Legislature(2019 - 2020)ADAMS ROOM 519

07/22/2019 01:00 PM FINANCE

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02:49:53 PM Start
02:50:51 PM HB2001
03:31:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 2:45 p.m. Today --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB2001 APPROP: ERA FOR PERMANENT FUND DIVIDENDS TELECONFERENCED
Moved CSHB 2001(FIN) Out of Committee
HOUSE BILL NO. 2001                                                                                                           
                                                                                                                                
     "An Act making a special appropriation from the                                                                            
     earnings reserve account for the payment of permanent                                                                      
     fund dividends; and providing for an effective date."                                                                      
                                                                                                                                
2:50:51 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  MOVED  to ADOPT  the  proposed  committee                                                                    
substitute   for    HB   2001,   Work    Draft   31-LS1103\H                                                                    
(Wallace/Caouette, 7/22/19).                                                                                                    
                                                                                                                                
Co-Chair Johnston OBJECTED for discussion.                                                                                      
                                                                                                                                
Co-Chair Foster asked staff to address the committee.                                                                           
                                                                                                                                
ERIN   SHINE,  STAFF,   REPRESENTATIVE  JENNIFER   JOHNSTON,                                                                    
explained the  changes in the  CS. She read from  a prepared                                                                    
statement.   She   stated   that  the   proposed   Committee                                                                    
Substitute   (CS)   would    remove   all   capital   budget                                                                    
appropriation  items and  some capital  budget items  in the                                                                    
previous bill  version. The CS additionally  removed some of                                                                    
the operating budget  items that were included  in version K                                                                    
of  the  bill.  The  CS removed  the  Constitutional  Budget                                                                    
Reserve (CBR)  section that had included  the reverse sweep,                                                                    
deficit filling language, and the  headroom language. The CS                                                                    
also  added  a  language  section to  access  the  Statutory                                                                    
Budget Reserve  (SBR); and appropriated $901,470,000  to the                                                                    
Permanent Fund Dividend  Fund; which in version K   had been                                                                    
$641,151,000.                                                                                                                   
                                                                                                                                
2:52:57 PM                                                                                                                    
                                                                                                                                
BRODIE   ANDERSON,   STAFF,  REPRESENTATIVE   NEAL   FOSTER,                                                                    
addressed  additional  changes  to the  bill.  The  previous                                                                    
version  of  the bill  had  restored  the complete  list  of                                                                    
vetoes  provided by  the governor.  The  CS restored  $278.7                                                                    
million of the vetoes.  He highlighted $110 million restored                                                                    
to the University,  Senior Benefits were restored  for FY 19                                                                    
supplemental  and  FY 20  budget.  Funds  were restored  for                                                                    
public  assistance  Medicaid  including  adult  preventative                                                                    
dental.  The  CS  kept approximately  $100  million  of  the                                                                    
governor's vetoes.                                                                                                              
                                                                                                                                
Mr.  Anderson  continued  to address  changes  to  the  bill                                                                    
reflected  in the  CS. He  reiterated that  sections removed                                                                    
including the  capital budget, supplemental  capital budget,                                                                    
and  mental  health capital  budgets.  The  last change  was                                                                    
related  to the  Permanent Fund.  The SBR  was added  to the                                                                    
deposit  to the  PFD account,  to increase  the size  of the                                                                    
fund over a surplus PFD.   After calculating the vetoes that                                                                    
remained, the  surplus deposit to  the dividend  account was                                                                    
increased. With  the changes the  size of the  surplus would                                                                    
be  approximately  $1,336.  Including  the  SBR  deposit  as                                                                    
outlined in the CS, the PFD payment would be $1,605.                                                                            
                                                                                                                                
2:54:58 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  provided clarifications for the  public. He                                                                    
summarized  that the  capital budget  had been  removed from                                                                    
the bill.  The original version  of the bill had  included a                                                                    
restoration  of  all  of  the   governor's  vetoes.  The  CS                                                                    
restored most  of the vetoes, save  for a few items.  The CS                                                                    
restored  up  to  $110  million  to  the  University,  which                                                                    
resulted in  a $20  million cut. School  bond debt  had been                                                                    
vetoed  by  50  percent  by the  governor,  which  had  been                                                                    
accepted, as  well as  the cut  to the  Regional Educational                                                                    
Attendance Area (REAA) of about $19 million.                                                                                    
                                                                                                                                
Co-Chair  Foster continued  to  discuss the  changes to  the                                                                    
bill. The  CS also accepted  some of the  governor's smaller                                                                    
vetoes  including cuts  to executive  branch travel,  except                                                                    
for  travel for  the  Office of  Public  Advocacy (OPA).  He                                                                    
reiterated  the changes.  The bill  would use  the Statutory                                                                    
Budget Reserve (SBR),  which had a balance  of $172 million;                                                                    
however, unless the reverse sweep  was in effect it would be                                                                    
hollow authority.  He explained that Mr.  Anderson had cited                                                                    
two PFD numbers to reflect the two different scenarios.                                                                         
                                                                                                                                
2:58:50 PM                                                                                                                    
                                                                                                                                
Representative  Knopp pointed  to  page 2  of the  sectional                                                                    
analysis and asked if the header version K was a typo.                                                                          
                                                                                                                                
Ms.  Shine  agreed  there  was a  typo,  and  the  sectional                                                                    
analysis was for version H.                                                                                                     
                                                                                                                                
Representative Knopp  asked if  there was  a summary  of the                                                                    
items  that had  been  excluded. He  asked  about the  State                                                                    
Council on the Arts.                                                                                                            
                                                                                                                                
Ms. Shine  replied that  the State Council  of the  Arts was                                                                    
included in the  bill, and that she could provide  a list of                                                                    
items that were and were not included in the bill.                                                                              
                                                                                                                                
Representative Knopp  would like to  see it but  would leave                                                                    
it to the  co-chairs to decide whether to  compile and share                                                                    
the information.                                                                                                                
                                                                                                                                
Co-Chair  Foster  asked  for  a  simple  list  of  what  was                                                                    
included  and excluded.  Everything had  been restored  with                                                                    
the  exception of  the University,  REAA,  school bond  debt                                                                    
reimbursement, and a host of  small items. Items restored in                                                                    
the bill  included Medicaid  adult preventative  dental, the                                                                    
Online  with   Libraries  (OWL)  internet   program,  public                                                                    
defenders, and Department of Law (LAW) support staff.                                                                           
                                                                                                                                
3:01:16 PM                                                                                                                    
                                                                                                                                
Representative  Knopp  asked  about funding  for  the  Court                                                                    
System.                                                                                                                         
                                                                                                                                
Co-Chair Foster replied that the funding was included.                                                                          
                                                                                                                                
Vice-Chair Ortiz seconded  the request to receive  a list of                                                                    
things that were not included in the budget.                                                                                    
                                                                                                                                
Mr.  Anderson replied  that he  had an  internal draft  that                                                                    
listed all  items not included  in the  committee substitute                                                                    
and offered to provide it to the committee.                                                                                     
                                                                                                                                
Co-Chair Foster agreed.                                                                                                         
                                                                                                                                
Co-Chair Foster spoke to items  in the bill including public                                                                    
broadcasting, Alaska  Legal Services, Pre-K and  Head Start,                                                                    
Alaska State Council  on the Arts, live  homework help, OWL,                                                                    
Department of Fish and Game  surveys and assessments, public                                                                    
assistance, behavioral health  treatment grants, LAW support                                                                    
staff  and prosecutors,  senior  benefits, the  agricultural                                                                    
revolving  loan  program,  $3  million  for  Village  Public                                                                    
Safety  Officers (VPSO),  the Council  on Domestic  Violence                                                                    
and  Sexual Assault  (CDVSA),  Department of  Transportation                                                                    
and Public Facilities funds, civil  air patrol, $110 million                                                                    
for the  University, and  therapeutic courts.  Cuts included                                                                    
agency  travel. He  asked if  there were  further items  not                                                                    
included.                                                                                                                       
                                                                                                                                
3:04:23 PM                                                                                                                    
                                                                                                                                
Mr. Anderson replied  there were roughly 74  items that were                                                                    
not included in  the new version of the bill  - the majority                                                                    
of which were travel  reductions. The list was approximately                                                                    
10 to 15 items outside of travel.                                                                                               
                                                                                                                                
Co-Chair Foster  relayed that  the bill  had started  with a                                                                    
surplus  PFD of  $929. The  bill version  considered how  to                                                                    
increase  the PFD  while  trying to  meet  somewhere in  the                                                                    
middle with  individuals who wanted  to see some cuts  and a                                                                    
larger PFD.  Consideration was also  given to  balancing the                                                                    
wishes of individuals who did not  want to access the ERA or                                                                    
draw  down  on savings  such  as  the Constitutional  Budget                                                                    
Reserve (CBR). While  the bill did access the  SBR, the goal                                                                    
was to balance the interests of all parties.                                                                                    
                                                                                                                                
3:06:39 PM                                                                                                                    
                                                                                                                                
Representative Tilton  asked for the total  amount for items                                                                    
left in  the bill. She  believed all the other  vetoes would                                                                    
be restored by the bill.                                                                                                        
                                                                                                                                
Mr. Anderson answered  the total sum of  vetoes not restored                                                                    
by  the bill  was $91,994,400;  of which  $89.3 million  was                                                                    
UGF, $226.3 million  was DGF, $1.6 million  was other funds,                                                                    
and  $684.8 million  was federal  funds. He  reiterated that                                                                    
the amounts he listed were remaining out as vetoes.                                                                             
                                                                                                                                
Co-Chair  Foster  referenced  the governor's  veto  of  $444                                                                    
million.  The $444  million had  included a  grand total  of                                                                    
UGF, DGF,  and other funds.  He asked about total  vetoes of                                                                    
state dollars.                                                                                                                  
                                                                                                                                
Mr. Anderson  responded that included  in the CS  was $259.9                                                                    
million in UGF.                                                                                                                 
                                                                                                                                
Co-Chair  Foster noted  that the  governor  had vetoed  $444                                                                    
million, of  which only part  was UGF. He thought  there was                                                                    
about  $90 million  in  cuts. He  wanted  to understand  the                                                                    
total amount of UGF vetoes.                                                                                                     
                                                                                                                                
Ms. Shine stated that there  was $259,990,700 in vetoes. She                                                                    
noted  that  the number  was  preliminary,  and staff  would                                                                    
provide final numbers to the committee.                                                                                         
                                                                                                                                
Co-Chair   Foster   stated    that   the   governor   vetoed                                                                    
approximately $259 million of UGF,  of which $91 million UGF                                                                    
in vetoes was being accepted in the CS.                                                                                         
                                                                                                                                
3:10:35 PM                                                                                                                    
Representative Wool referenced the  statement about the veto                                                                    
amount.  He thought  Mr.  Anderson had  stated  that the  CS                                                                    
reinstated  $278 million  of the  vetoes, which  would leave                                                                    
$162 million.  He wanted clarification.                                                                                         
                                                                                                                                
Ms. Shine  answered that $91  million was all funds  and the                                                                    
UGF  was  $89,387,000  million.   She  reiterated  that  the                                                                    
numbers  were  preliminary,   and  the  Legislative  Finance                                                                    
Division would provide transaction  compare detail to verify                                                                    
the total amounts in the bill.                                                                                                  
                                                                                                                                
Mr. Anderson added  that the director of LFD  was present to                                                                    
answer  questions.  He  stated  that of  the  original  $440                                                                    
million in  vetoes by the governor,  there was approximately                                                                    
$380 million in UGF. He  continued that of the $380 million,                                                                    
the proposed CS  had restored $259 million  in UGF, allowing                                                                    
for $89 million to remain cut.                                                                                                  
                                                                                                                                
Representative  Wool   replied  that  the   explanation  was                                                                    
helpful.                                                                                                                        
                                                                                                                                
3:12:51 PM                                                                                                                    
                                                                                                                                
Representative   Merrick  looked   at   item   144  on   the                                                                    
spreadsheet that  had been handed  out related to  a subsidy                                                                    
for the  University. She thought the  president had reported                                                                    
that  the University  could withstand  a  cut of  up to  $50                                                                    
million to $60  million. She wondered where  the $20 million                                                                    
cut had come from.                                                                                                              
                                                                                                                                
Representative   Josephson  replied   that  the   University                                                                    
president had  reported that the University  could withstand                                                                    
the cuts over a period of  three or four years. He thought a                                                                    
$50  million cut  would put  the  University in  a state  of                                                                    
exigency.                                                                                                                       
                                                                                                                                
Co-Chair  Johnston  added  that   in  discussions  with  the                                                                    
University she  had learned that  because the  fall semester                                                                    
was starting soon, there was  already enrolled students, and                                                                    
the University would have to  move forward as there had been                                                                    
no cuts. By spring, the cuts would be doubled.                                                                                  
                                                                                                                                
3:15:09 PM                                                                                                                    
                                                                                                                                
Representative   Wool   recalled  conversations   with   the                                                                    
University  president in  the past  and had  understood that                                                                    
$40 million could be sustained  over a period of four years.                                                                    
He recalled  that the  president had  talked about  a worst-                                                                    
case scenario  of a $60  million cut, which could  result in                                                                    
having to close  a campus. He pondered the  question of what                                                                    
was "sustainable" and  thought even a cut of  $25 million or                                                                    
$30 million would require a declaration of exigency.                                                                            
                                                                                                                                
Co-Chair Foster drew  attention to the list  of vetoed items                                                                    
that had been accepted.                                                                                                         
                                                                                                                                
Representative  Sullivan-Leonard had  concerns with  the PFD                                                                    
component. She asked for the ERA balance.                                                                                       
                                                                                                                                
Ms. Shine deferred the question to the LFD.                                                                                     
                                                                                                                                
Representative  Sullivan-Leonard  recalled the  ERA  balance                                                                    
was close to  $19 billion. She noted there was  a request to                                                                    
transfer $9.4  billion to  the corpus,  which would  leave a                                                                    
balance of  $8 billion  to $10 billion.  She wanted  to know                                                                    
why  ERA  funds  were  not  being  used  to  fund  the  full                                                                    
statutory PFD.                                                                                                                  
                                                                                                                                
3:18:17 PM                                                                                                                    
                                                                                                                                
Ms.  Shine answered  that the  bill was  following the  5.25                                                                    
percent of  market value (POMV)  draw from the ERA;  and the                                                                    
surplus  PFD   was  appropriated  after  state   funds  were                                                                    
expended to appropriate  the leftover for PFD.  She cited AS                                                                    
37.13.140.                                                                                                                      
                                                                                                                                
Representative  Sullivan-Leonard  clarified she  was  asking                                                                    
about the statutory PFD formula.                                                                                                
                                                                                                                                
Co-Chair Johnston replied that as  far as putting the vetoed                                                                    
amount back in the corpus  of the Permanent Fund would leave                                                                    
approximately three years  of structured draw in  the ERA so                                                                    
there   would  be   a  cushion.   She  acknowledged   market                                                                    
fluctuations, and thought the  cushion would protect more of                                                                    
the ERA and  the corpus, but not so much  that there was not                                                                    
a structured draw.                                                                                                              
                                                                                                                                
Co-Chair Foster recognized  Representative Steve Thompson in                                                                    
the audience.                                                                                                                   
                                                                                                                                
3:20:01 PM                                                                                                                    
                                                                                                                                
Representative Knopp  asked about the $9.5  billion that was                                                                    
in the original  budget, of which $5 billion  was vetoed. He                                                                    
thought  that by  signing the  operating  budget, it  should                                                                    
have transferred $4.5 billion from  the ERA to the corpus to                                                                    
bring the fund balance of the  ERA be closer to $14 billion.                                                                    
He thought  Mr. Anderson  had stated  that the  $380 million                                                                    
was  the  amount  of  UGF in  the  $440  million  originally                                                                    
vetoed. He  thought the bill  restored $259 million  in UGF.                                                                    
He  calculated that  there  was $121  million  cut, not  $80                                                                    
million.                                                                                                                        
                                                                                                                                
Mr.   Anderson  answered   that   LFD   had  clarified   the                                                                    
information in a note. He  reported the numbers the governor                                                                    
had vetoed: $367.7  million of UGF, $8.1  million DGF, $13.8                                                                    
million in other  funds, and $3.8 million  in federal funds.                                                                    
He continued  that there had  been $11.7  million separately                                                                    
vetoed  for   Alaska  Housing  Finance   Corporation  (AHFC)                                                                    
homeless  assistance  (the   Alaska  Mental  Health  capital                                                                    
projects), and  $800,000 vetoed from the  FY 19 supplemental                                                                    
budget that  showed on the  list of adds but  was calculated                                                                    
into FY 19 transactions.                                                                                                        
                                                                                                                                
Representative Knopp  asked if LFD  had sent a new  total of                                                                    
UGF funds  that remained vetoed.  He thought the  amount was                                                                    
on top of the $200 plus  million cut in the operating budget                                                                    
by  the legislature.  He wanted  to know  the total  UFG cut                                                                    
from the budget.                                                                                                                
                                                                                                                                
Mr. Anderson replied  that LFD confirmed that  the amount of                                                                    
remaining veto was $89.3 million UGF.                                                                                           
                                                                                                                                
3:24:10 PM                                                                                                                    
                                                                                                                                
Representative  Knopp was  curious about  the total  UGF cut                                                                    
from  the   FY  19  base   to  the  current   version  being                                                                    
considered.                                                                                                                     
                                                                                                                                
Mr.  Anderson  did   not  have  the  number   on  hand.  The                                                                    
information would have to be provided by LFD.                                                                                   
                                                                                                                                
Representative Tilton  thought there  was $4.5  million left                                                                    
in  to transfer  from the  ERA to  the corpus  and asked  if                                                                    
there was  another $9.5 million  in the CS,  or if it  was a                                                                    
total amount of $9.5 million.                                                                                                   
                                                                                                                                
Co-Chair Johnston referred  to page 16 of  the bill, Section                                                                    
8(h) that put back in the amount that had been vetoed.                                                                          
                                                                                                                                
3:26:04 PM                                                                                                                    
                                                                                                                                
Representative Josephson noted that  the largest item vetoed                                                                    
and  not restored  was school  bond  debt reimbursement.  He                                                                    
clarified  that the  legislature wanted  to honor  the moral                                                                    
promise,  and  though  it  had  the  funds  to  do  so.  The                                                                    
administration had  believed the  funds were  not available,                                                                    
and the effort to override the veto had failed.                                                                                 
                                                                                                                                
Co-Chair Johnston WITHDREW her OBJECTION.                                                                                       
                                                                                                                                
There  being  NO  OBJECTION,   Work  Draft  31-LS1103\H  was                                                                    
ADOPTED.                                                                                                                        
                                                                                                                                
Representative  Knopp wanted  to  express that  there was  a                                                                    
certain amount  of unease when  he did not  have familiarity                                                                    
when he  didn't know what  was going  into a bill  draft. He                                                                    
stated that after  going through the CS, he  liked the draft                                                                    
and thought it was appropriate.                                                                                                 
                                                                                                                                
3:28:16 PM                                                                                                                    
                                                                                                                                
Co-Chair  Johnston MOVED  to REPORT  CSHB  2001(FIN) out  of                                                                    
committee with individual recommendations.                                                                                      
                                                                                                                                
Representative Sullivan-Leonard  OBJECTED. She spoke  to her                                                                    
objection. She did not find the  CS to be a compromise bill,                                                                    
and hoped  there would be  some necessary changes  made when                                                                    
the bill reached the floor.                                                                                                     
                                                                                                                                
Representative  Josephson  mentioned   meetings  around  the                                                                    
state  and many  communications from  residents. He  thought                                                                    
Alaskans  overwhelmingly  supported  taking  the  action  in                                                                    
version H, to  restore funds. He thought  the restored funds                                                                    
were  affordable  and  supported  moving  the  bill  out  of                                                                    
committee.                                                                                                                      
                                                                                                                                
Co-Chair  Foster added  that the  operating line  items that                                                                    
were being restored had been  discussed in sub-committee, in                                                                    
full committee,  and on the floor.  He thought a lot  of the                                                                    
issues had  been discussed extensively. He  discussed public                                                                    
testimony  and recalled  a PFD  debate  when two  amendments                                                                    
came before  the body. He  acknowledged that the  bill moved                                                                    
fairly  quickly but  reiterated that  there had  been robust                                                                    
discussion on the topics.                                                                                                       
                                                                                                                                
3:30:54 PM                                                                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Josephson, Knopp, LeBon, Ortiz, Wool, Johnston,                                                                       
Foster                                                                                                                          
OPPOSED: Merrick, Sullivan-Leonard, Tilton                                                                                      
                                                                                                                                
The MOTION PASSED (7/3). There being NO OBJECTION, it was                                                                       
so ordered.                                                                                                                     
                                                                                                                                
CSHB 2001(FIN) was REPORTED out of committee with a "do                                                                         
pass" recommendation.                                                                                                           
                                                                                                                                

Document Name Date/Time Subjects
HB 2001 ver H Sectional.pdf HFIN 7/22/2019 1:00:00 PM
HB2001
HB 2001 CS WORKDRAFTvH.pdf HFIN 7/22/2019 1:00:00 PM
HB2001
HB2001 Public Testimony Emails July 20-21.pdf HFIN 7/22/2019 1:00:00 PM
HB2001
HB 2001 CS vH veto list.pdf HFIN 7/22/2019 1:00:00 PM
HB2001