Legislature(2021 - 2022)ANCH LIO DENALI Rm
11/02/2022 10:00 AM House LEGISLATIVE BUDGET & AUDIT
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Approval of Minutes | |
| Proposed Change to the Legislative Budget and Audit Committee Handbook | |
| Presentation on Fy 21 Audit Findings | |
| Executive Session | |
| Final and Preliminary Release of Audits | |
| Revised Programs - Legislative | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
November 2, 2022
10:02 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Chair
Representative Chris Tuck, Vice Chair
Senator Peter Micciche (via teleconference)
Senator Bert Stedman
Representative Ivy Spohnholz
Representative Andy Josephson
Representative Neal Foster
Representative James Kaufman
Senator Click Bishop (alternate) (via teleconference)
MEMBERS ABSENT
Senator Lora Reinbold
Senator Lyman Hoffman
Representative Dan Ortiz (alternate)
COMMITTEE CALENDAR
APPROVAL OF MINUTES
PROPOSED CHANGE TO THE LB&A HANDBOOK
PRESENTATION ON FY 21 AUDIT FINDINGS
EXECUTIVE SESSION
FINAL AND PRELIMINARY RELEASE OF AUDITS
REVISED PROGRAMS LEGISLATIVE
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KRIS CURTIS, Legislative Auditor
Legislative Finance Division
Juneau, Alaska
POSITION STATEMENT: Provided explanation regarding the
Legislative Budget and Audit Committee Handbook and RPLs.
NEIL STEININGER, Director
Office of Management & Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Provided information related to RPLs.
MEGAN WALLACE, Director
Legislative Legal & Research Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Provided information and responded to
questions during discussion of RPLs.
HANNAH LAGER, Director
Division of Administrative Services
Department of Commerce, Community & Economic Development
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
RPLs.
ACTION NARRATIVE
10:02:47 AM
CHAIR NATASHA VON IMHOF called the Legislative Budget and Audit
Committee meeting to order at [10:02] a.m. Representatives
Tuck, Foster, Kaufman, Josephson, and Spohnholz and Senators
Bishop (via teleconference), Micciche (via teleconference),
Stedman, and von Imhof were present at the call to order. Also
present was Senator Kiehl (via teleconference).
CHAIR VON IMHOF announced a change to the agenda, saving
discussion of RPLs to follow the executive session. There being
no objection, the change in agenda was so ordered.
^APPROVAL OF MINUTES
APPROVAL OF MINUTES
10:04:05 AM
CHAIR VON IMHOF announced the first order of business would be
the approval of minutes.
10:04:26 AM
REPRESENTATIVE TUCK moved that the Legislative Budget and Audit
Committee approve minutes of the following meetings as
presented: 7/14/22, 8/10/22, and 9/6/22. There being no
objection, the minutes from the 7/14/22, 8/10/22, and 9/6/22
meetings were approved.
^Proposed Change to the Legislative Budget and Audit Committee
Handbook
Proposed Change to the Legislative Budget and Audit Committee
Handbook
10:04:52 AM
CHAIR VON IMHOF announced that the next order of business would
be discussion of a proposed change to the Legislative Budget and
Audit Committee Handbook.
CHAIR VON IMHOF explained that the subject pertains to the
oversight and responsibility of the Legislative Budget and Audit
Committee related to the solution of significant audit findings.
The proposed change would formalize the process by which the
legislature continues oversight beyond review of audit findings.
She noted that the new language was flagged in the handbook
[available in the committee packet], beginning on page 41. She
asked Kris Curtis to provide further details.
10:05:38 AM
KRIS CURTIS, Legislative Auditor, Legislative Finance Division,
said she was asked to incorporate a new oversight process into
the handbook. She reminded the committee that the first step of
the process was to focus on top audit issues, following which
she had presented them to the committee. Second, the top issues
were communicated to state agencies, which were asked to provide
their corrective action or status of the issues. She said she
summarized those agency responses for the committee, which then
determined whether it wanted to continue the follow-up process
by sending those audit issues to legislative committees for
consideration during the next legislative session. She said the
process is meant to be an annual one.
10:06:56 AM
REPRESENTATIVE KAUFMAN added that the goal is "to standardize
what we've been doing that worked well." He indicated this
would be a guide for future legislative committees.
10:07:58 AM
SENATOR BISHOP asked whether this process would be a burden on
the Legislative Audit Division.
10:08:22 AM
MS. CURTIS answered that she would just be summarizing that
which the division already does. The burden would land on her
shoulders, not that of her staff, and that is part of her job.
She said this would actually benefit the audit process, and she
opined that it is a needed addition. She stated support for the
change.
10:09:33 AM
REPRESENTATIVE KAUFMAN noted the goal is not an audit but to
"drive improvement" - to ensure compliance. Without the change,
opportunity is missed, and languishing issues are not resolved.
He expressed that "doing a little bit of extra work can actually
start to drive down the future workload."
10:10:50 AM
SENATOR VON IMHOF described shining a light on the top ten
issues, and then the next top ten, and so on. She said this is
a tool the entire legislature can use during session in a
variety of ways to "begin to dive into the findings" and address
them.
10:12:00 AM
REPRESENTATIVE KAUFMAN thanked Ms. Curtis for her partnership
working on this issue.
10:12:10 AM
REPRESENTATIVE TUCK moved that the Legislative Budget and Audit
Committee adopt the updated and revised Legislative Budget and
Audit Committee Handbook as presented today. There being no
objection, the revised handbook was approved.
^PRESENTATION ON FY 21 AUDIT FINDINGS
PRESENTATION ON FY 21 AUDIT FINDINGS
10:12:37 AM
CHAIR VON IMHOF announced that the next order of business would
be a Presentation on Top Eight Audit Issues.
10:12:51 AM
MS. CURTIS began the PowerPoint presentation [hard copy included
in the committee packet] by specifying that the oversight
process she would discuss extends beyond a single audit; it
revisits special audits and performance audits and provides a
mechanism for following up those findings. She briefly showed
slide 2, which read as follows [original punctuation provided,
with some formatting changes]:
Audit Oversight Process Top Eight Audit Issues
Focus
Identify top audit findings in terms of fiscal or
societal impact and degree of difficulty in addressing
findings.
Communicate
Work with auditees to identify corrective action for
top audit findings.
Evaluate
Determine whether legislative action is required;
refer to legislative committee for consideration.
Measure
Examine progress through legislative finance
committees or other legislative committees as
relevant.
Repeat
Once the Single Audit is released repeat. Process
covers all reports issued over a fiscal year.
MS. CURTIS addressed slide 3, which read as follows [original
punctuation provided, with some formatting changes]:
1. Financial Statement Opinion Modifications
Issues That Led to Qualified Audit Opinion
? Revenues eligible for transfer to the Constitutional
Budget Reserve Fund (CBRF) due to Federal Energy
Regulatory Commission decisions were not transferred
during FY 18 through FY 21 and fund balances that
should have remained in the CBRF were moved to the
General Fund.
? The Department of Natural Resources did not transfer
to the Alaska Permanent Fund all dedicated mineral
lease revenues received during FY 18 and FY 19.
Based on guidance from the attorney general, fund
balances for certain subfunds were considered assigned
instead of swept into the CBRF.
Single Audit Findings (Reference)
? 2021-019, 2021-064 (CBRF transfers)
? 2021-063 (Perm Fund transfers)
? 2021-008 (General Fund assigned balance)
MS. CURTIS stated there were three reasons for modifying the
financial statement opinion, two of which the division believes
will resolve themselves. She said in July the Legislative
Budget and Audit Committee recommended pursuing a court
resolution for taxes and royalties received as a result of those
Federal Energy Regulatory Commission (FERC) decisions;
therefore, a court interpretation of that issue is being
pursued.
MS. CURTIS turned to the second issue, shown on slide 4, which
read as follows [original punctuation provided, with some
formatting changes]:
2. Financial Statement Errors
Significant Errors in Draft Statements
? Although improvements were noted regarding the FY 21
number and severity of errors, there were still
significant errors and repeat findings. The Division
of Finance is understaffed in terms of resources and
training. Department accounting staff suffer from
routine turnover and lack of experience.
Single Audit Findings (Reference)
2021-001, 2021-006, 2021-007, 2021-009, 2021-010,
2021-011, 2021-026, 2021-027, 2021-051, 2021-065,
2021-069
MS. CURTIS said she saw improvement when comparing the FY 20 and
FY 21 financial statements; however, there were significant
errors. She said this is a summary of 10-12 actual findings
merged into one area. She highlighted that the Division of
Finance, which produces the statements, is understaffed and has
inexperienced accountants, which impacts timing and quality.
She noted that the legislature, in the last sessions, approved
two new positions; those positions are yet to be filled, but
once filled should positively effect both quality and timing.
10:15:05 AM
MS. CURTIS moved on to slide 5, which read as follows [original
punctuation provided, with some formatting changes]:
3. Medicaid Eligibility Determinations
Significant Errors in Accuracy and Timeliness of
Eligibility Determinations
? Division of Public Assistance eligibility
technicians did not process applications in a timely
manner or redetermine eligibility when required for
32.5% of Medicaid cases tested and 72% of Children's
Health Insurance Program (CHIP) cases tested.
? Inaccurate eligibility determinations found in 20%
of Medicaid cases tested and 8% of CHIP cases tested.
? Special audit 06-30094-20 found that, during FY 19,
the Department of Health and Social Services paid $28
million in State general funds for ineligible benefits
due to eligibility errors.
Single Audit Findings (Reference)
? 2021-045, 2021-046
MS. CURTIS directed attention to slide 6, which read as follows
[original punctuation provided, with some formatting changes]:
4. Medicaid Behavioral Health
Significant Errors With New Behavioral Health System
and With Provider Screening
? New system had a defect, which caused claims to be
paid despite invalid procedure code and modifier
combinations.
? Logic flaws in new system resulted in paying for
ineligible services. Further, the system paid several
wrong providers and unenrolled providers.
? Certain behavioral health providers were not
screened and enrolled in accordance with federal
eligibility requirements.
Single Audit Findings (Reference)
? 2021-042, 2021-043, 2021-048
10:16:07 AM
MS. CURTIS, in response to Chair von Imhof, said the resulting
financial loss did not add up to "a huge amount," and she said
she could follow up with the exact number. The single audit is
available online, she noted. She added that often it is not
possible to determine the actual cost, just that there have been
"logic flaws" producing errors.
10:17:00 AM
MS. CURTIS returned to the PowerPoint, to slide 7, which read as
follows [original punctuation provided, with some formatting
changes]:
5. Temporary Assistance for Needy Families Program
Deficiencies
Material Weakness and Material Noncompliance Over
Eligibility and Special Tests and Provisions
? 13 of 45 cases (29%) lacked documentation to support
the request and use of data exchanges necessary for
determining eligibility and benefit amount.
? 6 of 12 child support noncooperation alerts tested
(50%) were not assessed a penalty to reduce benefits
when determined necessary.
? 37 of 45 cases tested (82%) reported work activities
that were inaccurate, unsupported, or unverified.
? Of 15 case files of clients that were not engaged in
work activities and did not have a good cause
exemption, 8 were not assessed a penalty, even though
documentation showed that a penalty should have been
assessed, and 3 lacked sufficient documentation to
determine whether a penalty should have been assessed.
Single Audit Findings (Reference)
? 2021-032, 2021-036, 2021-037, 2021-038
MS. CURTIS noted that the Temporary Assistance for Needy
Families Program (TANF) is found in the new Department of
Health's Division of Public Assistance, and the Legislative
Audit Division has reached out to get the status on the type of
action taken by the agency to address this issue. In response
to Chair von Imhof, she said the federal government relies on
the state audit of this program. The department provides
corrective action. Notwithstanding that, the federal government
will sometimes do its own review if it sees a problem not being
addressed. She added that the federal government can assess a
penalty, and the state can choose to use that amount of money
instead toward corrective action. In response to a follow-up
question, she said she does not think the path of communication
between TANF and the federal government is searchable. The
Legislative Audit Division receives copies of the management
decision; however, the summary of prior year audit findings can
be accessed in the back of the single audit, and that
information is available to the public.
10:19:38 AM
MS. CURTIS returned to the presentation, to slide 8, which read
as follows [original punctuation provided, with some formatting
changes]:
6. Alaska Mental Health Trust Authority
2021 Audit Made Five Recommendations
Audit Control Number 04-30099-21
1. The Authority's board of trustees should consider
liquidating the Trust Land Office managed commercial
real estate investments or transferring the
investments to the Alaska Permanent Fund Corporation
as inflation-proofing.
2. The board of trustees should develop written
procedures to ensure that annual withdrawals are
correctly calculated.
3. The board of trustees should develop written
policies to ensure Trust income reserves are correctly
determined.
4. The board of trustees should consider developing
written policies that require inflation-proofing
occurs annually if Trust income reserves are
sufficient.
5. The board of trustees should develop written
policies to annually evaluate whether Trust income
must be transferred to the General Fund.
MS. CURTIS said these recommendations come out of the division's
review of the use of trust cash principal for the purchase of
commercial real estate investments instead of sending that
principal to the Permanent Fund Corporation for investment. She
explained that the FY 21 audit is a follow-up of the FY 18
audit. She recommended the Legislative Budget and Audit
Committee reach out to the authority to request the current
status of resolving these recommendations. She remarked that
the authority has a lot of new trustees, and the chair that
existed when the division last did the audit has moved on, as
has the director.
10:20:42 AM
REPRESENTATIVE JOSEPHSON asked, "What is the [Alaska] Mental
Health Trust Authority's disposition toward the argument that
they shouldn't be doing this at all?"
MS. CURTIS responded that initially, back in 2018, the
authority's response to the audit was that it was still
evaluating whether to agree or disagree. She stated, "They have
stopped doing it." She noted that the authority had transferred
"a piece of the investments" some reserves to the authority,
which definitely addressed the problem. She stated that the
Legislative Audit Division had some concerns about that
corrective action "because we felt it really took their reserves
down to if it was a downturn in the market that might put them
in a precarious position." Further, the division recognized
that "they weren't inflation-proofing" in a timely and prudent
manner, thus the division made a list of recommendations. She
noted that the Trust Land Office posts these findings on its web
site, with a response to the findings for public access. Ms.
Curtis stated that she thinks "they were very cooperative" and
there was a team effort in figuring out what has been done and
can be done. Further, she pointed out that disposing of
commercial assets would be "something you'd want to do over
time, you know, finding the right time to ... dispose of them."
10:22:28 AM
SENATOR STEDMAN said he thinks there had been some reluctance on
liquidating the real estate assets. He noted that one or more
of them have substantial negative cash flow performance issues.
That said, he offered his understanding that "they're slowly
working through the issues." He indicated that he thinks a
current status update in January or February from the authority
board to the legislature would "probably be a good idea." He
offered his understanding that since the first audit, "they are
moving forward" but with no real estate acquisitions, so there
has been "a directional change."
10:23:45 AM
REPRESENTATIVE TUCK remarked that initial resistance to the
audit resulted in slow response at first; however, "they're
coming around." He recalled there had been a purchase of
undesirable real estate primarily in Texas that later increased
in value. He offered his understanding that "this money" was
"supposed to have been deposited and invested through the
Permanent Fund Corporation." He asked, "Is there any way that
we could just turn over these assets to the Permanent Fund
Corporation?"
10:24:47 AM
MS. CURTIS indicated she had spoken with the previous director
of the Alaska Permanent Fund Corporation about that issue. She
said that in the audit itself, she addresses "their reluctance
to do that" and expresses concerns related to quality and the
management of assets. She said, "So, [that] they did not want
... them is the gist that I got." She said she recommended a
transfer and inflation-proofing as an option. She said she
thinks the board is still trying to figure out "whether they
want to sell them or not." It is a matter of timing, and
considering the pandemic's impact on commercia real estate, it's
really not the right time, she concluded.
10:26:06 AM
REPRESENTATIVE TUCK asked Ms. Curtis to confirm that by "they"
she means the Alaska Permanent Fund Corporation doesn't want the
assets. He said if the corporation does not want the assets,
the only way to correct that is to sell them. He said he can
understand the hesitancy to sell the assets when the market is
currently not good. He suggested the committee let this process
occur according to the best timing.
MS. CURTIS responded that legally the management of the assets
is the responsibility of the authority. The legislature's role
is more of an oversight. She indicated this was part of a
settlement, which makes it difficult to change the law. She
offered a big picture observation that "all of these board
members that were involved in these decisions back in the day
have all gone," and there is a new authority board that has
learned from the results of the audit.
10:27:29 AM
MS. CURTIS returned to the presentation and discussed slide 9,
which read as follows [original punctuation provided, with some
formatting changes]:
7. Alcoholic Beverage Control Board
2021 Audit Made Five Recommendations
Audit Control Number 08-20127-21
1. The Department of Commerce, Community, and Economic
Development (DCCED) commissioner should ensure the
Alcohol and Marijuana Control Office (AMCO) staff
vacancies are filled in a timely manner and the AMCO
director should implement written licensing
procedures.
2. The board should significantly enhance or replace
its licensing database and automate the application
process where possible.
3. The board and AMCO director should strengthen
procedures for entering restricted purchasers in the
statewide database of written orders.
4. The board and AMCO director should implement
procedures to ensure municipalities receiving refunds
of biennial licensing fees are actively enforcing
alcoholic beverage laws.
5. The AMCO director should improve procedures and
fill vacancies in a timely manner to ensure refunds to
municipalities are appropriately reviewed.
MS. CURTIS directed attention to slide 10, which read as follows
[original punctuation provided, with some formatting changes]:
8. Board of Pharmacy Controlled Substance Prescription
Database
2021 Audit Made Three Recommendations
Audit Control Number 08-20126-22
1. Applicable occupational boards and the Division of
Corporations, Business and Professional Licensing
(DCBPL) director should continue to coordinate efforts
to improve the monitoring and enforcement of the
Controlled Substance Prescription Database (CSPD)
requirements.
2. DCCED's commissioner should allocate sufficient
resources to ensure licensees holding a Drug
Enforcement Administration registration number are
consistently recorded in DCBPL's licensing database.
3. DCCED's commissioner should allocate sufficient
resources to ensure the CSPD requirements are
enforced.
MS. CURTIS noted that there had been numerous meetings of the
House Finance Committee on this issue. She said the Department
of Commerce, Community & Economic Development (DCCED) had
secured funding to conduct a study to produce information to
provide to the legislature, and she recommended that the
Legislative Budget and Audit Committee ask about the status of
that study.
MS. CURTIS concluded her presentation on slide 11, which read as
follows [original punctuation provided]:
Next Steps LB&A Oversight
Legislative Auditor sends letters on behalf of the
LB&A Committee to the auditees asking for the status
of corrective action. A summary of the responses will
be presented at the December LB&A meeting. For those
audit findings that warrant consideration by other
legislative committees, the findings will be forwarded
to the appropriate committees for consideration during
the 2023 legislative session.
10:29:43 AM
CHAIR VON IMHOF explained that the presentation was the action
to a previous motion passed by the Legislative Budget and Audit
Committee. She said it will be up to the new legislature to
progress based on these findings. She said she thinks it will
be important to work with the committee to determine what the
next top findings will be.
10:30:24 AM
REPRESENTATIVE KAUFMAN, as a point of housekeeping, commented
that "some of these are bundles of items"; therefore, the top
eight items may end up segmented, because sometimes "the closure
of one gets ahead of the closure of a second or the third."
10:30:59 AM
CHAIR VON IMHOF responded that the committee is in the infancy
of this process, which would likely be tweaked going forward.
^EXECUTIVE SESSION
EXECUTIVE SESSION
10:31:11 AM
CHAIR VON IMHOF announced that the next order of business would
be an executive session to consider the final audit report for
the Alaska State Medical Board sunset and a preliminary audit
report for the Board of Certified Direct-Entry Midwives sunset
and the special audit of the Alaska State Commission for Human
Rights.
10:31:30 AM
REPRESENTATIVE TUCK moved that the Legislative Budget and Audit
Committee go into executive session under Uniform Rule 22(d)(3)
for the discussion of matters that may, by law, be required to
be confidential. He asked that the following persons remain in
the room or online: Kris Curtis, the legislative auditor, and
necessary staff to the auditor; any legislators not on the
committee; staff for legislators that are on the committee; and
House Finance staff in Juneau for access to their office. There
being no objection, it was so ordered.
10:32:27 AM
The committee took an at-ease from 10:32 a.m. to 11:21 a.m. for
the purpose of executive session.
11:21:16 AM
CHAIR VON IMHOF called the Legislative Budget and Audit
Committee back to order at 11:21 a.m. Representatives
Josephson, Spohnholz, Tuck, Foster, and Kaufman and Senators
Stedman, Micciche (via teleconference) and von Imhof were
present at the call back to order. Senator Kiehl (via
teleconference) was also present.
^FINAL AND PRELIMINARY RELEASE OF AUDITS
FINAL AND PRELIMINARY RELEASE OF AUDITS
11:21:43 AM
CHAIR VON IMHOF announced that the next order of business would
be motions for the final and preliminary release of audits.
11:21:55 AM
REPRESENTATIVE TUCK moved that the Legislative Budget and Audit
Committee release the State Medical Board Sunset Audit as a
final audit report. There being no objection, it was so
ordered.
11:22:11 AM
REPRESENTATIVE TUCK moved that the Legislative Budget and Audit
Committee release the following preliminary audits to the
agencies for response: the Department of Commerce, Community &
Economic Development Board Certified Direct-Entry Midwives
sunset audit; and the Office of the Governor Alaska State
Commission on Human Rights special audit. There being no
objection, the audits were released.
^REVISED PROGRAMS - LEGISLATIVE
REVISED PROGRAMS - LEGISLATIVE
[Contains discussion of HB 281.]
11:22:37 AM
CHAIR VON IMHOF announced that the final order of business would
be consideration of Revised Programs - Legislative.
CHAIR VON IMHOF noted that earlier that day, the Office of
Management & Budget (OMB) withdrew four revised programs -
legislative (RPLs), numbered 08-2023-0130 through 08-2023-0133
and replaced them with two RPLs, numbered 08-2023-0165 and 08-
2023-0166. The other two RPLs on the schedule, relating to the
Department of Natural Resources (DNR) and "the Judiciary
Department" are unchanged.
11:23:37 AM
The committee took an at-ease from 11:23 a.m. to 11:28 a.m.
11:28:30 AM
CHAIR VON IMHOF named those available to speak to the RPLs.
11:29:04 AM
NEIL STEININGER, Director, Office of Management & Budget (OMB),
Office of the Governor, explained that OMB had submitted four
RPLs for the Department of Commerce, Community & Economic
Development (DCCED) in order to distribute grants to seafood
processors. The breakdown into four RPLs was to accommodate the
overall grant amount from the U.S. Government of just over $30
million and ensure this fit under the restrictions provided in
HB 281 limiting RPLs to no more than $10 million per RPL.
Subsequently, it was determined that this manner of dividing the
funds did not align with the standards set under the
legislation; therefore, OMB has provided the two aforementioned
replacement RPLs: one that falls within the Division of
Community and Regional Affairs and one that falls within Serve
Alaska, both entities housed within DCCED. He indicated that
the two new RPLs would provide for at least $21 million of the
approximately $31 million in grant awards to be distributed to
seafood processors. He confirmed that the new two RPLs are
numbered 08-2023-0165 and 08-2023-0166.
MR. STEININGER stated another RPL, [numbered 10-2023-5089], is
for DNR, in the Division of Geological and Geophysical Surveys,
and is related to an award from the Federal Emergency Management
Agency (FEMA); another RPL, [numbered 41-2023-0001], is for the
judicial system and is related to a Fairbanks Wellness Court
enhancement project.
11:30:56 AM
CHAIR VON IMHOF reviewed that the original four RPLs were
related to funds from the U.S. Department of Agriculture (USDA)
Seafood Processors pandemic response due to COVID-19, and the
money has been "trying to get out the door for the last year or
so." She expressed her desire to issue the money sooner than
later. She said the committee is trying to figure out a way to
do this under the parameters of the aforementioned legislation.
She asked Mr. Steininger to explain the delay in issuing the
funds and how the new RPLs work with the parameters set forth by
the legislature "last spring."
11:32:42 AM
MR. STEININGER named factors that led to the delay in
distribution of funds. First, the federal award was delayed "a
month or so" from the anticipated delivery early in the calendar
year. Second, in attempting to issue the grant guidance, "we
had some delays in our ability to actually set up the grant
portal in order to have the grantees apply." Further, during
that process some of the grantees requested an extension in time
to provide their responses. Those factors resulted in OMB being
unable to have the grant applications and determinations by the
close of the fiscal year; this meant the appropriation had
"turned," and it was no longer possible to issue those grants.
He said OMB now has the applications and needs access to the
funds in order to spend federal receipt authority to make the
payments.
MR. STEININGER stated that the first set of RPLs would have
exceeded the $10 million restriction set by HB 281, because
although they were four RPLs each for less than $10 million,
they all addressed the same appropriation item. The two RPLs
replacing the original four address two separate items. They
are the appropriation allocation and the allocation to Serve
Alaska, both within the Division of Community and Regional
Affairs. He said both allocations would be provided by the
division as grant opportunities to fish processors throughout
Alaska.
11:35:25 AM
CHAIR VON IMHOF clarified her wish to have the full $35 million
distributed to the food processors, and that the two replacement
RPLs would get $20 million to them, leaving the distribution of
$15 million a conundrum. She requested Megan Wallace discuss
this issue as it relates to an Alaska Supreme Court decision in
Wielechowski v. State of Alaska and whether the Legislative
Budget and Audit Committee can appropriate however it sees fit,
regardless of statute.
11:36:50 AM
MEGAN WALLACE, Director, Legislative Legal & Research Services,
Legislative Affairs Agency, stated that "the legislature remains
the appropriating body." She continued:
The Legislative Budget and Audit Committee is an
interim oversight committee, and under AS
37.07.080(h), which is also known as "the RPL
process," the governor can submit an RPL asking for
increase of an appropriation item based on additional
federal, or other program receipts. And then LB&A has
the power to review and approve those RPLs. If the
LB&A committee does not approve or does not take
action, there's a 45-day wait period before the
governor can then proceed with expending the
additional federal, or other program receipts
requested in the RPL.
There are several legal issues with ... the two RPLs
that are now before the Legislative Budget and Audit
Committee based on my office's quick review of the two
RPLs sent over this morning. The issues we have
flagged really center on the ... RPL ... that is
associated with the appropriation on page 5, line 18,
of HB 281, and I believe that is RPL 08-2023-0166.
And so, that RPL seeks to increase the appropriation
for the Serve Alaska allocation. In HB 281, ... the
legal issue with respect to that RPL is that while
there are multiple RPLs that were submitted, from the
text of the RPLs themselves, it just appears to be a
singular program, and separating RPLs into multiple
RPLs appears to be an attempt to circumvent that
Section 77(e) of HB 281, which is now Chapter 11 SLA
2022, ... taking the limit of an increase, those two
in appropriation, items FY 23, to no more than $10
million. And so, what this really looks like is a $20
million increase to this program, which was originally
approved as an RPL back in December of 2021 by this
committee using the appropriation authority for the
[Division of] Community and Regional Affairs
allocation, which is the allocation that is used in
RPL 0165.
The other issue that I see with using the Serve Alaska
allocation is that it raises appropriation
constitutional issues similar to the CARES Act RPLs
that came before this committee back in 2020, in that
there is no program for the Serve Alaska allocation
that is currently used for this purpose. And the RPL
statute, under [AS] 37.07.080(h), are arguably not as
tended to be used to create appropriations; it's to be
used to increase appropriations for items that the
legislature has already appropriated for, and the ...
legislature cannot delegate to a singular committee to
make appropriations during the Interim.
11:41:36 AM
REPRESENTATIVE JOSEPHSON asked whether the opportunity would
lapse or whether this matter could be attended to in mid- to
late January.
11:42:13 AM
HANNAH LAGER, Acting Director, Division of Administrative
Services, Department of Commerce, Community & Economic
Development, explained that the division's concern with
distributing the funding is "the continued function of the
seafood processors." She indicated that the division has
received a number of inquiries from processors anxious to
receive the much needed funding. She added, "From the timing of
their inquiries it appears that many of their fiscal years may
end in December, and so that would be our largest concern would
be with January getting the funding in their current fiscal
year."
11:43:11 AM
SENATOR STEDMAN spoke about collateral damage in the last budget
cycle, "when we put the $10 million [cap] on." He noted that
this appropriation was "not even on the radar screen" the
previous year, "so we end up with an issue in front of us
today." He emphasized it is just a matter of sequence and
timing to get the money distributed, and he opined that "we need
to ... move this quickly as we can to disburse these funds like
we have the other COVID relief funds throughout multiple
appropriations, without tripping up litigation or disputes with
the administration to slow it down." That said, he also
emphasized the need to follow statutory guidelines. He
expressed concern about the potential of adding some of these
funds into a supplemental bill, which although intended as "a
fast-track supplemental" is not guaranteed to be quick. He
concurred with Representative Josephson that although it is
technically possible that the legislature can take quick action
once it convenes as a body on an appropriation bill, it is
highly unlikely because of the number of members with varying
opinions and ideas for additions that result in "an out-of-
control appropriation." He stated that he hopes the committee,
collectively with the administration, moves forward today to
"move as much money on these RPLs through the street as
possible." He recommended addressing the "RPL ending in 166"
and talking about how to "deal with the rest of them," and he
emphasized that "the legislature thought this would be gone in
the previous fiscal year, and here it is November, and it should
st
have been sent out by July 1."
11:46:51 AM
MS. LAGER, in response to Representative Spohnholz, proffered
that the difference between the two RPLs is just the
appropriation.
11:48:00 AM
REPRESENTATIVE SPOHNHOLZ expressed concern about the seafood
processor industry facing difficulties because the legislature
is failing to get the funds delivered. She expressed further
concern that the committee may be circumventing statute by
advancing two RPLs that are essentially the same, each with a
$10 million legal limit. She stated, "I think we would be
getting ahead of ourselves by doing that."
11:49:45 AM
MS. LAGER, to a question from Representative Tuck regarding the
total requested, said she does not have the total of the demand,
but award amounts that have been calculated are 28 percent of
each grantee's requested need, so over $90 million has been
identified. In response to follow-up questions, she said the
largest calculated grant amount at this point is $7.4 million
for one grantee, with the smallest being just over $800. She
said the original RPL was passed on 12/15/21, after a delay of
the application process from May. She informed Representative
Tuck that Serve Alaska has a commission responsible for awarding
grants through the program, but those are grants that come
through specific federal funding streams.
REPRESENTATIVE TUCK asked, "Could this be one of those federal
funding streams?"
MS. LAGER answered no.
11:52:43 AM
REPRESENTATIVE TUCK commented that while the legislature has
appropriation authority, the Legislative Budget and Audit
Committee does not. He said because of "poor past practices of
this committee" the legislature has put a limit on how much the
Legislative Budget and Audit Committee can approve during the
Interim. He said he has no problem with "the first" RPL but
that the "second one" is "a bit of a stretch." He spoke further
about timing with the legislature.
11:54:46 AM
SENATOR STEDMAN commented on the cap and reiterated that the
funds did not get out in a timely manner, and indicated that the
Legislative Budget and Audit Committee is "on the front lines
during the Interim."
CHAIR VON IMHOF suggested it would make sense to pass RPL 08-
2023-0165, for $10 million. She said this money has been in
limbo for a while. She pointed out that the committee would
meet again in December 2022 and could address the remaining $25
million then. She said, "This money that we're talking about
was passed ... December 21, 2020, under the Trump Administration
and signed into law on 12/27/20." She said HB 281 specifically
thth
calls out the 117 and 118 Congress in terms of applying the
th
limitations; however, these funds are from the 116 Congress.
For that reason, she suggested the committee may decide it has
the wherewithal to put in the other $25 million through the
original process. She suggested everyone educate themselves
between now and the next meeting in order to make a "timely,
thoughtful decision."
11:57:43 AM
REPRESENTATIVE TUCK spoke to the function of the Finance
Committee in ensuring money goes where needed. He said an RPL
process done on the fly does not allow him to do his homework.
He emphasized the committee had just received the two
replacement RPLs. He indicated that he has a lot of questions,
and he further indicated approval of Chair von Imhof's suggested
process going forward.
CHAIR VON IMHOF remarked that considering the unusual
circumstances, it would benefit the committee to extend the
discussion "30 more days."
11:59:47 AM
REPRESENTATIVE JOSEPHSON agreed with the extension of time but
emphasized that he would "strictly construe this law." He said
the Legislative Budget and Audit Committee has existed for 60
years and has not been challenged in court, but he agrees with
Representative Tuck that its members stand for the other members
of the legislature during Interim. Further, the legislature's
attorney has given two reasons that the RPLs are problematic.
12:00:49 PM
CHAIR VON IMHOF said she thinks it is important to weigh all
evidence between now and the next meeting. She said she thinks
the committee is looking at "a disaster declaration," and the
committee "kicked it forward," and there was some question that
that may have been a violation of statute and authority, but the
committee "went ahead and did it anyway" and then ratified it.
Whether the current situation can have the same circumstances
applied to it is up for debate, she stated.
12:01:46 PM
MR. STEININGER, at the invitation of Chair von Imhof, addressed
the remaining RPLs in the committee packet. He reviewed that
RPL 10-2023-5089 is for the Division of Geological Geophysical
Surveys, within the Department of Natural Resources. The award
is from FEMA for an amount just under $3 million. He further
reviewed that RPL 41-2023-0001 is for the Judiciary in the
amount of $128,300 to work on the Fairbanks Wellness Court
enhancement project.
12:02:56 PM
REPRESENTATIVE TUCK moved that the Legislative Budget and Audit
Committee approve the following revised programs - legislative:
RPL 08-2023-0165, Department of Commerce, Community & Economic
Development, USDA Seafood Processors pandemic response and
safety block grant program, for $10 million for federal
operating receipts; RPL 10-2023-5089, Department of Natural
Resources, Division of Geological and Geophysical Surveys, for
$2.96 million of federal operating receipts; and RPL 41-2023-
0001, Judiciary, Fairbanks Wellness Court enhancement project,
for [$128,300] for federal operating receipts.
12:03:58 PM
REPRESENTATIVE KAUFMAN asked for confirmation on the amount of
the RPL for Judiciary.
REPRESENTATIVE TUCK confirmed it should be for $128,300.
12:04:38 PM
CHAIR VON IMHOF announced that there being no objection, the
RPLs were approved.
12:05:08 PM
ADJOURNMENT
There being no further business before the committee, the 12:05
p.m. meeting was adjourned at 12:05 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| RPL Complete Packet LBA 11.2.22.pdf |
JBUD 11/2/2022 10:00:00 AM |
|
| Top Eight Audit Issues November 2022.pdf |
JBUD 11/2/2022 10:00:00 AM |
Presentation |
| 2022 LBAC Handbook DRAFT.pdf |
JBUD 11/2/2022 10:00:00 AM |
|
| Replacement RPL #08-2023-0165 USDA Seafood Processor Block Grant - $10 Million of Grant Need 11.01.2022.pdf |
JBUD 11/2/2022 10:00:00 AM |
|
| Replacement RPL #08-2023-0166 USDA Seafood Processor Block Grant - $10 Million of Grant Need 11.01.2022 - Serve Alaska.pdf |
JBUD 11/2/2022 10:00:00 AM |