20 and FY  21. She questioned                                                                    
which year  the funding would  be spent in. She  stated that                                                                    
the  method  made   it  very  difficult  to   see  what  was                                                                    
appropriated and  spent in a  particular year.  She reported                                                                    
that  LFD  believed  there were  more  transparent  ways  of                                                                    
appropriating money  to DHSS for  Medicaid; money  should be                                                                    
appropriated in the  year it was needed. The  removal of the                                                                    
governor's proposed  language should  not have an  impact on                                                                    
DHSS or  Medicaid; it simply  removed the funding.  The idea                                                                    
was to appropriate the amount needed for FY 20 in FY 20.                                                                        
2:04:24 PM                                                                                                                    
Mr. Anderson  turned to page 9,  item 9 (shown in  the right                                                                    
margin). The  CS removed  the governor's  request for  up to                                                                    
$100,000 of  statutory designated  program receipts  in case                                                                    
the Department  of Military and Veterans  Affairs (DMVA) was                                                                    
short.  He explained  that Section  1 (the  numbers section)                                                                    
allowed DMVA  to request additional authorization  from LB&A                                                                    
if it was short.                                                                                                                
Mr. Anderson moved  to item 10 on page 10,  line 11, Section                                                                    
18  that  added  $700  million from  the  bond  proceeds  to                                                                    
purchase oil and gas tax credit certifications.                                                                                 
Co-Chair Wilson  asked if  the item  assumed the  court case                                                                    
would be successful  and asked if it was the  new amount the                                                                    
state would bond for.                                                                                                           
Mr. Anderson replied in the  affirmative. He elaborated that                                                                    
the court case  could be settled as early  as October, which                                                                    
would still give the department time to sell bonds.                                                                             
Co-Chair  Wilson observed  that the  increment seemed  to be                                                                    
about  $300 million  less than  it  had been  when the  bill                                                                    
passed the previous year.                                                                                                       
Mr.  Anderson replied  that he  did not  have the  answer on                                                                    
Co-Chair Foster  believed the  number reflected  the balance                                                                    
of the outstanding amount.                                                                                                      
Ms.  Ryder replied  that she  did not  have the  number. She                                                                    
deferred to LFD Director David Teal.                                                                                            
Co-Chair  Wilson explained  she was  pointing out  that they                                                                    
were in better shape than  when the original legislation had                                                                    
passed. She knew the amount had been much higher.                                                                               
Mr. Anderson  answered that  the legislature  had authorized                                                                    
$797 million  the preceding year  in a similar  section. The                                                                    
legislature  had  authorized  $100  million to  be  paid  in                                                                    
credits. He  explained that the  actions from  the preceding                                                                    
year factored into the decision on the $700 million.                                                                            
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
believed  the  question  had   been  answered;  however,  he                                                                    
recalled the number  was $737 million the  previous year. He                                                                    
explained that  the amount was  appropriated and  never used                                                                    
because  the  state  did  not issue  bonds.  The  state  had                                                                    
purchased $100  million in credit certificates,  which would                                                                    
lower the outstanding amount  to approximately $640 million.                                                                    
He pointed  out that more  credits were earned as  well. The                                                                    
number in  the bill was  an approximation, but it  should be                                                                    
sufficient. He  noted there was  an additional  $100 million                                                                    
that Mr. Anderson would cover later in the bill.                                                                                
Representative Josephson discussed that  there had been some                                                                    
dispute about a formula resulting  in a smaller amount based                                                                    
on actual production tax received  versus the prior formula.                                                                    
He stated  that the new  administration wanted to  return to                                                                    
the prior formula. He recalled  that the governor's proposed                                                                    
budget  had included  a separate  line item  of around  $180                                                                    
million. He wondered where the CS stood on the issue.                                                                           
Mr. Anderson answered  there would be an  item under Section                                                                    
23(h) that  appropriated general  funds for the  purchase of                                                                    
credits. The  item would appropriate $70  million in general                                                                    
funds to  the oil  and gas tax  credit fund  for individuals                                                                    
who  would not  participate in  the budget  program. The  CS                                                                    
removed the  governor's $170 million  request for FY  20 and                                                                    
$84  million for  FY 19  from Alaska  Industrial Development                                                                    
and  Export   Authority  (AIDEA)  receipts.  The   CS  would                                                                    
appropriate  $70  million  in   general  funds  to  purchase                                                                    
2:09:13 PM                                                                                                                    
Representative  Josephson  asked  if  the  CS  rejected  the                                                                    
concept of taking AIDEA receipts.                                                                                               
Mr. Anderson  confirmed that the  CS did not utilize  any of                                                                    
the governor's recommendations for AIDEA receipts.                                                                              
Vice-Chair  Ortiz addressed  the bonds  for taxpayer  credit                                                                    
concept. He stated that a  positive decision was anticipated                                                                    
perhaps by  October. He asked  if the benefits to  the state                                                                    
started declining as  the issue was pushed  farther down the                                                                    
Mr.  Teal answered  that the  benefits  to the  state was  a                                                                    
difficult  question. The  state could  pay and  purchase the                                                                    
credits  anytime   it  wanted.  There  were   different  two                                                                    
different views  of the formula,  which would  determine how                                                                    
fast the  state purchased  credits. The CS  did not  use the                                                                    
maximum $181  million in the original  interpretation or the                                                                    
minimum of  approximately $50 million;  it used a  number in                                                                    
between the two  amounts that would be used  to purchase the                                                                    
2:11:15 PM                                                                                                                    
Vice-Chair  Ortiz  stated  his  question  pertained  to  the                                                                    
original   idea  of   advancing   the   Alaska  tax   credit                                                                    
certificate bonds.  He recalled the discussion  the previous                                                                    
year and why it seemed  reasonable - companies would be paid                                                                    
off  earlier,  they had  access  to  money,  and took  a  10                                                                    
percent cut for financing costs.  He observed there had been                                                                    
benefits  for  companies and  the  state.  He asked  if  the                                                                    
benefits [to the state] diminished as time went on.                                                                             
Mr. Teal answered  that the certificate holders  would get a                                                                    
discounted rate;  it was less  advantageous to  companies at                                                                    
present  (compared to  the previous  year) because  interest                                                                    
rates had  increased. He explained that  if the certificates                                                                    
were  purchased  by the  state  according  to the  statutory                                                                    
formula, they  were purchased at an  undiscounted, full face                                                                    
value. Under  the bond program,  whatever interest  rate the                                                                    
state  paid  on the  bonds,  theoretically  the state  would                                                                    
discount the face  value of the certificates in  order to be                                                                    
neutral.  It  was  a  choice   for  certificate  holders  to                                                                    
participate in  the program and  get their  cash immediately                                                                    
at a  discounted rate or to  get full face value  by waiting                                                                    
two  to  four  years.  Theoretically all  parties  would  be                                                                    
neutral,  except the  state  paid  interest to  bondholders,                                                                    
which  was   offset  by   the  lower   face  value   of  the                                                                    
certificates. He  stated that  if it  worked out  right, all                                                                    
parties  should  be  neutral if  the  discount  matched  the                                                                    
interest rate. The only real  advantage to the state was not                                                                    
having to address the issue on an annual basis.                                                                                 
2:13:50 PM                                                                                                                    
Representative   Knopp  assumed   the   $700  million   bond                                                                    
appropriation was the balance of  what the state owed in tax                                                                    
credits.   He   asked   if  the   additional   $70   million                                                                    
appropriation that  occurred later in  the bill would  go to                                                                    
pay the  statutory minimum requirement  if the bond  was not                                                                    
Mr. Anderson  replied that  when the  bond package  had been                                                                    
authorized  via legislation  the  previous  year, there  had                                                                    
been an ongoing conversation that  a company may not want to                                                                    
use  a  bond.  He  explained   there  had  always  been  UGF                                                                    
designated  for  nonparticipants  -   the  $70  million  was                                                                    
roughly 10 percent of the  outstanding bonds estimated to be                                                                    
$700 million. He  clarified that an estimated  10 percent of                                                                    
participants  may  not  participate in  a  bond;  therefore,                                                                    
money had been set aside.                                                                                                       
Representative  Knopp asked  if the  CS included  sufficient                                                                    
funds  to  pay  the  minimum  statutory  retirement  if  the                                                                    
lawsuit was not settled and the bonds were not sold.                                                                            
Mr.  Anderson  replied  that another  committee  member  had                                                                    
highlighted  that  the net  calculation  was  less than  the                                                                    
governor's  statutory calculation  of  $181  million in  the                                                                    
current year.  He stated  it would be  a discussion  for the                                                                    
committee  to   determine  whether   the  $70   million  was                                                                    
2:16:24 PM                                                                                                                    
Mr. Anderson  moved to  item 11, Section  19(b) on  page 10,                                                                    
which added $1 million of UGF  to the Office of the Governor                                                                    
for redistricting  costs for FY  20 through FY 23.  He moved                                                                    
to page  11, line  25, Section 21(e),  item 12,  which added                                                                    
$4,517,365 UGF  for debt service payments  for University of                                                                    
Alaska port and harbor  and electrical association projects.                                                                    
He  noted  the  projects  were  often  referred  to  as  528                                                                    
projects. He  turned to page  15, line 24,  Section 21(j)(1)                                                                    
and (3), item 13,  which incorporated the governor's revised                                                                    
estimates for the international airport bonds.                                                                                  
Co-Chair Foster asked  for the page number  Mr. Anderson was                                                                    
Mr. Anderson replied that he  was referencing page 15, lines                                                                    
21 through 23 and lines 29 through 31.                                                                                          
Co-Chair Wilson  asked for verification the  bonds were paid                                                                    
through revenue generated by the international airports.                                                                        
Ms. Ryder replied affirmatively.                                                                                                
Mr. Anderson moved to page  16, line 24, Section 21(n), item                                                                    
14  that  would  appropriate  $99,820,500  for  school  debt                                                                    
reimbursement. Item 15 began on  line 30 under Section 21(o)                                                                    
and incorporated a governor's  amendment adding an estimated                                                                    
$750,000  of general  obligation bond  funding for  expenses                                                                    
for the sale  and issuance of 2012  transportation bonds. He                                                                    
moved  to page  18, line  21,  Section 23(h),  item 16  that                                                                    
would appropriate up to $70  million in general funds to the                                                                    
Oil  and Gas  Tax Credit  Fund for  individuals who  did not                                                                    
participate  in bond  purchase program.  The CS  removed the                                                                    
governor's  requested   $170  million   in  FY  20   and  an                                                                    
additional $84 million in FY 19 from AIDEA receipts.                                                                            
Representative Josephson asked for  verification that the CS                                                                    
used   general  funds   instead  of   AIDEA  receipts   [for                                                                    
individuals  who did  not participate  in the  bond purchase                                                                    
Mr. Anderson agreed.  He moved to page 18,  line 28, Section                                                                    
23(i), item  17 that  replaced the governor's  requested $30                                                                    
million in  general funds to  the Community  Assistance Fund                                                                    
with  PCE  endowment  funding to  the  Community  Assistance                                                                    
Fund.  He  reported  that  use of  the  funding  source  was                                                                    
traditional and  consistent with statute. Item  18, line 30,                                                                    
Section 23(j) and (k) included funds  for FY 21 for K-12 and                                                                    
pupil transportation  with a delayed effective  date of July                                                                    
1  FY  21. The  change  removed  the governor's  section  on                                                                    
prorated FY 20 K-12 formula funding.                                                                                            
2:21:38 PM                                                                                                                    
Representative    Josephson   referenced    past   committee                                                                    
discussion  about  the  amounts  (in HB  287)  of  the  Base                                                                    
Student  Allocation (BSA)  and the  $30 million  in one-time                                                                    
funds were  not vetoable. He  detailed that the  request had                                                                    
been for repeal of the  forward funded amounts. He asked for                                                                    
verification that  the amounts in  item 18 were  not forward                                                                    
Mr. Anderson  replied that  the current  language in  the CS                                                                    
would carry  forward the idea  presented the past  year with                                                                    
forward funding the FY 21 education budget.                                                                                     
Representative Josephson remarked  that pupil transportation                                                                    
had  also been  part of  the legislative  effort to  forward                                                                    
fund education.                                                                                                                 
Mr. Anderson  answered that  FY 19 and  FY 20  were approved                                                                    
for funding under HB 287. The  CS removed the portion of the                                                                    
governor's  bill  that  prorated  the  FY  20  K-12  funding                                                                    
formula. The CS  reflected the forward funding of  the FY 20                                                                    
education formula.                                                                                                              
Co-Chair  Foster  explained  that   the  previous  year  the                                                                    
legislature had  forward funded education. He  detailed that                                                                    
if  the legislature  did not  insert the  education language                                                                    
into the into the current budget  it would not be subject to                                                                    
a  veto. He  elucidated that  funding for  the current  year                                                                    
should be  protected and the idea  was to do the  same thing                                                                    
for the  following year (forward  fund the  following year's                                                                    
education budget).                                                                                                              
Vice-Chair  Ortiz  asked  if   forward  funding  for  FY  20                                                                    
included the $30 million from the previous year.                                                                                
Co-Chair Foster  answered that the  $30 million had  been an                                                                    
extra  appropriation.  He  deferred  to  staff  or  LFD  for                                                                    
further detail.                                                                                                                 
Ms. Ryder answered  that several things impacting  FY 20 had                                                                    
occurred  the   preceding  year,  which  the   governor  had                                                                    
attempted  to  address in  his  proposed  budget. The  items                                                                    
included the  forward funding  of the  K-12 formula,  a one-                                                                    
time  $30  million appropriation  for  FY  20, and  a  $19.5                                                                    
million capitalization  for curriculum improvement  and best                                                                    
practices. The  governor's proposed budget would  repeal all                                                                    
three items  and replaced the  K-12 funding with  a prorated                                                                    
funding  of about  23 percent  less.  The governor's  budget                                                                    
would  repeal the  $30 million  and the  $19.5 million.  She                                                                    
explained that  the CS  did not impact  FY 20  funding other                                                                    
than a  section that repealed the  curriculum funding, which                                                                    
had  been  accepted  by  the   governor;  all  other  FY  20                                                                    
education funding  was held harmless  and was  not addressed                                                                    
in the CS. She clarified that  item 18 would forward fund K-                                                                    
12 education and pupil transportation formula for FY 21.                                                                        
2:26:16 PM                                                                                                                    
Mr. Anderson moved  to page 19, line 5,  Section 23(l), item                                                                    
19  that  appropriated  $39,389,000   UGF  to  the  Regional                                                                    
Educational Attendance  Area (REAA) School Fund.  He relayed                                                                    
that with the  addition of the school  debt reimbursement in                                                                    
Section  21(n),  the  REAA  funding  was  needed  to  ensure                                                                    
Co-Chair Wilson  asked if the school  construction increment                                                                    
of  $99,820,500  on  page  16, item  14  was  primarily  for                                                                    
maintenance; whereas, item 19 related to construction.                                                                          
Ms. Ryder  answered that item  14 paid the  statutory amount                                                                    
of the school debt  reimbursement that communities bond for.                                                                    
She clarified that  item 19 was the  amount that statutorily                                                                    
went  to REAAs.  There  was a  statutory formula  specifying                                                                    
that  if   a  given   amount  was   paid  for   school  debt                                                                    
reimbursement for municipalities, the  state was required to                                                                    
pay  another percentage  for the  REAAs. She  explained that                                                                    
because the CS included  school debt reimbursement, the REAA                                                                    
needed  to  be  included  in order  to  be  consistent  with                                                                    
Mr. Anderson moved  to page 21, item 20 (shown  in the right                                                                    
margin).  He detailed  that  the  governor's proposal  would                                                                    
transfer $60  million from the Community  Assistance Fund to                                                                    
the General Fund. The CS  removed the language and specified                                                                    
that community assistance would  be funded via PCE endowment                                                                    
funds (referenced earlier in the bill).                                                                                         
Co-Chair Foster  noted it was  part of the PCE  program that                                                                    
had been  written in  by statute  several years  earlier. He                                                                    
observed that the funding method was not new.                                                                                   
Mr. Anderson agreed.  He moved to item 21 (shown  on page 21                                                                    
in the right  margin). He detailed that  per statute Section                                                                    
24(c) appropriated  the amount  equal to  10 percent  of the                                                                    
filing fee  received by the  Alaska Court  System, estimated                                                                    
to be $309,090  to the Civil Legal Services Fund  to be used                                                                    
for  grants  to  organizations   that  provide  civil  legal                                                                    
services to  low income individuals. He  noted the increment                                                                    
was  the appropriation  component  that  had been  discussed                                                                    
2:30:18 PM                                                                                                                    
Mr. Anderson turned to page  22, line 7, Section 24(f), item                                                                    
22. He detailed that consistent  with statute the item would                                                                    
appropriate  any  remaining  PCE  endowment  funding  (after                                                                    
appropriations  were  made  to   the  PCE  program  and  the                                                                    
Community  Assistance Fund)  to the  Renewable Energy  Grant                                                                    
Fund.  He  noted  there  was  not expected  to  be  much  or                                                                    
anything remaining after  the payouts. He moved  to item 23,                                                                    
page  23  (shown  in  the right  margin)  that  removed  the                                                                    
governor's  requested  $10.8   million  from  the  Passenger                                                                    
Vessel  Gaming  and  Gambling  Tax  Account  to  the  Alaska                                                                    
Capital Income Fund.                                                                                                            
Co-Chair Wilson  asked for a  description of the  purpose of                                                                    
the Alaska Capital Income Fund.                                                                                                 
Mr.  Anderson  answered  that   the  fund  primarily  funded                                                                    
deferred maintenance projects throughout the state.                                                                             
Mr. Anderson  advanced to page  24, line 20, item  24 (shown                                                                    
in  the right  margin).  He explained  that  Section 26  was                                                                    
updated to  reflect the approval of  the Alaska Correctional                                                                    
Officers Association collective bargaining agreement.                                                                           
Co-Chair Wilson asked for detail on what the agreement.                                                                         
Mr. Anderson responded that he would follow up.                                                                                 
Co-Chair  Wilson stated  that the  contract negotiation  had                                                                    
been  in mediation  the last  she had  heard. She  wanted to                                                                    
know what the state was agreeing to.                                                                                            
Ms. Ryder did not know the answer and would follow up.                                                                          
Co-Chair Wilson wanted to put  the information on the record                                                                    
in  order for  the public  to  know how  the contracts  were                                                                    
being negotiated.                                                                                                               
Representative Josephson  asked if  the item  reflected that                                                                    
since  February  13th  the  contract  for  the  correctional                                                                    
officers had been finalized.                                                                                                    
Mr. Anderson  replied in the affirmative.  He explained that                                                                    
the  Alaska   Correctional  Officers   Association  contract                                                                    
negotiation  had  been agreed  upon  and  settled after  the                                                                    
March 14th amendments from the governor.                                                                                        
Co-Chair  Wilson   requested  detail   for  all   seven  new                                                                    
bargaining agreements  (page 24). She clarified  she was not                                                                    
picking on anyone; she was  merely interested in knowing the                                                                    
details of the agreements.                                                                                                      
Representative  Josephson   believed  that  as  long   as  a                                                                    
contract   had  been   entered  into,   regardless  of   the                                                                    
administration, it had to be included in the budget.                                                                            
Ms. Ryder agreed.  She detailed that Section  1 included the                                                                    
appropriations  for  the  bargaining unit  contracts.  Those                                                                    
appropriations  were   valid  unless  the   bargaining  unit                                                                    
members did not ratify the  contracts. In the past there had                                                                    
been  some  bargaining  units  that  had  not  ratified  the                                                                    
contracts  and  the  appropriations had  been  removed  from                                                                    
Section 1.  Item 24 specified  the appropriations  were made                                                                    
in Section 1 and if the  agreements were not ratified by the                                                                    
collective bargaining unit, the money would be removed.                                                                         
2:35:06 PM                                                                                                                    
Mr.  Anderson  moved to  page  25,  Section 27(a),  item  25                                                                    
(shown in  the right margin),  that added payments  of $21.7                                                                    
million to  communities for fisheries business  tax and $6.7                                                                    
million for fisheries resource landing tax.                                                                                     
Vice-Chair  Ortiz  asked  for  verification  the  increments                                                                    
indicated that  the tax payments  made to  communities would                                                                    
continue as they had in the past.                                                                                               
Mr. Anderson responded affirmatively.                                                                                           
Co-Chair Foster  clarified that currently 50  percent of the                                                                    
taxes   went  to   the  state   and  50   percent  went   to                                                                    
municipalities where the tax was  applied. He explained that                                                                    
the  governor's   proposal  would   shift  the   money  from                                                                    
municipalities  to   the  state   treasury.  He   asked  for                                                                    
verification that  the CS  would keep  the funds  with local                                                                    
Mr. Anderson agreed.  He moved to page 25,  line 26, Section                                                                    
27(b), item 26 (shown in  the right margin) that reverted to                                                                    
traditional  language for  refunding  aviation  fuel tax  or                                                                    
surcharges  to local  governments. He  advanced to  page 26,                                                                    
line  13,  Section 29,  item  27  that added  reverse  sweep                                                                    
language for FY 20 and FY  21. Items 28(a) and (b) (shown in                                                                    
the right margin) removed the  governor's repeal of FY 20 K-                                                                    
12  appropriations,  which  would   have  repealed  the  $30                                                                    
million  of outside  the formula  funding  (the entire  K-12                                                                    
foundation formula funding  for FY 20); however,  the CS did                                                                    
accept the repeal  of the governor's FY 19  $19.5 million to                                                                    
the curriculum improvement and best practices fund.                                                                             
Mr.  Anderson moved  to page  26, Section  30, item  29 that                                                                    
extended  the  lapse   date  for  the  FY   19  $27  million                                                                    
appropriation to  pay for oil  and gas tax credit  bonds for                                                                    
debt service.  He shared that the  information concluded the                                                                    
major  changes throughout  the  language section  (excluding                                                                    
retroactivity clauses and effective dates).                                                                                     
2:38:12 PM                                                                                                                    
Ms. Ryder clarified that HB  40 (the mental health bill) was                                                                    
part of  the reports, despite  the two bills.  She explained                                                                    
that all amendments would go to  HB 39. It was not necessary                                                                    
to amend  HB 40 unless  a committee  member wanted to  add a                                                                    
capital mental  health project. She reported  that LFD would                                                                    
have  all  of  the  bill information  on  its  website.  She                                                                    
cautioned  not  to  be alarmed  if  the  governor's  numbers                                                                    
changed because  as the  governor submitted  amendments, LFD                                                                    
added them to  the "20GovAmd+" column in  its agency summary                                                                    
sheets.  She detailed  that the  governor had  submitted new                                                                    
amendments  the  previous  evening,  which  had  yet  to  be                                                                    
incorporated in the LFD summary sheets.                                                                                         
Co-Chair Wilson asked why they would  not wait to see if the                                                                    
amendments were  passed by the committee  before adding them                                                                    
to the  budget. She wanted to  know why they would  be added                                                                    
before being vetted.                                                                                                            
Ms. Ryder clarified that LFD  added all governor's requested                                                                    
items  to   his  request,  which   were  reflected   in  the                                                                    
"20GovAmd+"  column in  order to  keep track  of all  of the                                                                    
governor's amendments. The method  enabled LFD and others to                                                                    
make  accurate comparisons  between  the governor's  request                                                                    
and what the legislature decided to approve.                                                                                    
Co-Chair Wilson  stated that although  the CS  was currently                                                                    
$914,057,300  above  the  governor's  proposal,  the  number                                                                    
could go up or down depending on the amendments.                                                                                
Ms. Ryder agreed.                                                                                                               
Vice-Chair Ortiz  asked if LFD  would provide  the committee                                                                    
with the governor's amendments.                                                                                                 
Ms. Ryder  replied that the  amendments would be on  the LFD                                                                    
website. Additionally,  the amendments had been  provided by                                                                    
the governor's office to the committee co-chairs.                                                                               
2:41:20 PM                                                                                                                    
Co-Chair Foster  clarified that the numbers  section had not                                                                    
been provided  during the current  meeting because  they had                                                                    
been  reviewed  during  the   Monday  and  Tuesday  meetings                                                                    
earlier  in   the  week  during  subcommittee   reports.  He                                                                    
reported  that amendments  to  the bills  would  be due  the                                                                    
following  Monday  by  3:00 p.m.  He  explained  the  budget                                                                    
amendment process.                                                                                                              
HB  39  was   HEARD  and  HELD  in   committee  for  further                                                                    
HB  40  was   HEARD  and  HELD  in   committee  for  further                                                                    
Co-Chair  Foster provided  the  schedule  for the  following                                                                    

Document Name Date/Time Subjects
HB 39 CS FIN WORKDRAFT v.R .pdf HFIN 3/28/2019 1:30:00 PM
HB 39
HB 39 Agency Summaries House Structure LFD various.pdf HFIN 3/28/2019 1:30:00 PM
HB 39
HB 39 CS FIN Workdraft COMPARE.pdf HFIN 3/28/2019 1:30:00 PM
HB 39
HB 40 CS FIN WORKDRAFT v.S.pdf HFIN 3/28/2019 1:30:00 PM
HB 40
Packet 5 Public Testimony HF39 OP Budget March 28 Emails.pdf HFIN 3/28/2019 1:30:00 PM
HB 39