Legislature(2021 - 2022)ADAMS 519
04/20/2021 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB181 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 181 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 20, 2021
1:34 p.m.
1:34:21 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:34 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor; Paloma Harbour, Fiscal Management
Analyst, Office of Management and Budget, Office of the
Governor.
SUMMARY
HB 181 APPROP: SPECIAL; AMERICAN RESCUE PLAN ACT
HB 181 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 181
"An Act making special appropriations relating to the
American Rescue Plan Act; and providing for an
effective date."
1:35:13 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced a PowerPoint
presentation titled "State of Alaska Office of Management
and Budget: House Finance HB 181 ARP Budget Bill Overview,"
dated April 20, 2021 (copy on file). He noted there were a
handful of items not currently included in the budget bill
due to a lack of information from the American Rescue Plan
Act (ARPA). He explained that the items were included in
the presentation for the committee's information. The
presentation outlined the reason why the items had not been
put forward. He relayed that once additional information
had been received from the federal government, the Office
of Management and Budget (OMB) would update the legislature
and would communicate whether or not the decision to
include the items had been made.
PALOMA HARBOUR, FISCAL MANAGEMENT PRACTICES ANALYST, OFFICE
OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR,
referenced a three-page handout titled "COVID-19 Response
Funding" provided by OMB (copy on file), which provided
additional information on many of the direct grants to
agencies. She noted there were items listed on page three
that were not included in the bill but would be covered in
the presentation. She turned to slide 2 of the main
presentation related to direct grants from ARPA. She began
with grants included in the bill for the Department of
Education and Early Development (DEED) including $2.2
million in institute or museum and library service funds
and $758,700 in National Endowment for the Arts funding.
Ms. Harbour addressed DEED pending items that were not yet
included in the bill. The first item was emergency
education relief funding. She explained that OMB was
awaiting additional guidance on state maintenance of effort
requirements pertaining to the item. She reported that OMB
had received the requirements the previous day from the
U.S. Department of Education. The federal agency had
scheduled a call with states later in the week to discuss
the guidance in further detail. She stated that OMB hoped
to have additional information shortly.
Co-Chair Foster noted that Representative Carpenter had
joined the meeting.
Ms. Harbour continued to review slide 2. The second DEED
item not yet included in the bill was funding for the Child
Nutrition Program; OMB was awaiting further funding and
program information. The bill did not yet include
Department of Environmental Conservation (DEC) Low Income
Household Water Assistance Program funds. She explained
that the program was brand new and still under development
by the federal government; OMB was awaiting further
information. She moved to the Department of Health and
Social Services (DHSS) and highlighted that the bill
included funding for the Centers for Disease Control and
Prevention (CDC) in the amount of $22 million for COVID
testing and $32.4 million for COVID vaccinations. The bill
also included funding from the Administration for Children
and Families in the amount of $3.4 million for pandemic
emergency assistance to provide short-term nonrecurring
support to impacted families. Additionally, the bill
included $1.2 million for the Women, Infant, and Children
program for benefit improvements.
Co-Chair Foster asked if the items included in the bill
were considered restricted and there was no question where
the funds could go.
Ms. Harbour replied in the affirmative.
1:39:54 PM
Representative Wool asked if the presentation was referring
to direct grants that went through the state appropriation
system and not directly to state agencies.
Ms. Harbour answered that the grant funding was direct to
state agencies for a specific program. She elaborated that
the funding had specific criteria and where it went was not
discretionary. She clarified that the direct grants did not
include funding going directly to businesses, individuals,
or tribal governments. The presentation and bill did not
cover funding sources that did not go through the state
budget.
Representative Wool asked for verification that the money
under discussion for the direct grant was $1 billion that
went through the state budget and not directly to other
agencies.
Ms. Harbour replied in the negative. She clarified that the
$1 billion was the last page of the presentation and OMB
was not referring to it as direct agency grants because the
funding was more discretionary in terms of where it could
go. The money currently under discussion included grants
above the $1 billion.
1:41:33 PM
Vice-Chair Ortiz looked at the $22 million for COVID-19
testing on slide 2. He noted that the funding went directly
to DHSS. He asked if the funds could be distributed to
community airports to fund free testing of visitors to
Alaska.
Ms. Harbour responded that a number of the programs had
very specific requirements and it would be best to have the
agencies administering the programs answer some of the
detailed questions. She elaborated that the majority of the
testing [under the $22 million increment] was specific to
education testing to help schools reopen. She noted there
was some funding for underprivileged individual testing.
She would have to look into whether the funds could be used
at airports.
Ms. Harbour relayed that the bill did not include anything
OMB had already submitted a budget amendment for,
specifically related to housing programs.
Representative Josephson asked where the housing amendments
had been submitted.
Ms. Harbour answered that the amendments had been submitted
to the capital and operating budgets. The administration
had submitted amendments for the Housing Emergency Rental
Assistance program to Alaska Housing Finance Corporation
(AHFC), a mortgage assistance program, and a home choice
vouchers program. She believed there were four or five
related amendments.
Representative Josephson thought Ms. Harbour had stated the
amendments had been submitted through ARPA.
Ms. Harbour clarified that she had meant there were some
ARPA items for the housing programs that had been
previously submitted as amendments. She noted the items
were not included in HB 181.
1:44:55 PM
Ms. Harbour advanced to slide 3 and continued to review
ARPA direct grants for DHSS. She noted that the following
funds were estimates. The bill included childcare
development fund grants of $28.4 million, childcare
stabilization grants of $45.5 million, child abuse
prevention funding of $291,000, mental health block grant
funding of $3 million, substance abuse block grant funding
of $4.7 million, Low Income Home Energy Assistance Program
(LIHEAP) funding of $23.7 million, various grants
supporting older Americans and their families of $7
million, and pandemic EBT administrative grant funding of
$768,400.
Co-Chair Foster asked what EBT stood for.
Ms. Harbour replied she believed it was electronic bank
transfer [electronic benefit transfer].
Representative LeBon looked at the grants for DHSS and
asked about the funding formula within the dollar amounts
designated to the specific programs. He asked how the
funding allocation was community or population driven.
Ms. Harbour responded that the ARPA funding had specific
stipulations. For example, the vaccine funding was split
between education funding and underprivileged individuals.
She explained that the federal agency administering the
program made further allocations.
Representative LeBon looked at the Childcare Development
Fund grant on slide 3. He stated that Fairbanks and many
communities had a robust childcare program including a
variety of private and public organizations providing
services. He asked how the money would be spent and used
and how it benefitted a current childcare operator.
Ms. Harbour answered that it would likely be best to have
the agencies speak to the specific grants. She did not know
what formula would be used to distribute the funding.
Representative LeBon stated his understanding that the
guidance on how the money would be spent had been received
by state agencies. He asked for verification that DHSS had
received the information.
Ms. Harbour replied that DHSS had received various levels
of guidance on the programs. The department knew there was
no significant match requirement tied to the funding;
therefore, OMB had put the items in the bill. She did not
know if DHSS had received all of the program details yet.
Representative Carpenter thought EBT stood for electronic
benefit transfer in regard to the school lunch program.
1:48:30 PM
Ms. Harbour addressed pending DHSS items not included in
the bill on slide 3. She detailed that OMB was awaiting
state match requirement guidance for childcare assistance
and home and community-based services enhanced federal
participation. Additionally, OMB was awaiting funding and
program information for the Supplemental Nutrition
Assistance Program administrative grant increase.
Co-Chair Foster asked if the pending items were mentioned
in the bill as to be determined later. Alternatively, he
asked if the items were not referenced in the bill at all.
Ms. Harbour confirmed that the grants were not included [or
referred to] in the bill. The items were included in the
presentation for the committee's information.
1:49:33 PM
Ms. Harbour turned to slide 4 and reviewed direct grants
included in the bill for the Department of Labor and
Workforce Development (DLWD). The bill included higher
education emergency relief funds for Alaska Vocational
Technical Center (AVTEC) in the estimated amount of
$441,000. She noted that half of the funding would go to
students as grants. The bill also included a capital
project for the Unemployment Insurance System modernization
in the estimated amount of $6 million. She moved to the
Department of Military and Veterans Affairs (DMVA) and
highlighted an emergency management performance grant for
$882,300 included in the bill. The bill included federal
transit administration grants in the amount of $6.6 million
for the Department of Transportation and Public Facilities
(DOT). She noted the bill did not include anticipated
funding from the Federal Aviation Administration (FAA) for
airport rescue grants. The administration was awaiting
funding information for the item. The bill included $30.8
million for higher education emergency relief funds for the
University of Alaska.
Co-Chair Foster requested to receive a copy of the bill for
all members.
Representative Wool referenced the higher education funds.
He noted at a previous meeting he had asked OMB about the
funding split between the university and students. He
remarked that initially students had been forced to leave
[due to the pandemic] and were reimbursed for housing or
tuition. He wondered if the funding going forward was meant
to give students a break on tuition via grants. He was
trying to understand the reasoning behind directing the
money to students if their semester had not necessarily
been disrupted.
Ms. Harbour answered that the funds could go to defray
students' costs, whether the costs were incurred for
distance learning or for technology upgrades to allow for
increased distance learning. She stated that the funds
could potentially go towards tuition costs. She was not
certain how the university would grant the funding out to
students.
Representative Wool asked about the maintenance of effort
and noted that the University of Alaska was getting $30
million in the bill. He asked if OMB was assuming the
variance or exemption would be granted.
Ms. Harbour clarified that the higher education emergency
relief funds did not require a state maintenance of effort.
She explained that the maintenance of effort requirement
applied to education funds referenced earlier in the
presentation that had not yet been included in the bill.
The administration was still waiting for additional
information on the maintenance of effort requirement.
1:53:02 PM
Representative LeBon looked at the Unemployment Insurance
System Modernization funds at the top of slide 4. He asked
if the state had a need to modernize its unemployment
insurance system. He wondered if the funds would default
back to the federal government if the state did not have a
need to modernize the system. He asked if the state would
use the funds for modernization even if it did not have a
need to do so.
Ms. Harbour replied that it was definitely a need in
Alaska. She detailed that the existing [unemployment
insurance] system was old, and modernization would help
with transparency, detecting fraud and other things. She
elaborated that the grant was a competitive award for the
specific purpose; therefore, if the state received a grant
it would have to be used for system modernization.
1:54:20 PM
Ms. Harbour moved to slide 5 and addressed two items tied
to the Coronavirus State and Local Fiscal Relief Fund
(CSLFRF). The first item was for capital projects funding
of $112.3 million. She noted it was a placeholder
appropriation at present. She shared that all OMB knew
currently about the funding was the language in the
[federal] bill stating that the funding was allowable to
carry out critical capital projects directly enabling work,
education, and health monitoring, including remote options,
in response to the public health emergency with respect to
the Coronavirus Disease. She reported that initial calls to
Treasury indicated the language only applied to broadband
projects. She stated that further federal guidance was
anticipated by May 10th.
Representative Johnson asked for a repeat of the
information related to broadband. She thought ARPA
originally included water and sewer as well.
Ms. Harbour complied. She explained that the information
about the rest of the CSLFRF funds in the amount of $1
billion was addressed on the last slide of the
presentation. She detailed that one of the uses of the
specific funding was on water, sewer, and broadband
infrastructure projects. The item on slide 5 was a separate
allocation in ARPA specifically for capital project funding
to carry out critical capital projects directly enabling
work, education, and health monitoring, including remote
options. She shared that Treasury was initially
interpreting the language to mean broadband.
1:56:22 PM
Representative Rasmussen asked if it would include
telehealth provisions.
Ms. Harbour did not currently know.
Co-Chair Foster referenced the $112.3 million in capital
projects funding on slide 5. He thought it was funding for
water, sewer, and broadband. He surmised that Ms. Harbour
was saying the funding was separate from that purpose. He
stated his understanding there was a separate bucket that
applied to water, sewer, and broadband. He asked for
verification that the $112.3 million was for broadband
only.
Ms. Harbour replied in the affirmative. She explained there
was a separate $1 billion in discretionary funding for the
state that could be used for water, sewer, and broadband
infrastructure. The $112.3 million on slide 5 was a
separate set-aside that OMB had initially thought could be
used for more than broadband; however, Treasury was
indicating the funding was for broadband only.
1:57:49 PM
Ms. Harbour continued to review slide 5 and explained that
the second item tied to the CSLFRF was $185.4 million in
pass-through funding via the Department of Commerce,
Community and Economic Development (DCCED). The funding was
for Alaska communities defined as non-entitlement local
governments and counties. She detailed that the funding
would be passed through [DCCED] as grants based on the
allocation methodology in the act and clarified by
Treasury.
Vice-Chair Ortiz asked for a definition of non-entitlement
local governments and counties.
Ms. Harbour answered that ARPA tied the definition to a
federal program. She elaborated for the most part, counties
were the same as the state's boroughs. She explained that
non-entitlement local governments were cities and/or
unorganized communities.
Representative Rasmussen asked for clarification that the
funding was direct to nonorganized communities in Alaska.
She asked if there was additional funding that went
directly to organized municipalities and boroughs.
Co-Chair Foster asked if non-entitlement local governments
and counties included villages.
Ms. Harbour answered that the non-entitlement allocation
primarily included cities such as Adak City and Akiak City.
She expounded that the U.S. Senate provided an initial
allocation that would be refined by Treasury before Alaska
received the funding. The county allocation included the
state's boroughs such as the Aleutians East Borough. She
noted the information had been provided to the committee
the last time OMB had presented on ARPA; however, she did
not have it on hand at the current meeting.
Co-Chair Foster requested a copy of the information.
1:59:59 PM
Representative Wool assumed it was more of a per capita
calculation. He asked if the information was in the bill.
Ms. Harbour answered that the bill did not include any
funding that would go directly to a community from the
federal government, including the Municipality of
Anchorage's allocation. The bill only included funding for
communities that would receive their funding through the
state.
Representative Wool asked if it was possible to create a
flow chart to show funds going through the state and others
that went directly to communities. He remarked that some of
the funds in the presentation went through legislation and
others did not.
Representative Josephson asked about the nexus to COVID and
surmised that it likely varied by item. He referenced
community pass through items on slide 5 and assumed it was
not like community assistance, which was unencumbered and
could be used liberally by a community for its own purpose.
Ms. Harbour agreed there were stipulations in ARPA that
specified how funds could be spent, which were similar to
the state. She noted that the presentation was about to
cover the topic.
2:02:13 PM
Mr. Steininger turned to slide 6 and addressed CSLFRF state
funding uses and restrictions. He referenced Representative
Josephson's question and relayed that the pass-through
funding to communities was subject to ARPA stipulations
outlined on the slide. He noted that communities had more
discretion to use the funding for COVID-related items. He
read from the slide that specified how the ARPA funds could
be used to cover expenses:
A. to respond to the public health emergency with
respect to the Coronavirus Disease 2019 (COVID19) or
its negative economic impacts;
Mr. Steininger noted that item A included items benefitting
households or businesses impacted by COVID. He read items B
and C:
B. to respond to workers performing essential work
during the COVID-19 public health emergency by
providing premium pay to eligible workers performing
such essential work;
C. for the provision of government services to the
extent of the reduction in revenue due to the COVID-19
public health emergency relative to revenues collected
in the most recent full fiscal year;
Mr. Steininger noted that item C would use a comparison to
revenues from FY 19. He read item D:
D. to make necessary investments in water, sewer, or
broadband infrastructure.
Mr. Steininger elaborated that item D was infrastructure
mentioned in ARPA that was separate from the $112 million
capital project grant. There were two restrictions included
in the Act:
A. direct or indirect offsets to a reduction in net
tax revenue resulting from changing law, regulation,
or administrative interpretation during the covered
period that reduces or delays the imposition of any
tax or tax increase;
B. deposits into any pension fund.
Mr. Steininger elaborated that under the reduction in
revenue restriction, the reduction could not be due to a
policy change by the state. Additionally, the $1 billion
could not be deposited into the Public Employees'
Retirement System (PERS) or Teachers' Retirement System
(TRS) funds. He noted that the capital projects description
indicated the capital project funds [of $112.3 million
shown on slide 5] narrowly focused on broadband. He
remarked that the federal interpretation was different than
OMB had initially understood. He advised members to keep it
in mind when interpreting the four guidelines listed on
slide 6. The state would be subject to how the Treasury
read the guidelines. He remarked that Treasury may read
things a bit differently than the state did.
2:05:10 PM
Representative Rasmussen asked if Treasury would consider
employees in retail, grocery stores, and food service to be
essential workers.
Co-Chair Foster replied that he would interpret it in that
way, but he did not know whether the Treasury would. The
administration had included it in a list of questions
submitted to the Treasury. He noted the question was also
included on a list sent by the National Governor's
Association and several other organizations. They had
requested a better definition of essential worker and what
types of workers it applied to. His initial read would be
workers who had been required to work as a result of being
deemed essential. He stated it was speculation at present.
Representative Rasmussen stated it would be helpful to
better understand the definition of eligible essential
worker. She stated an unintentional consequence of how
government had responded to the pandemic was workers no
longer had the same incentive to go work in some positions
such as retail at a grocery store due to the amount
unemployment benefits being received. She thought giving a
grant to companies who were trying to bring in employees
could possibly help offset the unintended consequence. She
hoped they would learn more about the topic once the
guidance was received.
2:07:33 PM
Representative Josephson stated that in the Capitol
Building there had been some debate over who was an
essential worker. He discussed that if the state were to
pay premium pay, it would have to follow the federal
guideline specifying who qualified as an essential worker,
otherwise the state would violate the guideline.
Mr. Steininger agreed. He expounded that the state had to
follow the federal guidelines for any of the ARPA funding
it received.
Ms. Harbour clarified that the state could be more
restrictive than the federal guidelines, but not broader.
She explained that if the federal government's definition
of essential workers was very broad and the state wanted to
focus on retail workers, it could narrow the eligibility,
but not broaden it.
Representative Johnson observed there were a couple of
missing pages in the presentation. She believed it was
being recopied for members.
Representative Carpenter asked for verification the handout
showed local pass through funding.
Mr. Steininger agreed.
Co-Chair Foster asked for verification the passthrough
funding fell outside of the $1 billion. He noted it was
outside of any discretion the state had [he received a
nonverbal affirmative from the presenters].
Representative Wool asked about the premium pay component.
He assumed it was a block grant or a pot of money going to
an entity that people applied for. He thought the
definition of essential workers would likely be fairly
broad and would not be limited to healthcare, but would
include teachers, grocery clerks, plumbers, utility workers
and other. He noted that without the aforementioned
workers, the state would have a difficult time functioning.
He imagined there would be substantial demand for the
funding. He asked if different entities would apply for the
funds. He understood the amount was capped at a certain
amount per hour, per year. He asked how the distribution
worked once the allocation was made.
Mr. Steininger answered that if the state chose to
establish an essential worker premium pay concept, it would
be determined in the setup of the program. How the
distribution would work would depend on how the state
structured the program.
2:11:02 PM
Mr. Steininger looked at the CSLFRF state funding
categories from Section 1 of the bill on slide 7. Section 1
of the bill covered discretionary funding coming into the
state and Sections 2 through 8 included direct grants Ms.
Harbour had reviewed. He noted that the five categories and
dollar values on slide 7 were not set in stone. He
explained that OMB had established the categories as a
starting point to determine how to best distribute the
funding in excess of $1 billion coming to the state. He
detailed that OMB had looked at different areas and
categories of impact to the state that the money could help
relieve. The first category was "Protecting Alaskans"
centered around individual security including food security
and health response that was not covered by some of the
direct grants to DHSS. He pointed out that the dollar value
shown on slide 7 was bolstered by direct grants for health
response. The category included one specific funding item
of $6 million for sexual assault and domestic violence
organizations due to an increase in cases during the
pandemic.
Mr. Steininger moved to the second category on slide 7
"Alaska Tourism Revitalization" that included $150 million
to support programs designed to help impacted tourism
businesses to rebuild the industry that had been hit hard
over the past year. The third section was "Economic
Recovery and Innovation" and focused on relief to
businesses and organizations in addition to investment in
future economy and rebuilding out of the economic downturn
resulting from COVID. The fourth category "Build Alaska
Infrastructure Investment" was focused on item D of the
guidance [on slide 6] for water, sewer, and broadband. He
noted that based on the forthcoming federal guidance, it
may be possible to do other types of infrastructure
investment as well.
Mr. Steininger reviewed the fifth category "General Fund
Offset" on slide 7. The category focused on Section C of
the bill that allowed the state to fund government services
to the extent of its revenue loss. The section would allow
the state to put ARPA funding in the bank to compensate for
lost revenue since the beginning of the pandemic. He
reported that based on the current guidance, OMB estimated
the state could utilize the full $1 billion for General
Fund offset. He remarked that it may get refined as further
guidance came in and the state may not be able to utilize
the full funding for General Fund offset in one year. He
relayed that if there were ideas for use of the funds that
did not perfectly fit the federal guidance, there was an
option to offset General Fund costs in one place in order
to execute on a program that may be better for Alaska's
economy.
2:15:36 PM
Co-Chair Merrick asked if the money came in two tranches,
whether it would be up to the legislature to divvy it up
between the programs. She used the example of two payments
of $500 million. She asked if the payments had to be
divided equally.
Mr. Steininger replied that whether to appropriate all of
the money upfront for specific purposes or appropriate some
upfront and some later when more information became
available was one of the bigger policy questions that the
executive branch and the legislature needed to work
through. He reiterated his earlier statement that the
dollar values [listed on slide 7] were not set in stone. He
stated that if half the money came in the current year and
half came in the following year, he suggested that the
state would likely want to focus the first tranche of money
on things that were best to set up soon. For example, the
first tranche could be used for workforce development and
things that could prepare the state for a possible
infrastructure plan from the federal government in the
future. He stated that the categories shown on slide 7
would not all be a clean 50/50 split.
Co-Chair Merrick asked about the General Fund offset and
why it would be beneficial to do it in the first tranche as
opposed to later on.
Mr. Steininger answered it was a good idea to consider the
General Fund offset upfront because the state's future
revenue projections were higher than they were at present.
Based on federal guidance, it was OMB's understanding the
comparison was between current year revenue and revenue in
FY 19. He explained that current year revenue for FY 21 was
estimated at about $750 million lower than in FY 19,
whereas it was only about $400 million to $460 million
lower in FY 22. He elaborated that the amount of General
Fund offset the state could accomplish in the future
appeared to be shrinking. He relayed that one of the
questions OMB had submitted to Treasury was whether the
state was allowed to count the revenue loss from FY 20
toward the concept of General Fund offset; if so, the lost
revenue was greater than $860 million in FY 20 alone. He
stated that with the uncertainty, it was a good idea to
focus the General Fund offset in the early stages before
revenue increased.
Co-Chair Foster stated that it was possible to split the
money in two tranches. He elaborated that the legislature
could elect to receive the money in two tranches and it was
also possible the federal government would mandate it. He
explained that the money could be split over FY21/FY22 and
FY23 as one scenario. He asked for verification that the
governor's bill would appropriate the full $1 billion in a
multiyear appropriation over FY 21 through FY 24.
Mr. Steininger answered in the affirmative. He explained
that primarily for the sake of simplicity, the bill
included a multiyear appropriation of the full amount if
the revenue came in from the federal government within that
appropriation. He noted that the federal government may
require the funding to come in two pots and the state
should be prepared for that scenario.
2:19:54 PM
Representative Wool referenced the General Fund offset of
up to $1.019 billion. He asked if it was primarily based on
the oil revenue reduction over 2019 and perhaps 2020 that
totaled a little over $1 billion (based on OMB's figures).
He asked if the amount of $139 million listed on slide 7
had been selected as a policy call by the administration.
Mr. Steininger responded, "Roughly speaking, yes." The
administration's understanding of the revenue comparison
based on the federal guidance was that the state would be
able to justify revenue loss well in excess of $1 billion
for the general fund offset. He elaborated that OMB had
looked at the state's operating budget to determine where
to offset government services with ARPA funding.
Additionally, OMB had identified about $2.5 billion in
annual expenditures that it believed could be offset
without jeopardizing match requirements in federal
programs. He noted that generally it was not possible to
match federal money with federal money. He stated that the
$139 million reflected the remainder of the funding after
adding up the other pots of money [shown on slide 7]. One
of the other key decisions the state had to contend with
was the balance between some of the programs to help build
Alaska's economy back out versus helping to offset some of
the general fund losses.
Co-Chair Foster referenced the revenue loss. He noted that
oil prices and production had been down during COVID. He
added that there had been revenue loss in the Commercial
Passenger Vessel head tax and in vehicle rental tax.
Representative Wool referenced the Alaska tourism
vitalization component on slide 7. He observed that it
appeared the state may lose another cruise ship season. He
remarked that many businesses would see major impacts as a
result. He surmised that certain communities would be hit
hard. He asked if some of the funding would go directly to
businesses to help them stay afloat. Alternatively, he
wondered if the funds were only to promote tourism and
adapt services.
2:23:49 PM
Mr. Steininger answered that OMB had not allocated specific
programs under any of the categories. It was currently
aiming to lay out a framework to think about how the state
was spending the money. As more guidance was received, the
state could work on specific programs that could benefit
any of the sectors. The Alaska tourism revitalization
category included impacted communities dependent on tourism
and businesses. He elaborated that part of funds would go
towards promotion for a different type of tourist to visit
Alaska if there were no cruise ships in the current year.
He noted it would not replace all of the loss in economic
activity. There would need to be some kind of balance in
the programs under the category. The administration was
working to develop plans that would fit within each of the
categories to share with the legislature and make some
decisions on what to move forward. Based on the level of
federal guidance received it was a little early to put
specifics out publicly especially because the guidance
could change.
Vice-Chair Ortiz had heard from constituents about the hope
that ARPA funding would be available for significant
revenue replacement for municipalities. He asked if it
would potentially fall under any of the categories on slide
7. He asked if some of the $325 million under the economic
recovery and innovation category could go to the effort.
Mr. Steininger agreed and relayed the use specified by
Vice-Chair Ortiz was within the guidance as OMB understood
it. He elaborated that impacted communities could fall
under the categories of tourism revitalization, the
economic recovery, and infrastructure investment since
there were some communities more in need of water and
sewer.
Vice-Chair Ortiz asked if the administration had publicly
stated how it felt about using funding from the $1.019
billion for revenue replacement for municipalities. He
asked if the administration was supportive of the idea.
Mr. Steininger answered that he could not speculate without
specifics on how the program was set up. He remarked that
the current stage was the high level view where the
administration was aiming to set priorities and find a
balance in the priorities. He stated they were currently in
the "no bad ideas" phase. He elaborated that it would be
interesting to talk through the details if there were
specifics on a proposal.
Vice-Chair Ortiz asked if there was a vision for the
mechanics of how the distribution would take place. For
example, if the state were to move forward $325 million in
economic recovery innovation. He asked if it would happen
through grants coming from agencies in the state.
2:27:57 PM
Mr. Steininger replied that he believed the state may run
the economic recovery and innovation a bit differently than
it had under the CARES Act program based on lessons learned
from operating the program. Additionally, the need had
changed a bit. He relayed that until the administration
received more detail on what the federal government had
learned from the last go-around, it was difficult to set
specific mechanics. In terms of relief to businesses and
organizations, it would likely come in the form of some
grant. The requirements of the grant still needed to be
worked out.
Co-Chair Foster believed under ARPA that local governments
would receive around $185 million, but there would still be
lost revenue of about $135 million. He explained that the
state could come in to backfill with other funding. For
example, the loss in cruise ship head tax of around $48
million and the amount going to local communities was about
$38 million. He detailed that the state could opt to
apportion some of the funding it received to help local
communities.
Mr. Steininger agreed. He noted that a significant amount
of the $185 million or $230 million when including the
Municipality of Anchorage was based on population, which
did not scale perfectly to the lost revenue in the affected
communities.
2:30:01 PM
Representative Rasmussen looked at the economic recovery
and infrastructure investment categories on slide 7. She
referenced a presentation the previous week from Meera
Kohler with the Alaska Village Electric Cooperative. She
recalled that Ms. Kohler had suggested a possible
appropriation of $5 million to $10 million for an energy
study to look at a larger scale energy project. She asked
if the study could fall under the categories.
Mr. Steininger confirmed that the study could fall under
economic recovery, infrastructure investment, or the
protecting Alaskans categories. He noted that the
affordability and security of the state's electrical
infrastructure was a protection of individuals at its root.
He relayed there was significant overlap in terms of what
could fit into each of the categories, which were loosely
defined.
Representative Rasmussen referenced a memorandum issued on
December 16, 2020 from the acting director of the Cyber
Security and Infrastructure Security under the U.S.
Department of Homeland Security. She detailed that the memo
followed the essential worker guidance issued in August
2020 and provided very detailed information in terms of
essential workers. She asked if it was likely for some of
the categories to be included.
Mr. Steininger was unfamiliar with the memo and could not
speculate as to how it would tie to the federal guidance.
2:32:42 PM
Representative Rasmussen read from the first paragraph of
the memo:
The current version of this guidance, Version 4.0 was
released in August 2002. This guidance is intended to
help state, local, tribal, and territorial officials
and organizations protect their workers and
communities and ensure the continued safe and secure
operation of critical infrastructure. It can also be
used to begin planning and preparing for the
allocation of scarce resources used to protect
essential workers against COVID-19.
Representative Rasmussen thought the memo may be a good
starting point to look at because it was 23 pages and
related to essential workers.
Representative Josephson looked at the categories on slide
7 and asked for verification they were OMB's own
subcategories. He asked for verification that the
subcategories were not created by the federal government as
in the CARES Act. He listed several categories specified in
the CARES Act that had been strongly recommended tranches
such as small business relief and the payment protection
plan.
Mr. Steininger answered in the affirmative. The information
on slide 7 was a product of the state looking at how to
organize the funding and how to wrangle all of the various
ideas coming from numerous stakeholders on how to use the
$1 billion. The goal was to try to organize the funds into
tranches to help with the evaluation of the ideas and the
prioritization in order to use the funding for the maximum
benefit of the state.
Representative Josephson stated that the administration had
a reputation for finding every opportunity to cut General
Fund spending. For example, the FY 22 budget paid oil tax
credits with Alaska Industrial Development and Export
Authority (AIDEA) dollars. He referenced Mr. Steininger's
testimony that it was possible to offset eight or nine
times more than the amount shown on slide 7 and free up
General Fund money for the future. He observed that
instead, the administration's approach was to view the
state as 730,000 Alaskans and not as an institution. He
looked at it as less selfish for the state as a government
and more beneficial to the people. He asked if his remarks
accurately reflected the administration's perspective on
how to spend the $1.1 billion.
2:36:09 PM
Mr. Steininger answered that it was a fairly fair way to
characterize how the administration had put the initial
allocations out. There was a balance between the state as
an institution and the opportunity it provided the state to
retain money in the Constitutional Budget Reserve (CBR) and
General Fund. In addition to the responsibility to care for
all Alaskans. The administration was trying to strike the
balance in the use of the funding. He noted that finding
the balance would be the result of a conversation with the
legislature as well. He relayed that the administration was
not married to the proposed allocation. He suggested an
option was a balance where more money was retained in the
General Fund to reduce General Fund expenditures. The
administration wanted to avoid allowing the windfall to
hide the structural problems in the state. He stated that
even if the state went with the full $1 billion of
available offset, it was very important not to use the
money with the intent of delaying the state's other fiscal
situations. The administration had chosen a bit more of a
balance towards assisting the Alaskans who had been
impacted by COVID and not just the state government.
Representative Josephson stated that even though the
proposal would offset more than the legislature may be
inclined to do and help others with immediate needs, the
legislature had been stymied other than percent of market
value (POMV) for years at advancing a fiscal plan. He
stated that given that there was no willingness to reach
agreement on a fiscal plan, one concern was even though the
state could hold onto the funds and use them to fully
offset, it also had benefit by forestalling imposition on
the public at some future year in the form of taxation or a
smaller dividend.
Mr. Steininger agreed it was not a cut and dry situation.
He stated that while it had been a long road trying to work
towards a sustainable fiscal plan, he wanted to avoid the
$1 billion further delaying the development of a plan.
Representative Johnson looked at item B on slide 6 and
asked if correctional officers were considered essential
workers and eligible for premium pay funding.
Mr. Steininger answered that correctional officers were a
presumptively eligible class of state employees for the
offset of salary costs under the CARES Act. He assumed they
would likely be considered essential workers under ARPA as
well.
Representative Johnson asked for verification the
administration anticipated ARPA money going to the
Department of Corrections (DOC).
Mr. Steininger answered that it would be an eligible cost.
He clarified there was currently no proposal to provide
premium pay to eligible state workers.
Representative Johnson asked if the funds had been
distributed to DOC under the CARES Act.
Mr. Steininger answered that CARES Act dollars had been
used to cover payroll costs for state troopers who were
another presumptively eligible class of employee; however,
the funds had been used to offset General Fund
expenditures. He clarified that no additional pay had been
given to the employees.
Representative Johnson asked for verification that the
administration had not directed substantial CARES Act
funding to DOC.
Ms. Harbour replied that funding had been directed to DOC.
She detailed that the administration had offset the
department's FY 21 expenses for the population management
allocation, which included correctional officer salaries.
She clarified that it was strictly offsetting the General
Fund expenses on the costs. She explained that the CARES
Act could offset the salary and benefits the state normally
paid those employees, which the administration had done in
order to free up unrestricted general funds (UGF). She
highlighted that under item B [on slide 6], it would be
necessary to set up a program to pay the employees more and
ARPA could then reimburse the state for the cost. The
administration had not yet developed the option as a
proposal.
2:42:57 PM
Representative Johnson asked for verification there had
been no premium pay for correctional officers that would
fall under item B [on slide 6].
Mr. Steininger agreed.
Representative Johnson highlighted there had been $50
million under the CARES Act for nonprofits. She asked if
the administration was aware of any set-aside for
nonprofits under ARPA.
Mr. Steininger replied that the administration had not
proposed any specific nonprofit relief within the fiscal
relief state funding categories; however, the programs
would fall under the economic recovery and innovation
category [on slide 7] within the relief to businesses and
organizations impacted by the pandemic.
Representative Johnson noted that the governor had spoken
about food security a number of times. She asked where it
would fall under the bill if it were to be included.
Mr. Steininger answered that the administration had been
collecting ideas regarding food safety from the
departments. He relayed that food security would fall under
the protecting Alaskans category [on slide 7]. The
administration did not have any specifics to release at
present because it was still trying to determine how to
tailor a program that would fit within the guidelines. He
confirmed that food security was an interest of the
administration.
2:44:40 PM
Co-Chair Foster referenced Representative Josephson's
comments related to the state's fiscal challenges. He asked
if it was safe to say the governor's proposal for the ARPA
funds did not increase the state's budget. For example, if
DOC had an annual budget of $100 million, the
administration may be replacing $10 million of the total
with ARPA funding, but it was not increasing the
department's overall budget. He stated that perhaps the
department's annual budget had increased slightly because
more had been spent on vaccinations for inmates and
physical care. He asked for verification that overall, the
administration's goal was to avoid increasing the budget.
Mr. Steininger agreed. He believed slide 8 went into more
detail on the administration's proposal to offset general
funds. He stated that administration did not want to use
the one-time federal funding to generate more programs the
state would have to pay for in the future. He elaborated
that there needed to be clarity that when the money was
deployed it was a short-term relief for one-time or short
duration projects.
Mr. Steininger turned to slide 8 and detailed that Sections
(f) and (i) were related sections in the bill. One of the
sections was a $120 million unallocated federal increment
and the other was a corresponding unallocated decrement of
$120 million. He explained that when areas in the operating
budget were found where General Fund expenditures could be
offset, the specific General Fund budget would be reduced
and the federal funds budget would be increased, resulting
in a net zero change. The two unallocated increments would
have to be allocated in the same place to avoid increasing
a budget with the ARPA funding.
Mr. Steininger continued to review slide 8. He detailed
that Sections (f) and (g) included the remainder of the
$139 million. He highlighted that cruise ship head tax
decreased dramatically down to zero as a result of COVID.
There were other similar funds in the state budget that had
created significant holes due to low collections that were
not UGF. The administration had set aside $19 million of
the General Fund offset for revenue collections for
designated general fund (DGF) fund sources or other
restricted revenue sources. He noted that priority would be
given to areas where there would be significant impacts to
programs if the revenue was not backfilled.
Mr. Steininger highlighted Section 9 of the bill on slide
8. He noted that Section 9 was a nonstandard section that
was different than something typically in appropriation
bills. He explained that because the federal guidance was
anticipated late in the appropriation process and it may
take the state time to interpret and understand the
language, there would be some uncertainty around how the
money was to be allocated. He communicated the desire to
have specific appropriations for the ARPA funding in the
final appropriation bill. He noted that the more specific
the budget was and the more guidance the legislature gives
the executive branch on how to deploy the funding, the more
the state's hands would be tied if the federal guidance
changed. Section 9 would utilize the General Fund offset
concept to ensure a program, if found unallowable by the
federal guidance, could be fulfilled using General Fund
dollars. He explained that the General Fund dollars would
then be backfilled with ARPA funding. He detailed it would
be a net zero to the state's bottom line and would avoid
getting into compliance issues with the federal government.
2:49:58 PM
Representative Wool referred to Sections (f) and (i) on
slide 8. He asked if the administration could have used FY
22 instead of FY 21. He wondered why the administration was
using ARPA funds for the FY 21 budget.
Mr. Steininger responded it was the administration's
understanding that ARPA funding could be used on an
expenditure occurring after March 3. The administration
believed there was more opportunity for General Fund offset
in FY 21 than in FY 22. He elaborated that if the General
Fund offset amount increased, it would be necessary to
reevaluate which fiscal year to apply it to and perhaps
spread the amount across two fiscal years.
Representative Wool asked if it was based on the lost oil
revenue from the particular year. He acknowledged that Mr.
Steininger was nodding his head in agreement. He pointed
out that the amount was $120 million [shown at the top of
slide 8], while the lost revenue was $700 million in FY 19
and $400 million in FY 20. He observed there was
significant latitude. He thought it would be allowable to
use the funds in FY 22 since the guidelines were coming out
May 10, 2021.
Mr. Steininger thought it was possible the funds could be
used in FY 22. He noted there was a risk that if revenues
increased substantially in FY 22, it may not be possible to
offset nearly as much General Fund expenditure in that
year.
2:52:05 PM
Representative Josephson referred to page 2 [of HB 181],
subsections C, D, and F. He stated that the sections stuck
him as ambiguous. He observed that in total the amounts
added up to a substantial part of the $1.1 billion. He
assumed the items were placeholders while the
administration was trying to figure out what ARPA would
award the state. He interpreted the language to indicate
the legislature should appropriate the funding and the
administration would decide.
Mr. Steininger replied that the subsections A, C, D, and E
were placeholders to start the discussion. The
administration anticipated that the legislature would pass
much more specific appropriations that were tailored
towards programs that were homed in on over the coming
weeks.
HB 181 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster thanked the presenters. He reviewed the
agenda for the following day.
ADJOURNMENT
2:54:10 PM
The meeting was adjourned at 2:54 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 181 ARP CSLFRF Plan Summary_4.16.2021.pdf |
HFIN 4/20/2021 1:30:00 PM |
HB 181 |
| HB 181 ARP Direct Agency Grant Detail_4.16.2021.pdf |
HFIN 4/20/2021 1:30:00 PM |
HB 181 |
| HB 181 HFIN OMB ARP Bill Overview 4.20.21.pdf |
HFIN 4/20/2021 1:30:00 PM |
HB 181 |