Legislature(2019 - 2020)ADAMS ROOM 519

03/08/2019 01:30 PM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 39 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 40 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ FY20 Dept. Budget Overview: Dept. of Education & TELECONFERENCED
Early Development
*+ HB 53 APPROP: SUPP; CAP; DISASTER RELIEF TELECONFERENCED
Heard & Held
*+ HB 54 APPROP:SUPP; REAPPROP; CAP; AMEND; REPEAL TELECONFERENCED
Heard & Held
                   HOUSE FINANCE COMMITTEE                                                                                      
                        March 8, 2019                                                                                           
                          1:34 p.m.                                                                                             
                                                                                                                                
                                                                                                                                
1:34:13 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 Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Kelly Merrick                                                                                                    
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Heidi Teshner, Administrative  Services Director, Department                                                                    
of  Education and  Early Development,  Office of  Management                                                                    
and  Budget;  Lacey  Sanders,  Budget  Director,  Office  of                                                                    
Management  and   Budget;  Michael   Johnson,  Commissioner,                                                                    
Department  of   Education  and  Early   Development;  Bryan                                                                    
Fisher,  State  Coordinating   Officer,  Homeland  Security,                                                                    
Department of Military and Veterans Affairs.                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 39     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 39 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 40     APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 40 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 53     APPROP: SUPP; CAP; DISASTER RELIEF                                                                                    
                                                                                                                                
          HB 53 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 54     APPROP:SUPP; REAPPROP; CAP; AMEND; REPEAL                                                                             
                                                                                                                                
          HB was HEARD and HELD in committee for further                                                                        
          consideration.                                                                                                        
                                                                                                                                
Co-Chair Foster reviewed the meeting agenda.                                                                                    
                                                                                                                                
HOUSE BILL NO. 39                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  making appropriations  under art.  IX,                                                                    
     sec. 17(c),  Constitution of the State  of Alaska, from                                                                    
     the constitutional  budget reserve fund;  and providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
HOUSE BILL NO. 40                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive   mental    health   program,   including                                                                    
     supplemental  appropriations;  and   providing  for  an                                                                    
     effective date."                                                                                                           
                                                                                                                                
1:35:13 PM                                                                                                                    
                                                                                                                                
HEIDI TESHNER, ADMINISTRATIVE  SERVICES DIRECTOR, DEPARTMENT                                                                    
OF  EDUCATION AND  EARLY DEVELOPMENT,  OFFICE OF  MANAGEMENT                                                                    
AND  BUDGET,  provided   a  PowerPoint  presentation  titled                                                                    
"FY2020  Governor's  Amended  Budget" dated  March  8,  2019                                                                    
(copy on  file). She began  with two  bar charts on  slide 3                                                                    
showing  funding and  budgeted position  comparisons between                                                                    
the FY 19  management plan and the FY  20 governor's amended                                                                    
budget   for  the   Department   of   Education  and   Early                                                                    
Development  (DEED).  The  left  chart  showed  the  funding                                                                    
comparison with  the DEED  FY 19  management plan  budget on                                                                    
the left. The  total was just over $1.6 billion,  made up of                                                                    
$1.483  billion general  funds: $1.321  unrestricted general                                                                    
funds  (UGF)  and  $26.5 million  designated  general  funds                                                                    
(DGF),  which  accounted  for  81   percent  of  the  total.                                                                    
Additional funds  included $64.8 million in  other funds and                                                                    
$251 million  in federal  funds (15  percent of  the overall                                                                    
budget). The  department's FY  20 governor's  amended budget                                                                    
was  slightly   over  $1.3  billion.  Total   general  funds                                                                    
accounted for  just over $1.031 billion:  $1.013 billion UGF                                                                    
and  $18.8  million  DGF, which  accounted  for  about  76.8                                                                    
percent  of  the  overall budget.  Other  funds  were  $61.6                                                                    
million (4.6  percent of the  total) and federal  funds were                                                                    
$250.2 million  (18.6 percent of the  total). The governor's                                                                    
FY 20  amended budget was $320  million less than the  FY 19                                                                    
management plan (a reduction of about 19.3 percent).                                                                            
                                                                                                                                
Ms. Teshner  addressed the  chart on  the right  that showed                                                                    
DEED's  budgeted  position  comparison  between  the  FY  19                                                                    
management plan and the FY  20 governor's amended budget. In                                                                    
FY  19 there  had been  289 total  positions and  the FY  20                                                                    
proposal was  282 positions. The reduction  included 5 full-                                                                    
time positions  associated with the Alaska  State Council on                                                                    
the Arts  (the governor proposed to  eliminate the council),                                                                    
1   permanent  position   associated  with   the  governor's                                                                    
proposed elimination  of the Online With  Libraries program,                                                                    
and  the transfer  of the  administrative services  director                                                                    
position to the Office of Management and Budget.                                                                                
                                                                                                                                
1:38:56 PM                                                                                                                    
                                                                                                                                
Ms. Teshner addressed notable  changes impacting the General                                                                    
Fund (GF)  on slide 4.  The first bullet showed  a reduction                                                                    
to statewide support  in the form of a  50 percent executive                                                                    
branch  travel reduction  totaling  $146,600  GF (the  total                                                                    
DEED travel  budget was $353,000). The  second bullet showed                                                                    
a  reduction  to  the foundation  formula  program  of  $269                                                                    
million. The  proposal would  repeal the  appropriation made                                                                    
under  HB   287  [legislation  passed  in   2018]  that  was                                                                    
scheduled  to take  effect  on July  1,  2019. The  proposal                                                                    
would underfund the formula but  would make no change to the                                                                    
Base Student  Allocation (BSA). The funds  would be prorated                                                                    
based on AS 14.17.400(b). She  added that the BSA equivalent                                                                    
of the reduction was $4,880. The current BSA was $5,930.                                                                        
                                                                                                                                
Ms. Teshner reviewed the last  bullet on slide 4 that showed                                                                    
the  governor's  proposed  elimination  of  one-time  future                                                                    
funding  of $30  million to  school districts.  The proposal                                                                    
would  repeal the  appropriation made  under HB  287 with  a                                                                    
scheduled effective date of July 1, 2019.                                                                                       
                                                                                                                                
1:40:33 PM                                                                                                                    
                                                                                                                                
Ms. Teshner advanced  to slide 5 and  addressed the proposed                                                                    
withdraw of  funding from  the Washington,  Wyoming, Alaska,                                                                    
Montana, and Idaho (WWAMI) program  totaling $3 million. She                                                                    
read from the slide:                                                                                                            
                                                                                                                                
    Total appropriation funds 80 WWAMI students (20                                                                          
     students per year for a total of four years)                                                                               
                                                                                                                                
    Program is delivered at the University of Alaska                                                                         
     Anchorage via the University of Washington, School of                                                                      
     Medicine                                                                                                                   
                                                                                                                                
    From calendar year 2014 through calendar year 2018,                                                                      
     the percent of graduates practicing in Alaska has                                                                          
     decreased from 84% to 61%                                                                                                  
                                                                                                                                
Vice-Chair Ortiz asked if the  data cited in the last bullet                                                                    
point was  an apples-to-apples comparison. He  had heard the                                                                    
84  percent figure  included individuals  from out  of state                                                                    
who  had come  to Alaska  to  work, whereas  the 61  percent                                                                    
figure only  included Alaskans participating in  the [WWAMI]                                                                    
program who returned to Alaska.                                                                                                 
                                                                                                                                
Ms. Teshner  replied that  she had  not heard  the statement                                                                    
Vice-Chair Ortiz had referenced.                                                                                                
                                                                                                                                
Vice-Chair  Ortiz read  from an  Anchorage Daily  News (ADN)                                                                    
newspaper article:                                                                                                              
                                                                                                                                
     The   84  percent   figure   was   large  because   the                                                                    
     calculation  included  Alaskan  students  and  students                                                                    
     from other WWAMI  states who ended up  in Alaska, while                                                                    
     the 61 percent figure included Alaskan students only.                                                                      
                                                                                                                                
Vice-Chair Ortiz  noted the information  in the  article was                                                                    
according to the WWAMI program.                                                                                                 
                                                                                                                                
1:43:08 PM                                                                                                                    
                                                                                                                                
Ms. Teshner replied that she would follow up.                                                                                   
                                                                                                                                
Representative  Sullivan-Leonard highlighted  the incredible                                                                    
need  for  positions  in  Alaska.  She  believed  the  WWAMI                                                                    
program  had been  successful and  had resulted  in Alaskans                                                                    
coming back  to work as physicians  in-state (including Mat-                                                                    
Su). She had  been a strong supporter of  the WWAMI program.                                                                    
She asked what would take  WWAMI's place if the program went                                                                    
away.                                                                                                                           
                                                                                                                                
Ms. Teshner  replied that the students  participating in the                                                                    
program would  have to  compete against  a larger  number of                                                                    
applicants.  She believed  the 20  individuals applying  for                                                                    
the  program would  have  to  compete against  approximately                                                                    
7,000 other applicants if the program was eliminated.                                                                           
                                                                                                                                
Vice-Chair Ortiz  asked if the term  "compete against" meant                                                                    
competing for  admittance into the University  of Washington                                                                    
medical  program or  competing  for  scholarships. He  noted                                                                    
that  part  of  the  program allowed  students  to  have  50                                                                    
percent of their  costs covered as long as  they returned to                                                                    
work in Alaska.                                                                                                                 
                                                                                                                                
Ms. Teshner replied that she  was referring to competing for                                                                    
admittance into  a medical school.  She used  a hypothetical                                                                    
example  where  7,000  individuals  applied  for  a  medical                                                                    
school  program  that only  had  100  spaces available.  She                                                                    
clarified  she   was  not   referring  to   competition  for                                                                    
scholarship money.                                                                                                              
                                                                                                                                
Vice-Chair   Ortiz   asked   for   verification   that   the                                                                    
elimination  of  the  program would  mean  Alaskan  students                                                                    
would  no longer  have  50 percent  of  their tuition  costs                                                                    
waived by returning to work in Alaska.                                                                                          
                                                                                                                                
Ms. Teshner replied affirmatively.                                                                                              
                                                                                                                                
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, added the  proposal had been put forward  as each of                                                                    
the   agencies   identified   their   core   services.   The                                                                    
elimination of  funding was not  about the  program's value.                                                                    
She explained  the department's focus was  on K-12 services;                                                                    
the WWAMI program fell outside DEED's core services.                                                                            
                                                                                                                                
1:46:42 PM                                                                                                                    
                                                                                                                                
Vice-Chair Johnston  asked if the program  was potentially a                                                                    
core  service  for  the  Department  of  Health  and  Social                                                                    
Services (DHSS).                                                                                                                
                                                                                                                                
Ms. Sanders  replied that  it was a  fair question.  She did                                                                    
not know that DHSS would  be the best location. She reported                                                                    
that  the program  was delivered  through the  University of                                                                    
Alaska and she suggested  there could be conversations about                                                                    
whether it was valuable to place the program there.                                                                             
                                                                                                                                
Vice-Chair Johnston asked if Alaska  would be the only state                                                                    
that had no  medical program for its residents  if the WWAMI                                                                    
funding was eliminated.                                                                                                         
                                                                                                                                
Ms. Sanders answered she would have to follow up.                                                                               
                                                                                                                                
Vice-Chair   Johnston   requested  a   spreadsheet   showing                                                                    
programs offered in other states.                                                                                               
                                                                                                                                
Ms. Sanders agreed to follow up on the request.                                                                                 
                                                                                                                                
1:48:20 PM                                                                                                                    
                                                                                                                                
Ms. Teshner continued to address  slide 5. She reported that                                                                    
60 percent  of WWAMI students return  to practice [medicine]                                                                    
in  Alaska.  She  noted  that   Alaska  had  a  shortage  of                                                                    
physicians  and  the  declining return  of  students  was  a                                                                    
primary   reason  for   the   governor's  proposed   funding                                                                    
reduction.  She   elaborated  that  Alaska   needed  60-plus                                                                    
physicians  each  year  to  meet  demand,  while  the  WWAMI                                                                    
program  only contributed  14-plus physicians  annually. She                                                                    
addressed the last  bullet on slide 5 and  reported that the                                                                    
Alaska Performance  Scholarship (APS)  was continued  in the                                                                    
budget  with  a  change  in  fund  source  from  the  Higher                                                                    
Education Investment Fund to UGF.                                                                                               
                                                                                                                                
Vice-Chair  Ortiz shared  that  he had  received a  question                                                                    
from  a  student  constituent  about  the  proposed  funding                                                                    
source change.  He appreciated the  fund would  continue. He                                                                    
asked  if the  change in  fund source  would change  how the                                                                    
program operated.                                                                                                               
                                                                                                                                
Ms.  Teshner  replied  there  would  be  no  change  to  the                                                                    
program; it  would continue as  established in  statute. The                                                                    
only change was the fund source.                                                                                                
                                                                                                                                
Representative  Sullivan-Leonard   asked  for   the  current                                                                    
balance of the APS account.                                                                                                     
                                                                                                                                
Ms. Sanders replied that the  balance was approximately $450                                                                    
million.                                                                                                                        
                                                                                                                                
Vice-Chair  Johnston  pointed  out  that the  focus  of  the                                                                    
budget was  on core missions.  She wondered why  funding the                                                                    
APS fell outside  the mission of the  current funding source                                                                    
[Higher Education  Investment Fund].  She believed  the fund                                                                    
had synergy with  the APS because it applied to  many of the                                                                    
same students.                                                                                                                  
                                                                                                                                
Ms.  Sanders asked  if Vice-Chair  Johnston was  speaking to                                                                    
the APS.                                                                                                                        
                                                                                                                                
Vice-Chair Johnston  answered in the affirmative.  She spoke                                                                    
to the proposal to change the fund source.                                                                                      
                                                                                                                                
Ms.  Sanders replied  that the  proposed fund  source change                                                                    
from the Higher Education Investment  Fund to UGF was due to                                                                    
the administration's  proposal to  eliminate quasi-dedicated                                                                    
funds.   She  elaborated   that  the   administration  would                                                                    
introduce  legislation to  eliminate quasi-dedicated  funds,                                                                    
which  included the  Higher Education  Investment Fund.  The                                                                    
proposed  budget changed  the funding  source to  enable the                                                                    
continuation of  the APS program after  the Higher Education                                                                    
Investment Fund was eliminated.                                                                                                 
                                                                                                                                
Vice-Chair  Ortiz questioned  whether there  was opportunity                                                                    
cost to  making the change.  He asked for  verification that                                                                    
the  funds   currently  came   from  the   Higher  Education                                                                    
Investment Fund.                                                                                                                
                                                                                                                                
Ms. Sanders replied in the affirmative.                                                                                         
                                                                                                                                
Vice-Chair Ortiz  asked if  the Higher  Education Investment                                                                    
Fund balance was currently $400 million.                                                                                        
                                                                                                                                
Ms. Sanders replied the fund  balance was approximately $450                                                                    
million.                                                                                                                        
                                                                                                                                
Vice-Chair Ortiz asked  if the APS assistance  had been paid                                                                    
for with return on  investments, allowing the fund principal                                                                    
to remain intact.                                                                                                               
                                                                                                                                
Ms.  Sanders  replied  that  the  fund  had  initially  been                                                                    
established to  pay for the  APS. However,  past legislation                                                                    
had  utilized   the  funds  for  other   items  outside  the                                                                    
statutory purpose.  She could  not speak  to the  eroding of                                                                    
the balance of  the fund's principal. She  reported that the                                                                    
amount of funds being utilized  had been increasing over the                                                                    
years  to be  utilized for  other programs.  She highlighted                                                                    
the  purpose of  quasi-dedicated funds.  She explained  that                                                                    
although the  fund was  set up for  a specific  purpose, the                                                                    
legislature  had  the  power   of  appropriation  and  could                                                                    
utilize  the  funds for  other  purposes.  The change  would                                                                    
transfer  all   the  funding   from  the   Higher  Education                                                                    
Investment  Fund into  the  GF and  allowed  the program  to                                                                    
compete with other  programs for funding. She  stated it was                                                                    
a  priority  of the  administration  and  the program  would                                                                    
continue.                                                                                                                       
                                                                                                                                
1:54:47 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz believed the  benefit of investment returns                                                                    
would be  lost if the  Higher Education Investment  Fund was                                                                    
eliminated  because the  General Fund  was not  invested for                                                                    
earning returns.                                                                                                                
                                                                                                                                
Ms. Sanders answered  that she was not an  investor, but she                                                                    
agreed with  the logic that the  returns may not be  as good                                                                    
as  those earned  in the  Higher Education  Investment Fund.                                                                    
The administration believed  quasi-dedicated funds should be                                                                    
eliminated  and that  programs  should  compete for  general                                                                    
funds on an even playing field.                                                                                                 
                                                                                                                                
Representative  Josephson was  confused about  the statement                                                                    
that  programs   should  compete.  He  cited   Ms.  Sanders'                                                                    
testimony that  there had been  some use  of quasi-dedicated                                                                    
funds  for purposes  outside of  their  original intent.  He                                                                    
asked for  verification that historically  there had  been a                                                                    
legislative understanding  there was some  vulnerability and                                                                    
nothing was dedicated.                                                                                                          
                                                                                                                                
Ms.  Sanders replied  that  the  administration's point  was                                                                    
that none  of the  funds should  be dedicated.  She believed                                                                    
there was  often an understanding that  statutory designated                                                                    
funds  could  only  be  used for  a  specific  purpose.  She                                                                    
highlighted  that  there  were no  constitutional  dedicated                                                                    
funds.  She thought  the proposal  to  eliminate the  quasi-                                                                    
dedicated funds  would provide clarity  that there  was only                                                                    
one fund source.                                                                                                                
                                                                                                                                
Representative  Josephson  understood  the  intent,  but  he                                                                    
believed each of the  [quasi-dedicated] funds, including the                                                                    
Power Cost Equalization  Fund (PCE) had been  designed for a                                                                    
legislative   purpose  that   succeeding  legislatures   had                                                                    
recognized and  largely honored by not  dissolving them. His                                                                    
concern was  that conceptually the public  would view "these                                                                    
things" differently. He was  concerned about the competition                                                                    
the programs would face for  funding [if the fund source was                                                                    
changed to GF]. He wondered if  the move was a forerunner to                                                                    
the programs'  eventual dissolution. He asked  why he should                                                                    
not be worried that the programs would be dissolved.                                                                            
                                                                                                                                
Ms. Sanders responded that she  could not convince anyone or                                                                    
make statements about  what could happen in  the future. The                                                                    
budget proposal  was to continue the  programs. She detailed                                                                    
that  the  proposal  was  merely   an  opportunity  for  the                                                                    
legislature to have  clarity in its budget.  She stated that                                                                    
the  public  may not  understand  that  the funds  were  not                                                                    
dedicated  for that  purpose.  She could  not  speak to  the                                                                    
future  and claim  that things  would not  be eliminated  or                                                                    
changed. She  continued that the  legislature had  the power                                                                    
of appropriation.  She elaborated  that all  projects should                                                                    
compete for equal funding and  it was the legislature's role                                                                    
to determine what was a priority.                                                                                               
                                                                                                                                
1:59:24 PM                                                                                                                    
                                                                                                                                
Ms. Teshner  moved to  slide 6  that included  reductions to                                                                    
early learning programs:                                                                                                        
                                                                                                                                
 Pre-Kindergarten Programs & Other Early Learning Grant                                                                      
     Programs (-$16,847.7 GF)                                                                                                   
                                                                                                                                
        o ($6,853.0) GF Head Start Grants                                                                                       
                                                                                                                                
             square4 Head Start grantees are required to have a                                                                 
               20 percent match on their federal grants                                                                         
                                                                                                                                
                   Match must   come   from   non-federal                                                                    
                    sources; can be in kind donations or a                                                                      
                    cash match received from their parties                                                                      
                    or contributed by the grantee                                                                               
                                                                                                                                
                   There is no requirement for State                                                                         
                    funding                                                                                                     
                                                                                                                                
             square4 This appropriation has served as that match                                                                
               on their federal Head Start grants                                                                               
                                                                                                                                
Ms.  Teshner   noted  that  Head  Start   entities  received                                                                    
approximately $46  million in  federal funds.  She expounded                                                                    
that DEED  did not  have oversight over  those funds  or the                                                                    
associated matching  funds. Alaska was  one of a  handful of                                                                    
states that provided matching funds  to Head Start grantees.                                                                    
She  highlighted   that  Head  Start  programs   were  still                                                                    
operating in states that did not provide matching funds.                                                                        
                                                                                                                                
Co-Chair Foster asked if the  state's $6.8 million leveraged                                                                    
the $46 million in federal funds.                                                                                               
                                                                                                                                
Ms. Teshner replied that the  state funding did not leverage                                                                    
the  full amount.  She  detailed  that 5  of  16 Head  Start                                                                    
agencies  [in  Alaska]  received waivers  from  the  federal                                                                    
government that  exempted them from  meeting the  20 percent                                                                    
federal  match. The  department distributed  the funds  that                                                                    
were  primarily, but  not always,  used towards  the federal                                                                    
match.                                                                                                                          
                                                                                                                                
Vice-Chair  Johnston   asked  if  other  states   had  other                                                                    
government  entities   (e.g.  counties  or   boroughs)  that                                                                    
provided matching funds.                                                                                                        
                                                                                                                                
Ms.  Teshner  responded that  she  did  not know  and  would                                                                    
follow up on the question.                                                                                                      
                                                                                                                                
Vice-Chair  Ortiz asked  how  much of  the  $46 million  [in                                                                    
federal funds] was leveraged by  the $6.85 million [in state                                                                    
funds]. He asked if $25 million sounded accurate.                                                                               
                                                                                                                                
2:03:16 PM                                                                                                                    
                                                                                                                                
Ms. Teshner replied  that she had not done the  math and did                                                                    
not have a clear answer.                                                                                                        
                                                                                                                                
Vice-Chair Ortiz  asked to hear  from the  DEED commissioner                                                                    
on the issue that he referred  to as a policy call. He noted                                                                    
that Commissioner Johnson had  served as commissioner during                                                                    
the previous  administration as well.  He recalled  that the                                                                    
commissioner had worked on a  program to improve schools but                                                                    
could not recall the name.                                                                                                      
                                                                                                                                
MICHAEL JOHNSON,  COMMISSIONER, DEPARTMENT OF  EDUCATION AND                                                                    
EARLY  DEVELOPMENT,  answered   that  Vice-Chair  Ortiz  was                                                                    
referring to the Alaska Education Challenge.                                                                                    
                                                                                                                                
Vice-Chair  Ortiz recalled  the challenge  included focusing                                                                    
on literacy by the third grade.                                                                                                 
                                                                                                                                
Commissioner Johnson replied that one  of the five goals was                                                                    
for every student  to read proficiently by the  end of third                                                                    
grade.                                                                                                                          
                                                                                                                                
Vice-Chair Ortiz asked how a  reduction to the accessibility                                                                    
to Pre-K  programs throughout the  state helped  achieve the                                                                    
goal of the overall challenge.                                                                                                  
                                                                                                                                
Commissioner Johnson  restated the  question. He  hoped that                                                                    
whatever happened  with the state's  budget that  access was                                                                    
not necessarily  reduced. He relayed that  DEED had recently                                                                    
received a  grant for over  $2 million to expand  access. He                                                                    
elaborated that  whatever happened to the  state budget, the                                                                    
department  would  continue  to  work  to  provide  as  many                                                                    
resources   and   opportunities   as   possible.   Secondly,                                                                    
districts  had  a  number  of   options  for  providing  the                                                                    
services (some used state resources,  some had tuition based                                                                    
programs,  and   some  worked  in  cooperation   with  their                                                                    
municipalities).  He added  that he  would not  characterize                                                                    
the cuts  as being helpful,  as he would not  expect someone                                                                    
to  characterize  using  the PFDs  from  families  as  being                                                                    
helpful,  or  taxing  families   that  were  already  eating                                                                    
paycheck  to paycheck  as being  helpful. He  stated that  a                                                                    
sustainable budget  would be helpful, which  he believed was                                                                    
true of Pre-K and the  goal of reaching third grade reading.                                                                    
Whatever the change  was to the budget would  not change the                                                                    
department's goal of students reading by third grade.                                                                           
                                                                                                                                
Vice-Chair  Johnston   remarked  that  if  the   state  only                                                                    
provided 20  percent matching funds,  it would mean  a large                                                                    
portion of  federal funds  would be left  on the  table. She                                                                    
requested to see the federal  grants that would be impacted.                                                                    
She  referenced Ms.  Teshner's testimony  that  some of  the                                                                    
funds would go  to programs that did not pay  the 20 percent                                                                    
match. She was interested how  much federal funding would be                                                                    
forsaken.                                                                                                                       
                                                                                                                                
2:08:07 PM                                                                                                                    
                                                                                                                                
Ms. Teshner clarified that the  $46 million in federal funds                                                                    
went  directly to  Head Start  grantees; the  funds did  not                                                                    
pass through  DEED. The  department had  not heard  that the                                                                    
reduction  would  put  the  federal  funding  at  risk.  The                                                                    
grantees would receive  the funds but would have  to make up                                                                    
the match through in-kind contributions  or within their own                                                                    
budgets.                                                                                                                        
                                                                                                                                
Vice-Chair Johnston  noted that  in an earlier  response Ms.                                                                    
Teshner had  stated that  some grantees  were not  using the                                                                    
funding for their 20 percent  match [for federal funds]. She                                                                    
asked where the  money was or was not being  used for the 20                                                                    
percent match. She wanted more clarity on the consequences.                                                                     
                                                                                                                                
Ms. Teshner clarified  that 5 of the 16  Head Start grantees                                                                    
had a  waiver and were not  required to meet the  20 percent                                                                    
match. The grantees with waivers  still received some of the                                                                    
$6.8 million (which had typically  been used as a match) but                                                                    
did not use the funds towards their match.                                                                                      
                                                                                                                                
Vice-Chair Johnston requested the monetary breakdown.                                                                           
                                                                                                                                
Co-Chair  Foster asked  for a  list of  all 16  [Head Start]                                                                    
programs  and detail  on  which  of the  5  had waivers.  He                                                                    
assumed  all  16  grantees  received a  piece  of  the  $6.8                                                                    
million.  He requested  specifics on  how much  the grantees                                                                    
could potentially lose in federal funds.                                                                                        
                                                                                                                                
2:10:43 PM                                                                                                                    
                                                                                                                                
Representative  Josephson asked  for  verification that  for                                                                    
every $1  the state contributed, $7.50  was received through                                                                    
the federal Head Start program.                                                                                                 
                                                                                                                                
Ms. Sanders clarified that the  $6.8 million was put forward                                                                    
by  the state  for the  Head Start  programs. She  explained                                                                    
that   some  of   the  programs   had   their  own   in-kind                                                                    
contributions. She detailed it was  necessary to look at the                                                                    
whole picture;  the state  funding was only  a piece  of the                                                                    
match requirement.                                                                                                              
                                                                                                                                
Representative  Josephson had  heard the  administration say                                                                    
it did not  know how local communities would  respond to the                                                                    
budget and  what monies communities would  raise to maintain                                                                    
the  services currently  provided.  He asked  if anyone  had                                                                    
checked to see how the  16 programs would respond to needing                                                                    
to come up with almost $7 million.                                                                                              
                                                                                                                                
Ms.   Teshner  believed   DEED   staff   had  recently   had                                                                    
conversations with  the Head Start  agencies. She  would get                                                                    
the information  from those individuals and  would follow up                                                                    
with detail on how the reduction would impact the agencies.                                                                     
                                                                                                                                
Representative Josephson  termed how he thought  former U.S.                                                                    
Senator  Ted  Stevens  would  handle   a  situation  as  the                                                                    
"Stevens doctrine."  He believed Senator Stevens  would "let                                                                    
Washington be  Washington" and would bring  home the revenue                                                                    
Alaska was entitled to under  current rules and laws. He was                                                                    
gravely  concerned  the  state would  be  leaving  countless                                                                    
dollars on the table in  program after program. He wanted to                                                                    
know the match was a real thing that was achievable.                                                                            
                                                                                                                                
Co-Chair  Foster  had  spoken  with  his  local  Head  Start                                                                    
agency, that was  under the umbrella of  the regional Native                                                                    
organization. The agency was currently  using other funds to                                                                    
fund the program and help with  its match. It sounded to him                                                                    
like the agency  was already accessing any  other funding it                                                                    
could. He did  not know where else the agency  could get the                                                                    
matching funds unless  the city helped cover  funds. He knew                                                                    
the issue was a concern for the agency.                                                                                         
                                                                                                                                
2:13:40 PM                                                                                                                    
                                                                                                                                
Representative  Carpenter remarked  that  the committee  was                                                                    
looking  at  K-12  education  but  was  discussing  a  Pre-K                                                                    
program. He asked if a  Pre-K program was a core requirement                                                                    
for K-12 education.                                                                                                             
                                                                                                                                
Commissioner  Johnson replied  that the  department was  the                                                                    
Department of  Education and Early Development.  He reported                                                                    
that in  the Moore case  [Moore vs. State of  Alaska], Judge                                                                    
[Sharon] Gleason  noted the importance  of Pre-K  but stated                                                                    
in that case it was not a constitutional mandate.                                                                               
                                                                                                                                
Ms. Teshner reviewed the remainder of slide 6:                                                                                  
                                                                                                                                
     ($1,200.0) GF Early Learning Grants                                                                                        
                                                                                                                                
         Funds currently serving 419 students in 9 school                                                                    
          districts                                                                                                             
                                                                                                                                
         Added in FY2018 as one time increment for Pre-                                                                      
          Kindergarten programs affected by the Moore                                                                           
          Settlement and added to base budget in FY2019                                                                         
                                                                                                                                
         Funding is not sufficient to serve the Pre-                                                                         
          Kindergarten population on a statewide basis                                                                          
                                                                                                                                
Ms. Teshner  added that  the funds along  with a  $2 million                                                                    
reduction to  Pre-K grants  (included on  slide 7)  were not                                                                    
sufficient to serve Pre-K statewide.                                                                                            
                                                                                                                                
2:15:43 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Johnston asked  when the  state's responsibility                                                                    
for the Moore settlement was over.                                                                                              
                                                                                                                                
Ms. Teshner replied the settlement  had been finalized in FY                                                                    
17.                                                                                                                             
                                                                                                                                
Vice-Chair  Ortiz asked  for further  detail about  the last                                                                    
bullet point on slide 6:  Funding is not sufficient to serve                                                                    
the Pre-Kindergarten population on a statewide basis.                                                                           
                                                                                                                                
Ms. Teshner replied that the  bullet point went in line with                                                                    
the $2  million reduction to  the Pre-K grant [on  slide 7].                                                                    
She  detailed  that Pre-K  grants  started  out as  a  pilot                                                                    
program  intended to  grow from  $2 million  to $10  million                                                                    
over  time.  She  elaborated  that  the  funding  had  never                                                                    
expanded  beyond  $2  million.  The  addition  of  the  $1.2                                                                    
million [one-time  Pre-K increment added  to the FY  19 base                                                                    
budget]  allowed DEED  to expand  the program  slightly, but                                                                    
the program  continued to only  serve a small  percentage of                                                                    
Pre-K students statewide.                                                                                                       
                                                                                                                                
Vice-Chair   Ortiz   asked   if  the   explanation   was   a                                                                    
justification for removing the funds.                                                                                           
                                                                                                                                
Ms.  Teshner   replied  that   it  was   one  justification.                                                                    
Additionally, the programs were not in statute.                                                                                 
                                                                                                                                
2:17:42 PM                                                                                                                    
                                                                                                                                
Representative  Josephson  remarked  that  only  looking  at                                                                    
constitutionally  mandated programs  could quickly  collapse                                                                    
the government.  He asked if  the Moore  settlement actually                                                                    
detailed  that the  obligation  to  contribute something  as                                                                    
part of  the Pre-K program  was time limited. He  thought it                                                                    
seemed like an  odd thing for a judge to  write. He asked if                                                                    
the judge  had actually specified  the state needed  to care                                                                    
more about Pre-K for a given period of time only.                                                                               
                                                                                                                                
Commissioner Johnson suggested the  Department of Law may be                                                                    
better equipped  to answer questions about  a settlement. He                                                                    
reported that  the [Moore]  settlement did  have timeframes,                                                                    
but  he  did not  characterize  the  judge or  agreement  as                                                                    
specifying  that  Pre-K was  important  only  for a  certain                                                                    
amount of time.                                                                                                                 
                                                                                                                                
Co-Chair  Foster  asked  Commissioner Johnson  for  a  brief                                                                    
description of  the Moore  settlement and  how it  sought to                                                                    
establish equity in the quality of education.                                                                                   
                                                                                                                                
Commissioner Johnson agreed and  encouraged the committee to                                                                    
get further detail on the  settlement from the Department of                                                                    
Law. He  shared a quote [by  the judge] from the  case, "The                                                                    
primary  question  in  this  case   is  whether  the  public                                                                    
education system in Alaska is constitutionally adequate."                                                                       
He  elaborated  that throughout  the  case  the judge  noted                                                                    
funding  was only  one element  and  she had  not found  the                                                                    
funding was  inadequate. The judge  had found that  DEED was                                                                    
not   providing  adequate   oversight  to   districts  where                                                                    
students were not proficient.                                                                                                   
                                                                                                                                
2:21:00 PM                                                                                                                    
                                                                                                                                
Ms. Teshner turned  to slide 7 and continued  to address the                                                                    
governor's  proposed reductions  to  Pre-K  and other  early                                                                    
learning grant programs:                                                                                                        
                                                                                                                                
    ($320.0) GF Best Beginnings Grant                                                                                        
        o 27 Imagination Libraries serving 107 communities                                                                      
                                                                                                                                
    ($474.4) GF Parents As Teachers Grant                                                                                    
        o Four grantees serving approximately 159 children                                                                      
          in 134 families in 6 communities                                                                                      
                                                                                                                                
Representative  Sullivan-Leonard  asked  if there  had  been                                                                    
conversations  with  nonprofits  that would  be  willing  to                                                                    
support   the  Best   Beginnings  and   Imagination  Library                                                                    
programs.  She  reported that  a  Rotary  chapter in  Mat-Su                                                                    
contributed a substantial amount  to the Imagination Library                                                                    
program.                                                                                                                        
                                                                                                                                
Ms.   Teshner   responded  that   she   had   not  had   any                                                                    
conversations  about   the  issue   and  would   check  with                                                                    
department staff to  see if there had  been any discussions.                                                                    
She thought  there were nonprofits  that would be  more than                                                                    
willing to help support the continuation of the program.                                                                        
                                                                                                                                
Vice-Chair Johnston  disclosed that her  daughter-in-law was                                                                    
on  the  Best Beginnings  board.  She  elucidated that  Best                                                                    
Beginnings is a nonprofit and  was constantly out working to                                                                    
raise funds and get further support from other groups.                                                                          
                                                                                                                                
Ms. Teshner reviewed the final items on slide 7:                                                                                
                                                                                                                                
    ($2,000.0) GF Pre-Kindergarten Grants                                                                                    
        o Funds currently serving 504 students in 11 school                                                                     
          districts                                                                                                             
        o Started out as a pilot Pre K program in FY2010                                                                        
        o Funding is not sufficient to serve the pre-                                                                           
          Kindergarten population on a statewide basis                                                                          
                                                                                                                                
    ($6,000.0) GF remove one time multi-year (FY2019 and                                                                     
     FY2020) increment for Pre-Kindergarten Grants                                                                              
        o FY2019 serving 231 students in 6 school districts                                                                     
        o FY2020 expected to serve 761 students in 9 school                                                                     
          districts                                                                                                             
                                                                                                                                
Ms. Teshner  elaborated on the  proposal to  remove one-time                                                                    
multi-year  funding. She  detailed  the  increment had  been                                                                    
removed  from  the  FY  20  base  budget  because  the  full                                                                    
increment had been received in FY  19 for the two years. She                                                                    
clarified that  the same six  districts participating  in FY                                                                    
19 would  participate in  FY 20 with  the addition  of three                                                                    
more districts.                                                                                                                 
                                                                                                                                
2:24:27 PM                                                                                                                    
                                                                                                                                
Vice-Chair    Ortiz   discussed    how    the   state    was                                                                    
constitutionally   mandated  try   to   provide  a   quality                                                                    
education  for K-12  students.  He asked  if  there was  any                                                                    
evidence  to  suggest that  investments  made  at the  Pre-K                                                                    
level reduced education costs for K-12.                                                                                         
                                                                                                                                
Commissioner  Johnson responded  there  was strong  evidence                                                                    
that reading proficiency by the  end of third grade was more                                                                    
efficient  for  the  system  and  more  productive  for  the                                                                    
student.   He  spoke   about  Pre-K   and  noted   that  the                                                                    
legislature could  find a  host of  advocates for  Pre-K and                                                                    
another  host of  individuals who  would say  the impact  of                                                                    
Pre-K  diminished  over time.  There  was  research on  both                                                                    
sides  of  the  issue.   Additionally,  there  was  research                                                                    
associated  with   universal  and  targeted   education  and                                                                    
whether it helped some students more than others.                                                                               
                                                                                                                                
Vice-Chair Ortiz pointed  to Commissioner Johnson's position                                                                    
as the  commissioner of  DEED and his  past experience  as a                                                                    
superintendent and  teacher. He asked from  that perspective                                                                    
whether Commissioner  Johnson believed Pre-K  helped provide                                                                    
better outcomes for students in grades K-12.                                                                                    
                                                                                                                                
Commissioner Johnson  answered that Pre-K was  one factor in                                                                    
a student's  success by  the third  grade. He  reported that                                                                    
the factor may  make a difference for some  students and not                                                                    
others.  He detailed  that targeted  Pre-K had  shown to  be                                                                    
very  helpful in  places throughout  the U.S.  He reiterated                                                                    
that Pre-K was one element of preparing kids for school.                                                                        
                                                                                                                                
2:27:52 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  agreed.  He asked  about  other  critical                                                                    
components.                                                                                                                     
                                                                                                                                
Commissioner Johnson asked for clarification.                                                                                   
                                                                                                                                
Vice-Chair  Ortiz was  interested  in  detail on  components                                                                    
that were critical for a student's success.                                                                                     
                                                                                                                                
Commissioner Johnson  replied there were as  many components                                                                    
as there were differences  in students. He provided examples                                                                    
including family, health,  community, economics, the quality                                                                    
of  the curriculum  and instruction.  He  stated there  were                                                                    
endless factors in kids' lives  that contributed to success.                                                                    
He added that funding was only one factor.                                                                                      
                                                                                                                                
Vice-Chair   Ortiz   clarified    his   understanding   that                                                                    
Commissioner  Johnson  had  stated   that  Pre-K  (not  just                                                                    
funding) was one factor. He  shared that from his experience                                                                    
as a former  educator, teachers did not have a  lot of input                                                                    
on family and  economics, but they did have  input on Pre-K.                                                                    
He acknowledged  the importance of the  other components. He                                                                    
asked for the accuracy of his statements.                                                                                       
                                                                                                                                
Commissioner Johnson asked Vice-Chair  Ortiz if the question                                                                    
was  whether  DEED  had influence  over  whether  a  student                                                                    
received Pre-K.                                                                                                                 
                                                                                                                                
Vice-Chair Ortiz nodded.                                                                                                        
                                                                                                                                
Commissioner   Johnson   replied   that  he   believed   the                                                                    
legislature had  influence over  whether students  had Pre-K                                                                    
because  it  controlled  the  budget.  He  stated  that  the                                                                    
department  merely implemented  the budget  provided by  the                                                                    
legislature.  He   stated  that  the  department   would  do                                                                    
everything   possible   to   support   Pre-K   opportunities                                                                    
throughout   the   state   with   whatever   resources   the                                                                    
legislature decided to appropriate.                                                                                             
                                                                                                                                
2:30:13 PM                                                                                                                    
                                                                                                                                
Representative LeBon recalled  that when he had  served on a                                                                    
school  board, the  board had  received  annual requests  to                                                                    
enroll  four-year-olds.  The  board had  always  denied  the                                                                    
requests  because  once an  age  exception  was granted,  it                                                                    
would  need  to  be  granted  for  everyone.  He  asked  for                                                                    
verification that  the Pre-K program  had been  designed for                                                                    
the four-year-old group.                                                                                                        
                                                                                                                                
Ms. Teshner replied the program  had been designed for three                                                                    
and four-year-olds.                                                                                                             
                                                                                                                                
Representative LeBon asked if  the program had been launched                                                                    
in the  previous year. He  cited the information on  slide 7                                                                    
stating that in  FY 19, 6 school districts  and 231 students                                                                    
had been served.                                                                                                                
                                                                                                                                
Ms. Teshner  asked if Representative LeBon  was referring to                                                                    
the  $6 million  [the  governor's proposal  to  remove a  $6                                                                    
million  one-time,  multi-year  increment for  Pre-K  grants                                                                    
(slide 7)].                                                                                                                     
                                                                                                                                
Representative LeBon responded affirmatively.                                                                                   
                                                                                                                                
Ms. Teshner  clarified that the  $6 million had been  a one-                                                                    
time additional grant to help  expand the Pre-K program. The                                                                    
grant was  intended to expand  the $2 million grant  and the                                                                    
$1.2 million on  slide 6. She explained that slides  6 and 7                                                                    
broke out the  pots of money and the number  of students the                                                                    
program  was   serving.  She   referenced  the   $6  million                                                                    
increment and detailed that in  FY 19, 231 students would be                                                                    
served in 6 school districts.                                                                                                   
                                                                                                                                
Representative LeBon  stated from the perspective  of a past                                                                    
school  board member  he  was concerned  about  the idea  of                                                                    
rolling out  a program  that would not  be sustained  in the                                                                    
future.  He asked  what the  department had  been hoping  to                                                                    
learn and whether it had  been supportive of the program. He                                                                    
asked if there  were any early results about  the success of                                                                    
three  and four-year-olds  in the  6  school districts  that                                                                    
served as  a model for the  program. He asked if  it was too                                                                    
early to have the results.                                                                                                      
                                                                                                                                
Ms.  Teshner  responded  that  it  was  too  early  to  have                                                                    
results. She explained the intent  behind the grants was for                                                                    
districts to  provide innovative ways to  provide Pre-K. She                                                                    
detailed that if districts applied  for the grants, they had                                                                    
to show the ability to  provide something they could sustain                                                                    
in  the   long-term  (when  state   funds  were   no  longer                                                                    
available).                                                                                                                     
                                                                                                                                
Representative LeBon  asked about the time  duration for the                                                                    
program.                                                                                                                        
                                                                                                                                
Ms. Teshner replied it was a two-year grant.                                                                                    
                                                                                                                                
Representative  LeBon  wondered if  it  was  enough time  to                                                                    
measure success. He asked how success was defined.                                                                              
                                                                                                                                
Commissioner  Johnson  replied  it  would  be  a  reasonable                                                                    
amount  of  time  to  determine  success  for  the  students                                                                    
enrolled in  the programs.  He was uncertain  it would  be a                                                                    
reasonable amount  of time to  make broad  conclusions about                                                                    
Pre-K programs.                                                                                                                 
                                                                                                                                
Representative LeBon  remarked that if a  program was rolled                                                                    
out, the state should be  ready for every school district to                                                                    
want to  enroll four-year-olds. He would  have been cautious                                                                    
about  accepting  the grant  without  a  good feeling  about                                                                    
sustainability and whether there was  a desire to continue a                                                                    
program in the future.                                                                                                          
                                                                                                                                
2:34:21 PM                                                                                                                    
                                                                                                                                
Representative  Josephson stated  it  appeared  that if  the                                                                    
state abandoned  its Pre-K programs  it would be one  of six                                                                    
states without  Pre-K. He  understood eliminating  Pre-K was                                                                    
not  necessarily  the  governor's proposal  and  that  there                                                                    
could   be  other   in-kind  contributions   or  nonprofits;                                                                    
however, it moved  in the direction of not  having Pre-K. He                                                                    
did not  want to debate  the efficacy of Pre-K.  He detailed                                                                    
that  Head   Start  had  begun  around   1965  under  Lyndon                                                                    
Johnson's  Great Society.  The  programs  had existed  since                                                                    
that time  and were established  in 45 states. He  asked for                                                                    
verification that  "we're not really saying  that it doesn't                                                                    
have value,  right?" He  believed the  value of  the program                                                                    
was  undeniable. He  reasoned it  was a  policy call  to say                                                                    
that the state could not afford it.                                                                                             
                                                                                                                                
Commissioner  Johnson would  let OMB  speak to  policy calls                                                                    
about what was  or was not included in  the budget. Whatever                                                                    
the final budget  looked like - school  districts would have                                                                    
to  go through  a  similar  process. He  stated  it was  not                                                                    
always a "this is important  or unimportant, but what's most                                                                    
important." He would not argue that Pre-K was unimportant.                                                                      
                                                                                                                                
Co-Chair  Foster noted  that school  districts  did not  all                                                                    
have the  Pre-K program. He  asked how each  school district                                                                    
had been chosen  to receive the funds. He  wondered if there                                                                    
had been  a desire  to achieve regional  diversification and                                                                    
balance. Alternatively,  he wondered  if districts  had been                                                                    
selected based  on a  need for  improvement or  if districts                                                                    
had merely applied for a chance to receive the grant.                                                                           
                                                                                                                                
Commissioner  Johnson answered  that Pre-K  included several                                                                    
programs  in  the  state.  One   part  was  from  the  Moore                                                                    
settlement  that   targeted  funds  to   claimant  districts                                                                    
associated  with  the case.  Head  Start  was another  Pre-K                                                                    
program that  DEED did not necessarily  regulate or control,                                                                    
though that  money had supported  some of those  programs in                                                                    
the past. There were  other district-initiated and sponsored                                                                    
programs that  had been developed throughout  the state. The                                                                    
Pre-K  picture  in  the  state  was  bigger  than  what  was                                                                    
represented in the presentation.                                                                                                
                                                                                                                                
2:38:09 PM                                                                                                                    
                                                                                                                                
Co-Chair  Foster  referenced  the  administration's  earlier                                                                    
testimony that a number of  Alaska State Council on the Arts                                                                    
positions  would be  eliminated. He  informed the  committee                                                                    
there was a  representative from the agency in  the room who                                                                    
was available for any questions.                                                                                                
                                                                                                                                
Representative  LeBon  asked  about the  WWAMI  program.  He                                                                    
highlighted  that the  program listed  205 active  borrowers                                                                    
who received  benefits from the  program. He asked  how many                                                                    
of the active borrowers were practicing in Alaska.                                                                              
                                                                                                                                
Ms. Teshner replied  that she did not know  and would follow                                                                    
up.                                                                                                                             
                                                                                                                                
Co-Chair  Foster respected  that  everyone  had a  different                                                                    
opinion about  how programs were funded.  He understood that                                                                    
one perspective was that if  something could not be provided                                                                    
for everyone that  it should not be provided  to anyone. His                                                                    
philosophy was  that the state  should embrace and  build on                                                                    
the small numbers that existed.  He understood it was policy                                                                    
call for the legislature to make.                                                                                               
                                                                                                                                
HB  39  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HB  40  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 53                                                                                                             
                                                                                                                                
     "An  Act making  supplemental  appropriations for  fire                                                                    
     suppression   activities   and   restoration   projects                                                                    
     relating  to earthquake  disaster relief;  capitalizing                                                                    
     funds; and providing for an effective date."                                                                               
                                                                                                                                
2:40:19 PM                                                                                                                    
                                                                                                                                
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, highlighted  that the administration  had introduced                                                                    
two  supplemental   bills  on  January  28   (the  statutory                                                                    
deadline). She indicated she would  first speak about HB 53.                                                                    
She  introduced a  PowerPoint presentation  titled "HB  53 -                                                                    
Disaster Relief  Supplemental Overview" dated March  8, 2019                                                                    
(copy on  file). The items in  the bill were related  to the                                                                    
2018 Cook  Inlet earthquake  and included  capitalization of                                                                    
the  Disaster Relief  Fund,  Federal Highway  Administration                                                                    
(FHWA) funding  within the Department of  Transportation and                                                                    
Public  Facilities (DOT),  and  state  facilities costs  not                                                                    
covered  by  insurance.   Additionally,  the  bill  included                                                                    
funding  for  FY  19 fire  suppression  activity  under  the                                                                    
Department of  Natural Resources  (DNR). The total  bill was                                                                    
$139  million,  comprised  of   $102  million  in  requested                                                                    
federal  receipt  authority  and $37.3  million  in  general                                                                    
funds  (matching  funds   and  direct  unrestricted  general                                                                    
funds).                                                                                                                         
                                                                                                                                
Ms. Sanders  advanced to a  bar chart  on slide 4  showing a                                                                    
historical summary  of disaster  supplemental appropriations                                                                    
from  FY 14  to  FY  19. She  reported  that disasters  were                                                                    
unpredictable,  and  the  funding needed  from  year-to-year                                                                    
varied  depending on  events and  the  Disaster Relief  Fund                                                                    
balance. The administration was  concerned about the current                                                                    
level of the  disaster fund. As of March 5,  the balance was                                                                    
currently an  unobligated $362,900,  which was  projected to                                                                    
be  fully  expended   by  April  1,  2019   (slide  5).  The                                                                    
Department   of  Military   and  Veterans   Affairs  (DMVA),                                                                    
Division  of  Homeland  Security  and  Emergency  Management                                                                    
managed   the  fund   and  was   diligently  analyzing   the                                                                    
outstanding  disasters to  make  funding  available for  the                                                                    
Cook  Inlet   earthquake  response.   The  urgency   of  the                                                                    
legislation was due to the low fund balance.                                                                                    
                                                                                                                                
2:43:44 PM                                                                                                                    
                                                                                                                                
Ms. Sanders looked at a high  level overview of items in the                                                                    
bill (slide 6).  The first item of $7.9 million  was for DNR                                                                    
fire suppression.  The amount that had  historically been in                                                                    
the   operating  was   low  and   not  sufficient;   it  was                                                                    
anticipated that approximately $7.9  million would be needed                                                                    
heading  into  the  fire  season. The  second  item  was  an                                                                    
appropriation to  DOT totaling  $65 million in  FHWA federal                                                                    
receipts  with  a match  requirement  of  $6.5 million.  The                                                                    
funding  would be  used  to  work on  roads  damaged by  the                                                                    
earthquake;  it   was  a  multi-year  appropriation   -  the                                                                    
supplemental request  would allow  the work to  occur sooner                                                                    
and would  enable the state  to continue to  collect federal                                                                    
receipts for the work into FY 20.                                                                                               
                                                                                                                                
Ms. Sanders reviewed  a $1 million UGF  appropriation to DOT                                                                    
for  costs not  covered  by insurance  for state  facilities                                                                    
(item  3,  slide  6).  She   elaborated  that  DOT  and  the                                                                    
Department of  Administration (DOA) were working  with DOA's                                                                    
Division  of Risk  Management to  address  all the  facility                                                                    
damages.  There were  some things  deemed  not coverable  by                                                                    
insurance.  For example,  part of  the funding  would go  to                                                                    
repair  damage  to  a  correctional  facility  parking  lot.                                                                    
Additionally,    administrative   costs    associated   with                                                                    
buildings and broken items in  buildings were other examples                                                                    
of items covered by the appropriation.                                                                                          
                                                                                                                                
Ms.   Sanders   addressed  the   last   item   was  a   fund                                                                    
capitalization of the Disaster  Relief Fund for $21,901,700.                                                                    
She detailed the fund balance  was anticipated to reach zero                                                                    
in the  near future. The  department was asking  for federal                                                                    
authority  related  to  what was  allowed  by  the  disaster                                                                    
declaration. The  administration recognized  the redundancy;                                                                    
the operating  bill allowed any receipts  received on behalf                                                                    
of  a disaster  to  be deposited  into  the Disaster  Relief                                                                    
Fund, but HB 53 was  an opportunity to clarify the necessary                                                                    
amount.  She  noted that  the  numbers  were estimates.  The                                                                    
$21.9  million  was  based  on an  estimate  that  had  been                                                                    
revised after  the signing of the  disaster declaration. The                                                                    
amount  specific  to  the Cook  Inlet  earthquake  had  been                                                                    
reduced to  $12 million.  The administration  was requesting                                                                    
to continue  the $21  million appropriation  in anticipation                                                                    
of any  potential spring disasters.  The goal was  to ensure                                                                    
there  was  money  available  in the  fund  to  allow  quick                                                                    
response time to any disasters in the near future.                                                                              
                                                                                                                                
2:48:03 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  asked what  the fund  balance had  been the                                                                    
previous April.                                                                                                                 
                                                                                                                                
Ms.  Sanders did  not  have the  balance  from the  previous                                                                    
year, but  offered to provide the  information. She detailed                                                                    
there  had  been  several  appropriations  to  the  Disaster                                                                    
Relief  Fund to  try  to increase  the  balance because  the                                                                    
amount  appropriated over  several years  was very  low. She                                                                    
believed  $10 million  had  been deposited  in  2018 and  $2                                                                    
million had been deposited in  2019. She noted the funds had                                                                    
all been utilized.                                                                                                              
                                                                                                                                
Vice-Chair  Johnston requested  a  10-year  lookback of  the                                                                    
fund balance.                                                                                                                   
                                                                                                                                
Ms. Sanders  replied that DMVA  had the information  and OMB                                                                    
would provide it.                                                                                                               
                                                                                                                                
Representative  Josephson  asked  whether  school  districts                                                                    
were eligible for any of the funds.                                                                                             
                                                                                                                                
Ms. Sanders deferred the question to DMVA.                                                                                      
                                                                                                                                
2:49:42 PM                                                                                                                    
                                                                                                                                
BRYAN   FISHER,   STATE   COORDINATING   OFFICER,   HOMELAND                                                                    
SECURITY,  DEPARTMENT  OF  MILITARY  AND  VETERANS  AFFAIRS,                                                                    
answered  that  school  districts,  local  governments,  and                                                                    
certain  nonprofits were  all eligible  for disaster  relief                                                                    
funding.                                                                                                                        
                                                                                                                                
Representative   Carpenter   referenced   insurance   claims                                                                    
related to the earthquake that  had been denied. He wondered                                                                    
about the state's process for  scrutinizing whether a denial                                                                    
to pay was legitimate.  He remarked that insurance companies                                                                    
liked to not pay when possible.                                                                                                 
                                                                                                                                
Ms.  Sanders  replied  that  the   items  addressed  by  the                                                                    
proposed funding  increment were not eligible  for insurance                                                                    
coverage. She  clarified that it  was not a  situation where                                                                    
claims had been  denied. She reported that  the DOA Division                                                                    
of Risk Management  worked on insurance claims  and may have                                                                    
additional information to provide.                                                                                              
                                                                                                                                
Ms. Sanders moved to slide  7 and addressed two supplemental                                                                    
amendments  that had  been submitted  to the  legislature on                                                                    
March  6.  She  relayed  that OMB  was  still  working  with                                                                    
agencies  to  work  through  the  needs  and  on  the  costs                                                                    
identified  related   to  the   Cook  Inlet   disaster.  She                                                                    
elaborated   that  DOT   was  requesting   $1  million   for                                                                    
administrative    activities    associated   with    surface                                                                    
transportation; the  costs were not  covered by FHWA  or the                                                                    
Federal  Emergency  Management  Agency. For  example,  funds                                                                    
would go towards costs  associated with administrative staff                                                                    
working to support  any engineers or surveyors  that may not                                                                    
be  covered by  FHWA.  The  second item  was  $1 million  in                                                                    
federal funding  for the Department  of Labor  and Workforce                                                                    
Development related to  the Disaster Unemployment Assistance                                                                    
Program.   She   elaborated   that   individuals   who   had                                                                    
interruption to  work could apply for  individual assistance                                                                    
or   self-employment  funding.   The  department   had  some                                                                    
existing authority  but needed the additional  $1 million to                                                                    
ensure the funding was provided to eligible individuals.                                                                        
                                                                                                                                
Co-Chair  Foster remarked  that the  committee would  try to                                                                    
get the bill passed quickly.                                                                                                    
                                                                                                                                
HB  53  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 54                                                                                                             
                                                                                                                                
     "An    Act    making    supplemental    appropriations,                                                                    
     reappropriations,  and  other appropriations;  amending                                                                    
     appropriations; capitalizing  funds; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
2:53:45 PM                                                                                                                    
                                                                                                                                
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, addressed the  supplemental request legislation that                                                                    
fell outside of  the disaster need. The  bills were separate                                                                    
in anticipation of needing to  move the disaster legislation                                                                    
more quickly. She provided  a PowerPoint presentation titled                                                                    
"HB  54   -  FY2019   Capital  and   Operating  Supplemental                                                                    
Overview" dated March  8, 2019 (copy on file).  She began on                                                                    
slide 3  and reviewed  items covered  by the  bill including                                                                    
reductions in spending,  formula program adjustments, salary                                                                    
adjustments  related   to  the  classification   of  trooper                                                                    
positions,  operating  adjustments,  capital  projects,  and                                                                    
several transfers back  to the General Fund.  The total bill                                                                    
was  $110.4  million, made  up  of  $92 million  in  federal                                                                    
funding,  $17.7  million  in other  funds,  and  $51,800  in                                                                    
general funds.                                                                                                                  
                                                                                                                                
Ms.   Sanders   provided    a   historical   comparison   of                                                                    
supplemental  appropriations (excluding  disasters) from  FY                                                                    
14 to  FY 19.  She noted  that supplemental  requests varied                                                                    
from  year-to-year   and  explained  that  costs   could  be                                                                    
unpredictable.                                                                                                                  
                                                                                                                                
2:55:51 PM                                                                                                                    
                                                                                                                                
Ms.  Sanders  referenced  a   spreadsheet  outlining  FY  19                                                                    
supplemental   requests  ["HB   54  -   FY2019  Supplemental                                                                    
Requests"  released January  28, 2019  (copy on  file)]. She                                                                    
noted  she had  briefly reviewed  the items  during a  House                                                                    
informational  meeting in  the past.  She offered  to review                                                                    
the items or take questions.                                                                                                    
                                                                                                                                
Vice-Chair Johnston  looked at  item 16 related  to Medicaid                                                                    
funding. She remarked that in  the past, large supplementals                                                                    
could be driven  by underfunding Medicaid. She  asked if the                                                                    
proposed amount would be sufficient.                                                                                            
                                                                                                                                
Ms. Sanders replied that OMB  had worked frequently over the                                                                    
past  several  months  with the  Department  of  Health  and                                                                    
Social Services  (DHSS) to  identify what  the need  was and                                                                    
should be.  She reported that  OMB believed the  funding was                                                                    
sufficient to meet Medicaid claims  through the remainder of                                                                    
the fiscal year.                                                                                                                
                                                                                                                                
Vice-Chair Ortiz asked  how the majority of  the $15 million                                                                    
[in  Medicaid   funds]  was   dispersed.  He   wondered  who                                                                    
benefitted from the funds.                                                                                                      
                                                                                                                                
Ms. Sanders  answered that  she was  not a  Medicaid expert,                                                                    
but  it  was  her   understanding  the  funds  went  towards                                                                    
payments  due  to  Medicaid  providers.  She  clarified  the                                                                    
funding was  to get through  the end  of the fiscal  year to                                                                    
reimburse  providers  for  costs  incurred  in  the  current                                                                    
fiscal year and not to end  payments and shift them into the                                                                    
next fiscal year.                                                                                                               
                                                                                                                                
2:58:00 PM                                                                                                                    
                                                                                                                                
Representative  Josephson  looked  at item  18  [related  to                                                                    
Village Public  Safety Officer (VPSO) program]  and asked if                                                                    
the reduction was  due to the inability to  hire [VPSOs] and                                                                    
spend the money.                                                                                                                
                                                                                                                                
Ms.  Sanders  clarified  the   reduction  would  align  VPSO                                                                    
program funding.  It was the  administration's understanding                                                                    
that grantees receiving  the funding were not  able to fully                                                                    
use the  funds on an  annual basis due  in some part  to the                                                                    
inability to fully fill the VPSO positions.                                                                                     
                                                                                                                                
Co-Chair Foster  stated that the prior  year the legislature                                                                    
had  included   language  in   the  operating   budget  that                                                                    
specified any excess funds would  go towards recruitment and                                                                    
retention of  VPSOs. He asked  if any efforts had  been made                                                                    
to increase recruitment and retention of VPSOs.                                                                                 
                                                                                                                                
Ms.   Sanders  recalled   through  conversations   with  the                                                                    
Department of Public Safety that  the department was working                                                                    
on the  issue. She  would follow up  with the  department to                                                                    
learn what efforts had been made.                                                                                               
                                                                                                                                
Representative Carpenter asked about  a $5 million reduction                                                                    
from  the  Alaska  Gasline  Development  Corporation  (AGDC)                                                                    
[item 27, page 2].                                                                                                              
                                                                                                                                
Ms.  Sanders   responded  that  when  OMB   was  working  on                                                                    
supplementals  it  had  asked  each  agency  to  review  the                                                                    
funding they  had been  allocated for  the current  year and                                                                    
the funding they  had available in funds.  She detailed that                                                                    
AGDC contributed  $5 million back  to the General  Fund; the                                                                    
funds were in excess of what  AGDC needed to get through the                                                                    
end of the  fiscal year. The agency was working  on what its                                                                    
plan  moving  forward  would  be.  She  clarified  that  the                                                                    
reduction did  not mean  the agency would  not come  back to                                                                    
the  legislature for  funding in  the future  once it  had a                                                                    
developed plan.                                                                                                                 
                                                                                                                                
Representative  Knopp  stated  that  the  [administration's]                                                                    
request  had come  in before  the Federal  Energy Regulatory                                                                    
Commission (FERC) had moved the  process back by four months                                                                    
for the  environmental impact  statement (EIS),  which would                                                                    
extend  AGDC's timeframe.  He  asked  if the  administration                                                                    
believed AGDC could get through with the remaining funds.                                                                       
                                                                                                                                
Ms.  Sanders responded  that it  was her  understanding that                                                                    
AGDC's  remaining funds  were sufficient  to get  the agency                                                                    
through the end of the fiscal year.                                                                                             
                                                                                                                                
Representative  Carpenter  asked  when the  money  had  been                                                                    
identified and when the administration  had been notified to                                                                    
include it on the spreadsheet.                                                                                                  
                                                                                                                                
Ms.  Sanders  answered  that   supplementals  had  been  put                                                                    
forward  on January  28.  She  shared that  if  there was  a                                                                    
concern,  AGDC would  reach out  to OMB;  she had  not heard                                                                    
anything from the agency.                                                                                                       
                                                                                                                                
3:01:53 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  pointed  to  item  12  -  a  $20  million                                                                    
reduction to DEED  [for the repeal of one-time  state aid to                                                                    
school districts for FY 19].  He referenced discussion in an                                                                    
informational  hearing about  the distribution  of funds  to                                                                    
the district. He recalled hearing  the distribution would be                                                                    
made  as soon  as  some  type of  action  was  taken by  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
Ms. Sanders  replied in the  affirmative. She  detailed that                                                                    
the  funding would  be distributed  if the  legislature took                                                                    
action  and  the requested  repeal  proposal  was not  moved                                                                    
forward.                                                                                                                        
                                                                                                                                
Vice-Chair Ortiz  stated it was  his understanding  that the                                                                    
previous legislature had already  taken the necessary action                                                                    
for  the $20  million  to be  distributed  to districts.  He                                                                    
thought the  scenario presented was a  catch-22. He believed                                                                    
action was only necessary if  the legislature decided not to                                                                    
distribute  the money.  He asked  if  the legislature  could                                                                    
issue an  intent statement indicating  its desire  to follow                                                                    
the action taken in 2018.                                                                                                       
                                                                                                                                
Co-Chair Foster replied  that the item could be  left out of                                                                    
the  supplemental that  would ultimately  be  passed by  the                                                                    
House. Additionally,  the House could  issue a sense  of the                                                                    
House  or  the   House  and  Senate  could   issue  a  joint                                                                    
resolution to send a message of the legislature's intent.                                                                       
                                                                                                                                
Vice-Chair Ortiz  remarked that  action on  the supplemental                                                                    
would be  necessary [to  provide clarity  on the  issue]. He                                                                    
remarked  that  districts were  in  limbo  until action  was                                                                    
taken  on  the  bill.  He  asked if  there  was  action  the                                                                    
legislature  could take  outside the  supplemental to  allow                                                                    
the distribution of the funds.                                                                                                  
                                                                                                                                
Co-Chair Foster  responded that he  did not  envision taking                                                                    
months to pass the supplemental.  He estimated it may be one                                                                    
month. He noted  that if there were issues  in the meantime,                                                                    
the  committee could  talk  about the  options.  He did  not                                                                    
believe the supplemental process would be drawn out.                                                                            
                                                                                                                                
HB  54  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  Foster  canceled the  9:00  a.m.  meeting for  the                                                                    
following  Monday.   He  reviewed   the  schedule   for  the                                                                    
following week.                                                                                                                 
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:06:12 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:06 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HFC 3.8.19 HB 53 - FY2019 Disaster Relief Supplemental Overview.pdf HFIN 3/8/2019 1:30:00 PM
HB 53
HFC 3.8.19 HB 54 - FY2019 Supplemental Overview.pdf HFIN 3/8/2019 1:30:00 PM
HB 54
FY19 Supplemental Summary 3.8.19.pdf HFIN 3/8/2019 1:30:00 PM
HB 54
FY2020 Gov Amend Budget to HFC 3.8.19 DEED.pdf HFIN 3/8/2019 1:30:00 PM
HFIN - DEED Budget Overview
FY2020GovAmdK-12FundingReductions_2-15-2019.pdf HFIN 3/8/2019 1:30:00 PM
HFIN - DEED
Modified Education Aid.pdf HFIN 3/8/2019 1:30:00 PM
HFIN - DEED
Moore vs State Settlement Agreement.pdf HFIN 3/8/2019 1:30:00 PM
HB 53 HB 54
House Finance 3.8.19 OMB Response.pdf HFIN 3/8/2019 1:30:00 PM
HB 53
DRF - SFY16 - SFY19 by BGR transaction Updated 3.8.19.pdf HFIN 3/8/2019 1:30:00 PM
HB 53 HB 54