Legislature(2021 - 2022)ADAMS 519
08/25/2021 10:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB3003 | |
| Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB3003 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
THIRD SPECIAL SESSION
August 25, 2021
10:12 a.m.
10:12:37 AM
[Note: continuation of recessed meeting from the previous
day. See separate minutes dated 8/24/21 1:00 p.m. for
detail.]
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 10:12 a.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 (via teleconference)
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division; Ken
Alper, Staff, Representative Adam Wool; Neil Steininger,
Director, Office of Management and Budget, Office of the
Governor.
PRESENT VIA TELECONFERENCE
Megan Wallace, Director, Legislative Legal Services, Alaska
State Legislature.
SUMMARY
HB 3003 APPROP: OPERATING; PERM FUND; EDUCATION
CSHB 3003(FIN) was REPORTED out of committee with
three "do pass" recommendations and seven "no
recommendation" recommendations.
Co-Chair Foster indicated the meeting was a continuation of
the meeting from the prior day.
HOUSE BILL NO. 3003
"An Act making an appropriation from the general fund
to the Department of Education and Early Development
for the payment of educational programs; making an
appropriation from the earnings reserve account for
the payment of permanent fund dividends; making an
appropriation from the earnings reserve account to the
budget reserve fund; and providing for an effective
date."
10:13:35 AM
Co-Chair Foster relayed the committee would continue to
hear amendments to the bill. [Note: amendments began the
previous day. See separate document dated 8/24/21 for
detail.]
^AMENDMENTS
10:13:38 AM
Representative LeBon MOVED to RECIND action on Amendment 1.
[Note: Amendment 1 was adopted on 8/24/21. See separate
minutes for detail.] He relayed he planned to offer a
conceptual amendment to Amendment 1.
Representative Wool OBJECTED for discussion.
Representative LeBon explained that he wanted to reconsider
the vote on the funding source for the oil and gas tax
credits. He detailed that the previously adopted amendment
split the funding source between undesignated general fund
(UGF) at $54 million and Alaska Industrial Development and
Export Authority (AIDEA) receipts at $60 million. He wanted
to reconsider the funding sources in a conceptual
amendment.
Co-Chair Foster asked for clarification about the recission
process and whether the motion was debatable.
Representative Edgmon stated that it was debatable, but the
subject should be confined to the motion to rescind and not
the substance of the amendment.
Representative Wool remarked that Representative LeBon had
not specified what he would propose changing the fund
source to.
Representative LeBon replied that his proposal would be to
change the funding source entirely to UGF for the total
$114 million.
Representative Wool MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Thompson, Carpenter, Edgmon, Johnson, LeBon,
Ortiz, Rasmussen, Merrick
OPPOSED: Wool, Josephson, Foster
The MOTION PASSED (8/3). There being NO further OBJECTION,
the previous action on Amendment 1 was RESCINDED.
Representative LeBon MOVED to ADOPT conceptual Amendment 4
to Amendment 1. The amendment would change the fund sources
to UGF for the total $114 million. He explained that the
proposal would eliminate the AIDEA fund source of $60
million.
Representative Josephson commended Representative LeBon on
his historical policy position with a conservative view of
budgeting and placing importance on his fiduciary role. He
stated the committee had heard testimony the previous day
that the funds would have to come from monies brought in
since July 1, which could imperil the General Fund's
capacity to cover other obligations. He asked for comment
from Representative LeBon.
Representative LeBon replied that he would speak in broad
terms on the impact for AIDEA and on UGF. He added that
Alexei Painter [with the Legislative Finance Division] was
in the audience and available to answer questions on the
impact to UGF funding. He explained his position that AIDEA
was a valuable entity for the State of Alaska and operated
as the state's bank. He stressed that AIDEA needed a strong
capital position. He stated that pulling $60 million from
the AIDEA receipts was a drain on the agency's capital. He
thought it was important to be cautious. He shared that he
had spoken with an AIDEA official after the committee's
action on the amendment the previous evening. He reported
the official had expressed serious concern about the size
of the drawdown.
Representative LeBon reminded committee members that AIDEA
paid an annual dividend to the state. He believed the most
recent dividend had been about $17 million. He suggested
against viewing AIDEA as a big cash cow to draw a large
amount from, which could potentially impair its ability to
function as an authority on behalf of the state. He
recommended a measured draw, perhaps over the remaining
five years of the [oil and gas tax credits] obligation. He
suggested $20 million per year for five years as an
example. He stated that AIDEA could be a participant in the
payment of the obligation if the legislature directed the
funding source for future oil and gas tax payments.
Representative LeBon stated he could talk about projects
AIDEA had on the docket and things the agency was doing to
benefit the state. He elaborated that AIDEA had hundreds of
millions of dollars on the table for funding investments
and projects. The agency provided participation funding
with banks on projects. Additionally, he stated that AIDEA
had been a partner with Alaska small businesses over the
last 18 months in a material way to help the state work its
way through the COVID-19 economic crisis. He expounded that
AIDEA was doing modifications and working with borrowers to
get them through a very difficult time. He pointed out that
the work was at AIDEA's expense. He thought AIDEA was
reducing interest rates, doing loan forbearances (forgiving
payments), and taking actions to help Alaskan small
businesses. He remarked that the actions could be at the
detriment of the agency's financial footing, but it was
measured and well thought out. He emphasized that a $60
million draw all at once was not measured or well thought
out.
Representative LeBon hoped that Representative Josephson's
comment about him being a fiscal conservative also
reflected that he supported private sector development and
AIDEA's partnership with Alaska banks and small businesses.
He noted the majority of lending through AIDEA with banks
was for small businesses. He stated that banks partnered
with AIDEA, but not at an equal level. He stated the split
was typically 90/10 or 75/25, with AIDEA acting as the
major financing partner. He underscored the importance of
supporting AIDEA and allowing the agency to do its work. He
wanted to let AIDEA stand on its own two feet with the
capital to do so. He stated it was important for the
state's economic future.
10:23:28 AM
Representative Josephson remarked that the statements made
by Representative LeBon were well said but did not really
answer his previous question. He reminded committee members
that the amount Amendment 1 would take from AIDEA receipts
was less than 20 percent of the agency's current total
receipts. He highlighted that the administration had been
willing to take 3.5 times that sum two years back. He
stated Amendment 1 would take much less.
10:24:38 AM
Co-Chair Foster asked Mr. Painter for the balance of the
General Fund if the conceptual amendment were to pass.
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
responded that in addition to Amendments 2 and 4 that also
added to the General Fund, based on the current surplus in
the spring forecast, he estimated there would be about
$300,000 remaining. He remarked that the spring forecast
had a margin of error. He elaborated that if oil was $64
per barrel, there would be hundreds of millions remaining,
whereas if oil was $59 per barrel it would need to be
addressed in a supplemental. He stated it was very unusual
for the legislature not to have deficit filling language
from some fund or another. He remarked that the current
situation was unusual where they were potentially budgeting
extremely close to projected revenues.
10:25:54 AM
Vice-Chair Ortiz commended Representative LeBon for his
comments and logic behind the proposed conceptual
amendment; however, with the recent statement that the draw
would take the fund balance down to $300,000, he believed
it put the state in a precarious situation. He could not
support the conceptual amendment.
Co-Chair Foster considered a scenario where the General
Fund balance was down to $300,000. He noted there was no
backstop language in the budget. He explained that in other
times with the three-quarter vote there was deficit filling
language specifying that if the oil forecast did not come
in as expected and some additional funds were needed it had
been possible to perhaps tap into the Constitutional Budget
Reserve (CBR). He asked what would happen in the current
situation without that ability.
Mr. Painter replied that the first line of defense would be
a supplemental appropriation in January or later when it
would be possible to address a potential shortfall. He
explained that if the legislature opted against a
supplemental and there was still a projected deficit
towards the end of the year without deficit filling
language, the governor could impound appropriations to keep
the General Fund from going negative. He assumed the
legislature would take action well in advance of that given
there would be fall and spring revenue forecast updates
before the end of the fiscal year.
10:27:57 AM
Representative Wool appreciated Representative LeBon's
statements about AIDEA being the state bank; however, he
did not believe the agency was beyond reproach. He believed
it had made many recent and past errors. He remarked that
the agency was going to get rid of the Mustang property
through foreclosure and $70 million had been invested. He
thought some of the agency's actions such as excluding the
public from certain inputs of different points deserved a
closer look. He did not think a responsible bank would make
loans down to its last $300,000 dollars at the equivalent
of $0.50 per person in Alaska. He highlighted there had
been some heartburn over a $400,000 amendment the previous
day, which the co-chair had stated was .003 percent of the
General Fund requirement of the oil tax credits. He thought
they were now going to .0015 of that percentage. He
remarked that some people did not want to increase any
pressure on the budget and $400,000 was too much; however,
he noted that somehow $60 million was not. He pointed out
it was the equivalent of $100 per person in a PFD
calculation. He thought the whole thing was very
irresponsible. He agreed the state should pay the oil tax
credits. He highlighted that the committee had passed an
oil tax credit payment involving AIDEA funding and he had
not heard an uproar at the time. He understood the Senate
had reversed the action. He did not support draining the
General Fund to pay the oil tax credits.
Co-Chair Merrick clarified that the aforementioned $400,000
was .003 percent of the total $114 million.
10:30:45 AM
Representative Edgmon stated that the conceptual amendment
introduced an entirely different dynamic and conversation
in his view. He remarked that the legislature had not had a
full on conversation about oil tax credits. He elaborated
that earlier in the budget process the committee had voted
to advance $114 million to be funded with AIDEA and UGF
funds. He did not recall any substantive pushback and noted
that most of the committee had supported the action. He
stated the picture had changed and there was clearly a
scarcity of UGF dollars.
Representative Edgmon mentioned a report issued based on HB
247 that passed the legislature in 2016 and required the
Department of Revenue (DOR) to report annually to the
legislature on the expenditures of tax credits in aggregate
(due to confidentiality provisions). He shared that he had
been a recipient of the report as Speaker of the House in
2020. Given the scarcity of UGF dollars, he thought it was
worth pondering whether the legislature was using UGF money
to make good on debt. He noted the money would not be going
toward exploration, drilling, or future oil for the state.
He thought it should be part of the conversation as well.
Co-Chair Foster stated that typically the budget included
back stop deficit filling language, but it was not included
in the current year. He referenced Mr. Painter's statement
that the legislature could do a supplemental or take action
or the governor could impound [appropriations]. He wondered
if any of the funds were in peril. He cited the PCE Fund
and Higher Education Investment Fund as examples of funds
the legislature could use to backfill. He asked if it would
be an option.
Mr. Painter responded that without a reverse sweep, the
only funds with a significant balance were the PCE Fund,
the ERA, and the CBR. He relayed that the legislature could
designate any of the funds as backstop. He stated that
traditionally the CBR had been used. He noted that in FY 15
in the supplemental, when oil prices had been dropping
rapidly, there had been a series of funds as backstops. He
elaborated that beyond the Statutory Budget Reserve (SBR),
which was the deficit filler that year, the legislature had
also designated the Higher Education Investment Fund as a
potential backstop in case oil prices kept falling. He
noted the funds from the Higher Education Investment Fund
had not been used. The legislature could use any fund it
wanted, but without a reverse sweep there were not many
other than the aforementioned three.
Co-Chair Foster asked Mr. Painter to repeat the funds in
addition to PCE.
Mr. Painter replied, "The ERA or the CBR."
10:34:39 AM
Representative LeBon asked about the projected remaining
General Fund balance of $300,000 mentioned by Mr. Painter.
He asked for verification the number was based on projected
oil prices and throughput numbers from the spring forecast.
Mr. Painter responded in the affirmative.
Representative LeBon asked what the oil price was projected
to be during the forecast period.
Mr. Painter answered that the oil price projection was $61
per barrel in FY 22.
Representative LeBon asked what the price had averaged
during the period.
Mr. Painter replied that he did not know what the average
had been, but it had been above the forecast. He believed
the average was likely around $70, but it had ranged from
the upper $60s to low $70s in the current fiscal year.
Representative LeBon believed the most recent price listing
was about $70. He asked what the forecast had been on
average throughput. He asked how it had changed up or down.
Mr. Painter responded that the through put forecast had
been 469,000 barrels per day. He informed members it was
difficult to project throughput throughout the year due to
seasonal maintenance. He relayed that production thus far
had been significantly below [the projection], but that was
expected during the summer. He believed the Department of
Natural Resources would have a better idea of the
annualized number when it updated its forecast in December.
He explained that it was very difficult to extrapolate from
summer maintenance work.
Representative LeBon understood the number was hard to
predict due to the seasonality impact on throughput. He
remarked that it was not possible to know exactly what may
lie ahead and he knew there was financial risk. However, he
believed the average price of oil had been materially above
the projected amount. He asked for the current approximate
balance of the CBR.
Mr. Painter thought the question was difficult to answer
because of the status of the sweep and whether or not the
SBR would be swept. He continued that the projection prior
to assuming a reverse sweep and before any expenditures in
the bill would be about $1 billion at the end of FY 22. The
current bill would spend $400 million from the CBR or from
the General Fund that would lapse. The conceptual Amendment
4 would spend another $500 million, which would leave about
$500 million at the end of the year.
Representative LeBon highlighted that the purpose of his
questions was to show that perhaps the state's financial
position was not as dire as the $300,000 left in the
General Fund as previously indicated. He pointed out that
it did not take into account any designated funds or other
monies within the state's coffers.
10:38:11 AM
Vice-Chair Ortiz asked Representative LeBon if he would be
amenable changing the proposed conceptual amendment to pay
$54 million in UGF towards the credits.
Representative LeBon answered that he did not want to
reduce the payment. He explained that funding the credits
at about 50 percent would extend the repayment period years
in the future. He highlighted that the committee had been
told the previous day there were about five years left to
satisfy the unpaid tax credits. He wanted to hold to the
obligation the state accepted when it offered the tax
credits by paying the credits in a timely manner. He
pointed out that the repayment period had already been
stretched out. He recalled the state had missed several
years of payments.
Representative Wool asked Mr. Painter if he could predict
the price of oil in the following year. He also asked about
the possibility that the resurgence in COVID-19 would
impact air and other travel. He wondered if there would be
another oil glut and perhaps a price drop into the negative
range. He recalled when the pipeline had been turned off
for a period of time due to negative oil prices.
Mr. Painter responded that he could not predict the price
of oil.
Representative Wool thanked Mr. Painter for his honesty. He
stated that no one could predict oil prices. He remarked
that while the price of oil may be great at present, no one
knew what it would be six months in the future. He did not
think the conceptual amendment was fiscally responsible.
10:41:11 AM
Representative Josephson referenced Mr. Painter's testimony
that under a circumstance where the state was broke, he
thought the legislature would pass a supplemental budget in
early in the next session. He disagreed. He had seen the
government almost shut down on the 28th of June and he had
no idea whether it would stay open. He believed the
legislature was pretty broken. He stated the sponsor of the
conceptual amendment noted the state had the CBR. He
underscored that there had only been 22 or 23 votes in
support of accessing the CBR. He stressed there was no
evidence the legislature could access the CBR. He remarked
that the maker of the motion had also indicated there were
designated general funds. He pointed out that those funds
were swept. He wanted the record to reflect that he had
supported paying the $114 million from the CBR.
Co-Chair Foster referenced a comment made by Representative
Wool about there being a tradeoff with the PFD. He shared
that his constituents wanted a full PFD. He opposed
spending another $60 million in general funds that could
have gone toward a larger PFD.
10:42:43 AM
AT EASE
11:09:50 AM
RECONVENED
Co-Chair Foster invited Representative Wool to make any
comments about the handout he had distributed.
Representative Wool explained that the document [a letter
to the Senate president and House Speaker from the
Department of Revenue dated January 29, 2020, showing oil
and gas tax credits purchased in 2019 (copy on file)]
showed how the last $100 million in tax credits were
dispersed and who the recipients were. He detailed that the
$114 million would go to the same recipients in the same
proportion. He asked his staff to provide a more detailed
explanation.
11:10:57 AM
KEN ALPER, STAFF, REPRESENTATIVE ADAM WOOL, referenced the
annual report required per the tax credit reform bill HB
247 passed in 2016. He detailed that the annual report
included a list showing which companies received credits
and in what amount. The document provided included the
report from calendar year 2019. He informed the committee
that the last appropriation had been passed in the 2018
session for FY 19 and the money had been distributed in
January 2019. He stated that the report showed where the
$100 million appropriation in addition to some leftover
money that must have been in the tax credit fund because
the total paid was $101 million. He explained that based on
regulation the oldest tax credits were paid first pro rata
within a year. He pointed to the end of the report and
elaborated that slightly over $290 million open tax credits
remained that were issued, and payment was requested in
2016. The next $290 million appropriated by the legislature
would go to the same recipients shown on the report. Over
$400 million in additional credits were issued and
requested in 2017, 2018, and beyond; there was no public
information about those credits, they were confidential.
Mr. Alper explained it was possible to determine with some
accuracy where the next $290 million would go based on the
last $100 million. He referenced a statement by
Representative Edgmon the previous day that Repsol would
receive $27 million. He detailed the number was based on
looking at the $23 million the company received that was
shown on the report and expanding the total credit payment
upward from $100 million to $114 million.
11:13:08 AM
Representative Thompson had heard Mustang was going into
bankruptcy. He remarked that Mustang owed AIDEA money. He
wondered what would happen with the payment for Mustang. He
asked if the funds would go to AIDEA or if it would be held
up in bankruptcy.
Mr. Alper responded that he did not know specifics related
to the bankruptcy case. He listed various lines of the
report associated with the Mustang project including
Mustang Operations Center 1, MEP Alaska, Caracol Petroleum,
and TP North Slope Development. He detailed that AIDEA had
lent the money backed by the tax credit payments. He stated
his understanding that the tax credit payments that came
into Mustang would be going towards interest payments. He
could not speak in detail about what actually took place
due to confidentiality. He expected subsequent payments
would fall into a similar category.
Representative Josephson referenced the taxpayer Caelus
shown in the tax credit report. He remarked that Caelus
sold its interest to a successor. He asked if dollars given
as credits would go to the successor.
Mr. Alper replied that the report showed three different
Caelus entities. He noted one of the entities referenced
Smith Bay, which had been an exploration project in the
offshore waters of NPRA. He did not believe the assets had
been sold and he did not know whether there were any
current further development plans. He explained that to the
extent Caelus sold its portion of the Oooguruk field in the
North Slope to its partner, the outcome of the credits
would be within the private sale transaction. He added that
many of the credits had been assigned to a financing entity
where the state would be making direct payments to someone
who lent money to the underlying oil company. He recalled
from his work at the Department of Revenue that about half
of the outstanding credits had actually been assigned to a
financial entity.
11:15:58 AM
Vice-Chair Ortiz looked at the payouts going to
approximately 25 entities shown on the report. He stated
that many of the entities did not appear to be oil
companies. He asked for a general description of what the
groups were (e.g., Jan D. O'Neill and John Searls).
Mr. Alper discussed companies that earned a cashable tax
credit of some form where credit was issued and payment was
requested during calendar year 2016. He detailed that some
of the entities were exploring for oil, and some were
developing an oil field and the credit would have been a
carried forward net operating loss (NOL). He stated that
many were in the latter category. He highlighted a couple
of the larger payments in the report, including one for
Bluecrest Energy, the operator of the Cosmopolitan project
off of Homer, and another for Cornucopia/Furie with an
offshore platform in Cook Inlet, which he believed had gone
from bankruptcy and he did not know the current status. He
mentioned Repsol, which had been exploring for what became
the Pikka project; the entity was now partnered with Oil
Search. Many of the smaller names showing much lower credit
amounts including O'Neill and Searls were small inholdings
withing the Point Thomson unit.
Representative Edgmon asked how many of the recipients
shown on the report were still solvent and active in
Alaska. He thought there was some sense that a large
portion of the $114 million could be going to secondary
financial markets. He used Carnegie Bank in New York and
the Bank of San Francisco as examples. He asked if his
understanding was accurate.
Mr. Alper recalled that about half were assigned. He
elaborated that the secondary market, where a holder of a
credit could sell the credit to another company, was fairly
limited. He stated that the only real plausible buyers
would be a major oil company (i.e., Conoco, Hilcorp, Exxon)
in Alaska that could use the credit to offset its tax
obligations. He explained that assignment occurred at the
front end of the process. He elaborated that AS 43.55.029
passed in 2012 or 2013 that allowed companies, upon getting
the loan from a third-party, to assign the credit from the
third-party to the entity. He mentioned that in 2018
legislation had been introduced which would have allowed
the purchase of a bond to pay off the credits; the courts
had ruled against the plan. He relayed that ING and Bank of
America had both testified in support of the legislation in
the hopes of getting paid. He stated the two entities were
probably the two most prominent assignees.
Representative Edgmon stated he was a proponent of making
good on the $726 million indicated on the report. He had
heard Mr. Painter say that with the price of oil, the
amount could be $740 million ultimately. He clarified that
whatever the number ended up being, he was in favor of
paying the amount owed. He discussed the current situation
with oil prices at $61 in the spring forecast (likely
higher in reality) and a potential increase in production.
He stated he was an even stronger proponent of doing what
was possible to ensure the companies the state owed money
were up on the slope doing work to get more oil in the
pipeline. In terms of paying credits owed, he thought it
was important to prioritize entities that were doing the
work on the slope and bringing in more oil versus companies
that were no longer in Alaska due to bankruptcy or leaving
the state for other reasons. He believed companies in the
latter category should be paid later on.
Representative Edgmon remarked that for all of the oil tax
credits there was a proviso subject-to-appropriation by the
legislature. There was an understanding the obligation was
a commitment from the State of Alaska but there was also
the subject-to-appropriation disclaimer that accompanied
all of the tax credits.
11:22:38 AM
Mr. Alper briefly discussed the governing regulations. He
explained that the 2016 credits were pro rata. He believed
that the legislature could theoretically make an
appropriation to purchase the credits of a specific
company, but barring any such action, the money
appropriated would be governed by the regulations. He
informed the committee there was a different regulation for
the 2017 and later certificates as specified under HB 247,
which created a priority for percentage of resident hire.
There was another filter within the 2017 and subsequent
credits specifying that companies operating in Alaska and
with a higher percent Alaska resident hire would get some
form of priority in the newer regulations; however, it
could not be applied retroactively to the 2016 credits in
the system. He explained that the concept of making sure
the money went to those most effectively needing it in
Alaska would govern after the next $290 million was paid
and the 2017 credits began.
11:23:52 AM
Representative LeBon recalled discussions the committee had
two years previous on the role a bank may play in assisting
any of the companies through a short-term working capital
line of credit. He stated there may have been different
ways to do it, but the banks would secure the obligation
with the credits. He stated that even if the business went
bankrupt, the security interest of the bank to provide
financing to the entity did not go away unless the
bankruptcy court ruled that the secured creditor was not
entitled to payment, which would be unusual. He explained
that if there was a secured instrument in place, the
entitlement of payment had to wait for the state to take
action to fund the tax credits; the clock was ongoing and
did not end. He suspected that the banks were still hopeful
payments would be forthcoming.
Representative Rasmussen thought Repsol was one of the
larger recipients. She highlighted that the company was on
the cusp of making a $3 billion investment decision that
would produce just under 100,000 barrels per day by 2025.
She stressed it was major revenue for the state and [the
payment] provided stability for industry showing Alaska was
a good state to enter into business contracts with. She
hoped the committee would take it into consideration. She
remarked there were major decisions being made around the
legislature's policy decision on the funding.
Representative LeBon WITHDREW conceptual Amendment 4.
Representative LeBon MOVED to ADOPT conceptual Amendment 5.
He explained that the amendment would change the $60
million funding source [for payment toward oil tax credits]
from AIDEA receipts to the CBR.
Vice-Chair Ortiz OBJECTED for discussion.
Representative LeBon remarked that a draw on the CBR
required a three-quarter vote. He stated that when HB 3003
reached the floor and if the House agreed to split funding
with $54 million UGF and $60 million from the CBR, it would
take bipartisan collective work to reach the three-quarter
vote. He proposed that the item would stand alone on the
CBR reverse sweep vote.
Representative Edgmon spoke in favor of conceptual
Amendment 5 to Amendment 1.
Representative Josephson spoke in support of the amendment,
although he believed Representative LeBon's last statement
was aspirational.
Representative Edgmon clarified there would be a specific
separate three-quarter vote on the floor regarding the CBR
funding source.
11:29:27 AM
Representative Rasmussen asked how the bill funding would
be impacted if the item passed on the floor and the final
bill failed to achieve 30 votes in the House and 16 in the
Senate. She asked if the one specific item could be funded
with the CBR.
Representative Edgmon stated his understanding that it
would be just the single provision involving conceptual
Amendment 5 to Amendment 1. He stated that the final bill
would still be subject to the simple majority rule of 21
for passage [in the House].
Representative LeBon understood that if the three-quarter
CBR vote failed, the $54 million would remain funded with
UGF.
Co-Chair Foster remarked that the bill had started out as
primarily setting the PFD. He stated that the PFD had been
reduced from $2,350 to $1,100. He thought it would be one
thing if that was the only change that occurred. However,
the payment of oil credits had been introduced into the
bill. He did not believe it would be lost on individuals,
especially those who had testified the previous day, that
the bill did not pay a statutory PFD, but it did pay
statutory oil credits to oil companies. Consequently, he
could not support the amendment.
Vice-Chair Ortiz MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Wool, Edgmon, Johnson, Josephson, LeBon, Ortiz,
Rasmussen, Thompson, Merrick
OPPOSED: Carpenter, Foster
The MOTION PASSED (9/2). There being NO further OBJECTION,
conceptual Amendment 5 to Amendment 1 was ADOPTED.
Co-Chair Foster addressed the original amendment.
Vice-Chair Ortiz MAINTAINED the OBJECTION to Amendment 1 as
amended. He asked to hear a synopsis of Amendment 1 in its
current form.
Representative LeBon summarized that Amendment 1 as amended
would fund the oil and gas tax credits with $54 million UGF
and $60 million from the CBR (subject to a successful
three-quarter CBR vote). He added that the amendment was a
benefit to the [oil and gas] industry and private industry
including AIDEA. He believed the action was a statement of
support to industry, private development, and the economic
future of the state. He stated the amendment was bigger
than just oil and gas tax credits.
A roll call vote was taken on the motion to adopt Amendment
1 as amended.
IN FAVOR: Edgmon, Johnson, Josephson, LeBon, Ortiz,
Rasmussen, Thompson, Wool, Carpenter, Merrick
OPPOSED: Foster
The MOTION to PASSED (10/1). There being NO further
OBJECTION, Amendment 1 as amended was ADOPTED.
11:35:30 AM
Representative Josephson MOVED to ADOPT Amendment 5 (copy
on file):
DEPARTMENT: Department of Environmental Conservation
APPROPRIATION: Spill Prevention and Response
ALLOCATION: Spill Prevention and Response
FUND CHANGE: $2,999.0 Unrestricted General Funds, 1004
($2,999.0) Oil/Hazardous Release Prevention & Response
Fund (1052)
EXPLANATION: Using UGF to offset the impact of funds
being unavailable due to the sweep of the
Oil/Hazardous Release Prevention & Response Fund
(1052). Without the reverse sweep, DEC will only have
what was collected in surcharges during FY 2021,
resulting in a shortfall of $2,999.0 (approximately $3
million).
Co-Chair Foster OBJECTED for discussion.
Representative Josephson shared that he had been the
liaison to the Prince William Sound Regional Citizens
Advisory Council for years. He stated that if a liaison
from the legislature did not listen to the group it was
representing, the person would be derelict in their duty.
He explained that the advisory council was one of the
agency's watchdogs. He elaborated that the agency's
employees were paid poorly and there was a 30 percent
turnover. He believed there was some evidence the
commissioner of Department of Environmental Conservation
(DEC) was somewhat indifferent about the situation. He
expounded that the commissioner seemed to have been fine
that the governor had vetoed funding for five unfilled
positions. He shared that he would want his commissioner to
speak up and say that 22 positions had already been lost
and the agency could not withstand the loss of another five
positions.
Representative Josephson underscored the positions being
eliminated included two engineering support positions,
leaving only three engineers to cover the entire state. He
stressed the agency was suffering greatly. He referenced
debate over the reason for designated general funds (DGF).
He stated it was logical for the petroleum industry to
participate in the cost associated with spills because many
were petroleum related. He pointed out that the funds had
been swept. He shared that he had great evidence from the
DEC public affairs officer and commissioner that the agency
would be short about $3 million. He explained that his
motion would say, just like with the tax credits and Alaska
Legal Services, the problem could be addressed one band aid
at a time. He stressed the importance of maintaining
vigilance with oil spills. He furthered there were 2,300
places of concern (not all oil spills) in the state. He
underscored there were inadequate resources to take care of
and remediate those places. Additionally, there was a 1990
federal law that created the Prince William Sound Regional
Citizens Advisory Council. He reported that the council was
required to be vigilant. He was offering the motion to
remind and notify his colleagues and the public of the
problem. He asked how to pay salaries when an agency had
nine-twelfths of the needed funding. He wondered if
employees would receive a 25 percent cut in salary. He was
the council's liaison and cared passionately about the
subject. He highlighted that politics was the art of the
possible.
Representative Josephson WITHDREW Amendment 5.
11:40:15 AM
Representative Josephson MOVED to ADOPT Amendment 6 (copy
on file):
FY21 Supplemental
DEPARTMENT: Department of Public Safety
APPROPRIATION: State Troopers
ALLOCATION: Alaska Bureau of Judicial Services
ADD: $261,000, unrestricted general fund, 1004
DEPARTMENT: Department of Public Safety
APPROPRIATION: Fire and Life Safety
ALLOCATION: Fire and Life Safety
ADD: $39,000, unrestricted general fund, 1004
EXPLANATION: Supplemental FY 21 appropriation for
retroactive negotiated pay increase for Department of
Public Safety Court Service Officers and Deputy Fire
Marshalls.
See attached language amendment from Legislative Legal
[labeled 32-GH3353\A.5 (Marx, 8/20/21]:
Page 1, line 2, following "programs;":
Insert "making supplemental appropriations for
salary and benefit adjustments;"
Page 1, lines 4 - 5:
Delete "budget reserve fund"
Insert "constitutional budget reserve fund (art.
IX, sec. 17, Constitution of the State of
Alaska)"
Page 5, before line 1:
Insert a new bill section to read:
"* Sec. 4. SUPPLEMENTAL SALARY AND BENEFIT
ADJUSTMENTS. (a) The amount necessary, estimated
to be $261,000, to implement the monetary terms
of the Public Safety Employees Association
collective bargaining agreement, representing the
regularly commissioned public safety officers
unit, for members in the Court Services Officer
job class series is appropriated from the general
fund to the Department of Public Safety, Alaska
State Trooper Detachments, for that purpose for
the fiscal year ending June 30, 2021.
(b) The amount necessary, estimated to be
$39,000, to implement the monetary terms of the
Public Safety Employees Association collective
bargaining agreement, representing the regularly
commissioned public safety officers unit, for
members in the Deputy Fire Marshall job class
series is appropriated from the general fund to
the Department of Public Safety, Fire and Life
Safety, for that purpose for the fiscal year
ending June 30, 2021."
Renumber the following bill sections accordingly.
Page 5, line 8:
Delete "APPROPRIATION"
Insert "APPROPRIATIONS"
Delete "sec. 4"
Insert "sec. 5"
Page 5, line 9:
Delete "a fund"
Insert "funds"
Page 5, line 10:
Delete "The appropriations made in sec. 4 of this
Act are retroactive to July 1, 2021."
Insert "(a) Section 4 of this Act is retroactive
to July 1, 2020.
(b) Section 5 of this Act is retroactive to July
1, 2021."
Co-Chair Foster OBJECTED for discussion.
Representative Josephson explained the amendment. He stated
two main buckets of concern had been discussed by the
committee including swept buckets and vetoed buckets. He
noted the amendment topic did not fit into either category.
He appreciated the time and effort put in by the
legislative [fiscal policy] working group, but he believed
some obligations were not reflected in its presentation.
The amendment item was $299,000. He elaborated that the
state was under contract to pay deputy fire marshals and
court services officers. He described the individuals as
quasi-troopers who were responsible for keeping judges,
juries, and court personnel safe. The positions were also
responsible for transporting prisoners and other things. He
highlighted that deputy fire marshals were instrumentally
involved in work on the Two Rivers-Pleasant Valley fires
located in Representative Mike Cronk's district. He noted
the amendment was supported by the [Department of Public
Safety] commissioner. He shared that the commissioner had
come to the committee to communicate the department's need
for the funding. He stated that presumably the governor
would not veto the funding, although he added that the
governor sometimes vetoed things he had asked for.
Representative Josephson WITHDREW Amendment 6.
Co-Chair Foster added that many different contracts had
been approved the previous year, but the specific item had
gotten caught up in the COVID situation. He thought it was
something that was supposed to have been approved along
with all of the other contracts. He stated that perhaps it
was something the legislature could address the following
session in the fast track supplemental or supplemental
budgets.
11:42:31 AM
Co-Chair Foster MOVED to ADOPT Amendment 7, 32-GH3353\A.9
(Marx, 8/24/21) (copy on file):
Page 5, lines 10-11:
Delete all material and insert:
"*Sec.6. RETROACTIVITY. This Act is retroactive to
July 1, 2021."
Vice-Chair Ortiz OBJECTED for discussion.
Co-Chair Foster explained that the amendment was technical.
He detailed that the governor had introduced a bill and had
acknowledged several issues needed fixing. He asked for
further detail from Legislative Legal Services.
11:43:15 AM
MEGAN WALLACE, DIRECTOR, LEGISLATIVE LEGAL SERVICES, ALASKA
STATE LEGISLATURE (via teleconference), explained the
technical amendment. She detailed that the appropriations
or fund source changes indicated in Section 1 of the
legislation should have also been made retroactive to July
1 upon passage of the immediate effective date. The change
would not substantively impact the bill, but it made the
bill more consistent with the intent and the manner in
which Legal Services would typically draft an appropriation
for FY 22.
Co-Chair Foster invited Mr. Steininger to comment on the
governor's bill.
11:44:27 AM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, reported it was his understanding
the amendment changed the retroactivity clause to include
the entirety of the bill. He noted the original bill
included only Section 4 in the clause, but a more correct
drafting would include the entire bill. The administration
agreed with the statements made by Ms. Wallace.
Vice-Chair Ortiz WITHDREW the OBJECTION.
There being NO further OBJECTION, Amendment 7 was ADOPTED.
11:45:30 AM
Co-Chair Merrick MOVED to report CSHB 3003(FIN) out of
Committee with individual recommendations with
authorization to the Legislative Finance Division and
Legislative Legal Services to make any necessary technical
and/or conforming changes.
There being NO OBJECTION, it was so ordered.
CSHB 3003(FIN) was REPORTED out of committee with three "do
pass" recommendations and seven "no recommendation"
recommendations.
Co-Chair Foster indicated there was nothing else to come
before the committee.
ADJOURNMENT
11:46:47 AM
The meeting was adjourned at 11:46 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 3003 Oil & Gas Tax Credits Report 2019 082521.pdf |
HFIN 8/25/2021 10:00:00 AM |
HB3003 |
| HB3003 HF Public Testimony Pkt 3 08.24.21.pdf |
HFIN 8/25/2021 10:00:00 AM |
HB3003 |
| HB 3003 Amendment Pkt with Actions 082521.pdf |
HFIN 8/25/2021 10:00:00 AM |
HB3003 |
| HB3003 HF Public Testimony Pkt 4 08.25.21.pdf |
HFIN 8/25/2021 10:00:00 AM |
HB3003 |