Legislature(2021 - 2022)ADAMS 519

04/27/2021 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 92(FIN) Out of Committee
Heard & Held
-- Public Testimony --
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 27, 2021                                                                                            
                         9:12 a.m.                                                                                              
9:12:25 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 9:12 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Kelly Merrick, Co-Chair                                                                                          
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Bryce Edgmon                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Andy Josephson                                                                                                   
Representative Bart LeBon                                                                                                       
Representative Sara Rasmussen                                                                                                   
Representative Steve Thompson                                                                                                   
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Brodie Anderson,  Staff, Representative Neal  Foster; Alexei                                                                    
Painter,    Director,    Legislative    Finance    Division;                                                                    
Representative Chris Tuck.                                                                                                      
PRESENT VIA TELECONFERENCE                                                                                                    
Jeff  Jones,  Self,   Ketchikan;  Gerard  Asselin,  Captain,                                                                    
Anchorage  Police  Department,  Anchorage;  Jodie  Hettrick,                                                                    
Fire  Chief,  Anchorage  Fire Department,  Anchorage;  Angie                                                                    
Fraize,  Officer,  Anchorage   Police  Department  Employees                                                                    
Association,  Anchorage;  Justin Mack,  Alaska  Professional                                                                    
Firefighters  Association,  Anchorage;  Nick  Davis,  Senior                                                                    
Captain,   Anchorage  Fire   Department,  Anchorage;   Jacob                                                                    
Wilson,   Business   Agent,   Alaska   Correction   Officers                                                                    
Association,  Anchorage;  Nick  Clark,  Paramedic  and  Fire                                                                    
Fighter, Fairbanks Fire Department, Fairbanks; Jim Puckett,                                                                     
Deputy Director, Division of Retirement and Benefits,                                                                           
Department of Administration.                                                                                                   
HB 55     PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS                                                                             
          HB 55 was HEARD and HELD in committee for further                                                                     
HB 69     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          HB 69 was HEARD and HELD in committee for further                                                                     
HB 71     APPROP: MENTAL HEALTH BUDGET                                                                                          
          HB 71 was HEARD and HELD in committee for further                                                                     
HB 92     ANTICIPATION OF REVENUE; BORROWING;CREDIT                                                                             
          CSHB 92(FIN) was REPORTED out  of committee with a                                                                    
          "do   pass"  recommendation   and  with   one  new                                                                    
          indeterminate fiscal  note from the  Department of                                                                    
Co-Chair Foster reviewed the meeting agenda.                                                                                    
HOUSE BILL NO. 69                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;    making   reappropriations;    making                                                                    
     supplemental   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. 71                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive    mental    health    program;    making                                                                    
     supplemental appropriations; and providing for an                                                                          
     effective date."                                                                                                           
9:13:15 AM                                                                                                                    
Co-Chair Foster  relayed that the  committee would  hear the                                                                    
latest  changes on  the operating  budget.  He referenced  a                                                                    
request from  the previous day  to take more  time reviewing                                                                    
proposed changes  in the committee substitute  (CS) [adopted                                                                    
on  May  23, 2021].  He  discussed  that  the first  CS  the                                                                    
committee had considered was the  governor's budget that had                                                                    
been  rolled out  on March  9.  He shared  that the  meeting                                                                    
would focus on  the operating budget. He  indicated the goal                                                                    
was  adjournment on  May 19  and he  was hoping  to get  the                                                                    
budget over  to the Senate.  The meeting would focus  on the                                                                    
high points  of the  changes from  the governor's  budget to                                                                    
the current CS.                                                                                                                 
Co-Chair Foster detailed that the  CS rolled in supplemental                                                                    
and capital items from the  governor's operating and capital                                                                    
budgets.  He  planned  to  speak   about  the  CS  and  have                                                                    
committee discussion  on the  details of  traditional budget                                                                    
items. Additionally, he would have  his staff to speak about                                                                    
supplemental  and  supplemental capital  additions  included                                                                    
for FY  21. He  planned to address  how the  American Rescue                                                                    
Plan  Act  (ARPA)  funds  had  been  included.  He  referred                                                                    
members to  a table titled "FY22  House Committee Substitute                                                                    
(CS1) Summary" (copy on file).                                                                                                  
9:17:10 AM                                                                                                                    
Co-Chair  Foster explained  the first  part of  the document                                                                    
included  traditional operating  budget items  and the  last                                                                    
part of  the document focused  on ARPA funding.  He detailed                                                                    
that  the  operating  budget  summary  was  broken  down  by                                                                    
department  and  included  the   major  changes  in  the  CS                                                                    
compared to the governor's budget.                                                                                              
Co-Chair Foster began with  the Department of Administration                                                                    
(DOA) and  highlighted that  the House  Finance subcommittee                                                                    
had accepted  the governor's  proposal to  consolidate human                                                                    
resources  procurement.   The  CS  added  $3.3   million  in                                                                    
undesignated  general funds  (UGF) for  public broadcasting.                                                                    
He  moved  to  the  Department of  Commerce,  Community  and                                                                    
Economic Development  (DCCED) budget where  the subcommittee                                                                    
had accepted  the governor's  proposal to  move a  couple of                                                                    
economic development  positions from DCCED to  the Office of                                                                    
the  Governor. The  CS included  $450,000  for Alaska  Legal                                                                    
Services. He  detailed that Alaska Legal  Services typically                                                                    
received  funding from  two sources.  He explained  that the                                                                    
agency received  some funding  through the  language section                                                                    
via court  fees. He highlighted  an addition of  $450,000 in                                                                    
the  numbers  section. He  believed  the  $450,000 had  been                                                                    
included because it  had been vetoed by the  governor in the                                                                    
past. He asked his staff if his recollection was accurate.                                                                      
BRODIE ANDERSON, STAFF,  REPRESENTATIVE NEAL FOSTER, replied                                                                    
that Alaska  Legal Services funding  had been  maintained at                                                                    
that level for a few  years. He elaborated that the governor                                                                    
had  attempted  to  veto the  funding  several  years  back;                                                                    
however,  the funds  had been  replaced  by HB  2001 at  the                                                                    
time.  He explained  that the  governor had  not vetoed  the                                                                    
funding  since that  time, but  he continually  attempted to                                                                    
remove it from  the numbers section of  the operating budget                                                                    
each year.                                                                                                                      
Co-Chair Foster  stated that the  governor had  not included                                                                    
the funding  for Alaska  Legal Services  in the  budget, but                                                                    
the CS  added the amount  to maintain flat funding  from the                                                                    
prior year.  Additionally, the CS included  $370,000 UGF for                                                                    
the Kuskokwim Ice  Road grant. He detailed the  item was new                                                                    
and was a  grant to named recipients for  the maintenance of                                                                    
an ice road from Bethel connecting 10 to 15 communities.                                                                        
9:20:24 AM                                                                                                                    
Co-Chair Foster highlighted changes  under the Department of                                                                    
Corrections  (DOC).  The  CS  denied  $4.3  million  UGF  to                                                                    
replace  restorative justice  lost funds.  Additionally, the                                                                    
CS  denied structure  change  proposal  relating to  putting                                                                    
electronic  monitoring  and  community  residential  centers                                                                    
(CRC) into population management.  He detailed that the bill                                                                    
included intent  language for  DOC to  renegotiate contracts                                                                    
with CRCs to flat rate contracts.                                                                                               
Co-Chair  Foster moved  to the  Department of  Education and                                                                    
Early  Development (DEED).  He reported  that the  House had                                                                    
early  funded  and  forward   funded  education,  which  was                                                                    
included in  separate legislation. He believed  there may be                                                                    
a  misconception that  the  legislature  was double  funding                                                                    
education  in   the  current  year   and  future   years  by                                                                    
potentially increasing  the budget.  He clarified  the early                                                                    
funding  for  education funded  the  FY  22 budget  and  the                                                                    
forward  funding  component  funded education  one  year  in                                                                    
advance  and used  FY  23 revenue.  He  elucidated that  the                                                                    
action did  not increase  the budget,  it just  pertained to                                                                    
the timing of  the budget. The CS added $5  million for Pre-                                                                    
K. He noted that Pre-K had  been funded in the past, but the                                                                    
governor's  budget   did  not   include  an   increment.  He                                                                    
highlighted that  the CS funded  $640,000 for  the Statewide                                                                    
Library  Electronic   Doorway  (SLED)  program   and  Alaska                                                                    
Library  Catalog  using DGF  funds.  He  asked Mr.  Anderson                                                                    
about the DGF fund source.                                                                                                      
9:22:31 AM                                                                                                                    
Mr.  Anderson  replied that  the  DGF  fund source  was  the                                                                    
Higher Education Fund.                                                                                                          
Co-Chair  Foster continued  to  review changes  to the  DEED                                                                    
budget. The CS denied the  governor's proposed deletion of a                                                                    
State  System  of  Support position.  The  CS  retained  the                                                                    
$109,000 using DGF.                                                                                                             
9:23:10 AM                                                                                                                    
Co-Chair  Foster moved  to the  Department of  Environmental                                                                    
Conservation (DEC).  The subcommittee would continue  to use                                                                    
the  Commercial  Passenger  Vessel  (CPV) fund  to  pay  for                                                                    
shellfish testing.  He reported that no  significant changes                                                                    
had been made to the Department of Fish and Game budget.                                                                        
Co-Chair Foster  advanced to  the budget  for the  Office of                                                                    
the  Governor.  The CS  accepted  the  transfer of  economic                                                                    
development  positions  from  DCCED  to the  Office  of  the                                                                    
Governor.  Additionally,  the  CS  accepted  the  governor's                                                                    
request for $690,000  UGF for the Division  of Elections for                                                                    
ranked  choice voting.  He noted  ranked  choice voting  had                                                                    
passed  by  ballot initiative  and  the  increment would  go                                                                    
towards  notifying  the  public.   The  CS  included  intent                                                                    
language  that the  Office of  Management  and Budget  (OMB)                                                                    
review  single  audit  costs  (for  amounts  billed  to  the                                                                    
federal government) and reimbursements.                                                                                         
Co-Chair  Foster  moved  to the  Department  of  Health  and                                                                    
Social Services  (DHSS) and addressed  the addition  of $3.4                                                                    
million  UGF  related to  a  tribal  compact. He  asked  Mr.                                                                    
Anderson for verification the funds were for child welfare.                                                                     
Mr. Anderson  replied in the affirmative.  He elaborated the                                                                    
tribal  compact was  between  tribal  organizations and  the                                                                    
Office  of   Children's  Services.  The  $3.4   million  DGF                                                                    
increment  helped   take  care   of  Native   adoptions.  He                                                                    
explained  the  increment  was   a  one-time  allocation  to                                                                    
provide the level of funding  typically expended in a single                                                                    
year  and encourage  the development  of  a partnership  for                                                                    
other fund sources going forward.                                                                                               
Co-Chair   Foster  asked   if  the   DGF  fund   source  was                                                                    
restorative justice funds.                                                                                                      
Mr.  Anderson replied  that the  fund source  was recidivism                                                                    
Co-Chair  Foster continued  to discuss  the changes  made to                                                                    
the DHSS  budget. The CS  used $16 million in  mental health                                                                    
funds  instead  of the  governor's  proposal  to use  Alaska                                                                    
Mental    Health   Trust    Authority   (AMHTA)    reserves.                                                                    
Additionally, the administration  proposed using $35 million                                                                    
in lapsing  Medicaid carryforward, which had  been denied by                                                                    
the subcommittee.  The CS would reappropriate  lapsing funds                                                                    
to the  language section for school  bond debt reimbursement                                                                    
[and Regional Educational Attendance Area (REAA)].                                                                              
9:26:36 AM                                                                                                                    
Co-Chair Foster  moved to Judiciary  and stated that  the CS                                                                    
accepted the  governor's $480,000 increment  for therapeutic                                                                    
courts. There  were no  significant recommendations  for the                                                                    
Department  of Labor  and Workforce  Development. Under  the                                                                    
Department of  Law, the budget  eliminated $267,000  UGF for                                                                    
the chief  of staff  position. Additionally,  in FY  21, the                                                                    
governor  had vetoed  a new  $20,000 line  item for  Janus v                                                                    
ASCME. The  CS reinstated  the structure  and $20,000  in FY                                                                    
22.  He reported  that  $1  million UGF  was  added for  the                                                                    
Division  of Legislative  Audit. He  highlighted interagency                                                                    
charging for  time and work  related to audits.  He detailed                                                                    
that the funds were not always  paid back to the Division of                                                                    
Legislative  Audit.  The  increment  would  go  directly  to                                                                    
legislative audit  for compensation  instead of  sending the                                                                    
money  through a  department first.  He  believed there  had                                                                    
always been a question about who  owes what and the goal was                                                                    
to  cut  out  the  middle  person. He  asked  his  staff  to                                                                    
Mr. Anderson confirmed the statements.  The $1 million was a                                                                    
one-time   increment  while   OMB   and   the  Division   of                                                                    
Legislative  Audit  worked  out   the  details  for  billing                                                                    
through  the   RSA  [reimbursable  services   agreement]  or                                                                    
interagency receipts. He highlighted  intent language in the                                                                    
Office  of   the  Governor  for   OMB  to  work   with  some                                                                    
cooperation. He  stated that while the  entities figured out                                                                    
the rates for  different things, it would also be  a time to                                                                    
determine  how  Legislative  Audit  would be  able  to  bill                                                                    
departments  for work,  primarily  the Comprehensive  Annual                                                                    
Financial   Report   (CAFR),  which   was   constitutionally                                                                    
required. He  explained that Legislative Audit  audited each                                                                    
department;   therefore,  some   sort  of   cooperation  for                                                                    
providing  funds to  the division  was necessary.  Until the                                                                    
parties determined how  to get the rate  established, the $1                                                                    
million increment  would enable  the production of  what was                                                                    
formerly known  as the  CAFR to be  produced for  the coming                                                                    
9:29:44 AM                                                                                                                    
Co-Chair  Foster moved  to the  Department  of Military  and                                                                    
Veterans Affairs. The  department identified various savings                                                                    
(i.e.,  eliminated  vacant  positions)   all  of  which  the                                                                    
subcommittee  accepted. He  advanced  to  the Department  of                                                                    
Natural Resources. The  subcommittee had recommended filling                                                                    
six Alaska Conservation Corps positions,  but only if enough                                                                    
fees were collected and no UGF funds were required.                                                                             
Co-Chair Foster  briefly moved to  the Department  of Public                                                                    
Safety.  The  subcommittee had  denied  a  $1.4 million  UGF                                                                    
capital  outlay request  for troopers  in  addition to  $1.4                                                                    
million  UGF   for  the  full  funding   of  vacant  trooper                                                                    
positions. He  highlighted the  Department of  Revenue (DOR)                                                                    
and  relayed  that  $210,000  DGF  was  added  for  two  tax                                                                    
auditors. He  explained that the  cost of the  two positions                                                                    
would be outweighed  by the potential revenue.  He asked Mr.                                                                    
Anderson to elaborate on the associated DGF fund source.                                                                        
Mr. Anderson  believed the document  contained an  error. He                                                                    
corrected  that  under the  Department  of  Revenue the  tax                                                                    
auditor positions  at a cost  of $210,000 should be  UGF not                                                                    
DGF. He  elaborated the  first attempt had  been to  pay for                                                                    
the positions  with DGF program receipt  authority pushed to                                                                    
DOR  to help  offset  the  cost of  the  two new  positions;                                                                    
however, the effort had not been successful.                                                                                    
Co-Chair  Foster continued  discussing  DOR. He  highlighted                                                                    
the  incentive compensation  for the  Alaska Permanent  Fund                                                                    
Corporation    (APFC).   He    moved   to    Department   of                                                                    
Transportation  and Public  Facilities (DOT)  and referenced                                                                    
the   Coronavirus    Response   and    Relief   Supplemental                                                                    
Appropriations  Act (CRRSAA)  funding of  slightly over  $50                                                                    
million. He detailed that the  funds in addition to language                                                                    
from  the language  section  of the  bill  would go  towards                                                                    
providing for  18 months of  forward funding for  the Alaska                                                                    
Marine  Highway System  (AMHS).  He would  elaborate on  the                                                                    
funding later in the meeting.                                                                                                   
Co-Chair  Foster  turned  to   the  University  budget.  The                                                                    
subcommittee accepted the  governor's $20 million decrement,                                                                    
which was the  third year of the  three-year compact between                                                                    
the  administration and  the  University  Board of  Regents.                                                                    
Additionally, the subcommittee added  $15.7 million for lost                                                                    
revenue relief  at a net  decrease to the  University budget                                                                    
of $4.3 million.                                                                                                                
Co-Chair Foster moved to the  language section of the CS. He                                                                    
detailed  that the  Permanent Fund  Dividend (PFD)  would be                                                                    
addressed in  a separate  bill that should  be heard  on the                                                                    
coming Thursday  or thorough  the budget  amendment process.                                                                    
He  discussed that  the governor  had originally  put out  a                                                                    
supplemental to pay the balance  of the 2020 PFD in addition                                                                    
to a separate bill that would  pay a full PFD in the current                                                                    
year. He  shared that "we  have been looking at  rolling out                                                                    
our own version" of a PFD.  He added that the issue may come                                                                    
up in  the form  of an amendment  from any  committee member                                                                    
regardless of the introduction of a separate bill.                                                                              
9:34:43 AM                                                                                                                    
Co-Chair Foster continued to review  changes in the language                                                                    
section of  the bill. He  moved to 18-month  forward funding                                                                    
of AMHS  via CRRSA FTA [Federal  Transit Administration] and                                                                    
FHWA [Federal  Highway Administration]  funds. He  asked for                                                                    
verification the amount was around $110 million.                                                                                
Mr. Anderson  answered that  the total  funding for  the 18-                                                                    
month forward  funding of AMHS  was $193  million, including                                                                    
$53 million UGF.                                                                                                                
Representative LeBon asked about  oil tax credits. He stated                                                                    
his understanding that  the original $60 million  to pay oil                                                                    
tax credits  with Alaska  Industrial Development  and Export                                                                    
Authority  (AIDEA)   reserves  had  been  amended   to  $114                                                                    
million.  He asked  if  the funds  were all  UGF  or if  the                                                                    
funding source was split.                                                                                                       
Co-Chair  Foster  answered   that  the  governor's  original                                                                    
budget allocated  $60 million in  AIDEA reserves to  pay for                                                                    
oil tax  credits, which had  been the full  statutory amount                                                                    
based  on oil  prices at  the time.  The governor  had later                                                                    
submitted an amendment to change  the fund source to UGF and                                                                    
increase  it  to  the  current   statutory  amount  of  $114                                                                    
Co-Chair  Foster continued  addressing the  language section                                                                    
of the  budget. He highlighted  an increment of  $950,000 to                                                                    
cover  the  costs  to elections  for  implementing  the  new                                                                    
redistricting plan  and a separate  increment of  $1 million                                                                    
for the redistricting board. He  shared that had chaired the                                                                    
Legislature subcommittee  and the $1 million  had been added                                                                    
at  the request  of the  redistricting board.  He elaborated                                                                    
that the  legislature had appropriated $2.5  million for the                                                                    
redistricting  board in  FY 21/FY  22. The  board had  since                                                                    
come back  to the  legislature requesting the  additional $1                                                                    
million, bringing  the amount to $3.5  million. He explained                                                                    
the  board was  anticipating  legal challenges,  as was  the                                                                    
case 10 years back. He  believed the board's budget had been                                                                    
$7 million at the time.                                                                                                         
Mr.  Anderson confirmed  that the  board's budget  [10 years                                                                    
back]  had  started off  at  $7  million  and ended  at  $10                                                                    
Co-Chair Foster asked Mr. Anderson  to touch on the $950,000                                                                    
increment  to  cover  the  cost   of  implementing  the  new                                                                    
redistricting plan.                                                                                                             
Mr. Anderson  replied that the  $950,000 increment  would go                                                                    
to   the  Division   of  Elections   for  implementing   the                                                                    
redistricting  plan  after  the  board had  rolled  out  its                                                                    
plans.  He elaborated  it would  be  up to  the division  to                                                                    
produce  the new  maps and  distribute new  voting cards  to                                                                    
citizens. The $950,000  was to cover new  costs required due                                                                    
to some of the problems related to implementation.                                                                              
Co-Chair Foster  asked for verification  it was part  of the                                                                    
governor's proposal.                                                                                                            
Mr. Anderson agreed.                                                                                                            
9:38:56 AM                                                                                                                    
Co-Chair Foster addressed school  bond debt, which was fully                                                                    
funded at  $83.5 million.  The funds were  made up  of $30.8                                                                    
million from  the School Trust  Fund and $52.7  million from                                                                    
Medicaid  lapsing  funds. He  noted  that  the governor  had                                                                    
proposed  carrying  forward  Medicaid lapsing  funds  within                                                                    
DHSS, but the  CS would reappropriate the  lapsing funds for                                                                    
school bond debt.  He reported that the REAA  Fund was fully                                                                    
capitalized at  $34.2 million  with Medicaid  lapsing funds.                                                                    
He explained that  school bond debt and  REAA were typically                                                                    
tied together,  meaning if  one was  fully funded  the other                                                                    
typically received full  funding as well. He  noted that the                                                                    
CS  contained backstop  language  specifying the  increments                                                                    
would be  funded with  UGF in the  event lapsing  funds were                                                                    
not available.                                                                                                                  
Co-Chair   Foster  highlighted   the  large   difference  in                                                                    
community assistance  funds between the  governor's proposal                                                                    
and the CS. He detailed  that community assistance was fully                                                                    
capitalized   at  $90   million.  He   explained  that   the                                                                    
legislature  had  added  $21.3  million in  FY  21  and  $17                                                                    
million  in FY  22  to  bring the  fund  back  to its  fully                                                                    
capitalized level  of $90  million. He  added that  the fund                                                                    
had to be replenished annually.                                                                                                 
9:41:46 AM                                                                                                                    
Co-Chair  Foster  addressed  ARPA funding.  The  legislature                                                                    
anticipated the  state would receive  about $1.9  billion in                                                                    
federal  funding. He  explained that  a significant  portion                                                                    
was  restricted for  specific purposes.  He highlighted  the                                                                    
spending  flexibility related  to  $1 billion  of the  funds                                                                    
commonly  referred to  as the  Coronavirus  State and  Local                                                                    
Fiscal Recovery Funds  (CSLFRF). He noted that  in some ways                                                                    
the  allocation  approach  in  the CS  was  similar  to  the                                                                    
governor's and  in some ways  it diverged. One of  the large                                                                    
differences was in the amount  spread out over the years. He                                                                    
explained that  the governor had appropriated  the full $1.1                                                                    
billion under  HB 181 using  a multiyear  appropriation from                                                                    
FY 21 through FY 24. The CS  would spend 70 percent in FY 21                                                                    
and FY  22 and 30  percent in  FY 23. The  strategy centered                                                                    
around the  belief that  most of the  impacts to  the cruise                                                                    
ship industry and  other related areas had  occurred in 2020                                                                    
and in the coming summer. He  expected the hit to be less in                                                                    
the following  year; therefore, more  of the funds  had been                                                                    
weighted towards the present than later on.                                                                                     
Co-Chair Foster looked at the  last page of the document and                                                                    
noted  that $30  million  had been  allocated to  nonprofits                                                                    
compared to a  $50 million allocation the  previous year. He                                                                    
pointed out that things had  been done differently under the                                                                    
Coronavirus Aid,  Relief, and Economic Security  (CARES) Act                                                                    
when  compared  to  ARPA.  The  $30  million  increment  for                                                                    
nonprofits reflected flexible money.  He explained that when                                                                    
accounting for  the non-flexible funding  that automatically                                                                    
went  to nonprofits,  the number  could be  larger than  $30                                                                    
million. Additionally,  he reminded  members the CS  did not                                                                    
appropriate  the  full  $1 billion  like  the  governor  had                                                                    
proposed; the CS  would appropriate 70 percent  of the total                                                                    
for the current budget cycle.  He explained that between the                                                                    
two sources  nonprofits may receive  between $60  million or                                                                    
$70 million.                                                                                                                    
Co-Chair  Foster addressed  public  testimony the  committee                                                                    
had received about  the unexpected loss of  Victim of Crimes                                                                    
Act  (VOCA) federal  funds. The  CS included  $6 million  to                                                                    
backfill lost  federal funds in  addition to  any reductions                                                                    
seen on the state side. He  asked Mr. Anderson to expound on                                                                    
the topic.                                                                                                                      
Mr. Anderson  elaborated that the committee  had heard about                                                                    
a  $6  million  reduction  in federal  VOCA  funding  during                                                                    
public  testimony. The  CS included  funding to  restore the                                                                    
reduction.  He stated  there had  been some  confusion about                                                                    
the reduction  during public  testimony. He  clarified there                                                                    
had been  some incremental  reductions to  domestic violence                                                                    
shelters  at the  state level  beginning  in FY  18. The  CS                                                                    
restored  the federal  loss but  did not  address increasing                                                                    
the Council on Domestic  Violence and Sexual Assault (CDVSA)                                                                    
funding levels back to FY 18  or FY 19. He stated that while                                                                    
the  CS  restored the  federal  loss,  the funding  remained                                                                    
lower than in previous years.                                                                                                   
9:47:52 AM                                                                                                                    
Co-Chair Merrick had  been under the impression  the loss of                                                                    
the federal funds  had been $1.3 million and  the $6 million                                                                    
included previous state cuts.                                                                                                   
Mr.  Anderson  clarified that  the  $6  million covered  the                                                                    
federal loss for the next three years.                                                                                          
Representative  Rasmussen  asked  if   there  had  been  any                                                                    
conversation with advocates in the  VOCA sector about a one-                                                                    
time  $6 million  payment. Alternatively,  she asked  if the                                                                    
funds would be broken up over three fiscal years.                                                                               
Mr. Anderson answered  that the CS included  $6 million over                                                                    
three  years.  He  explained  there  would  have  to  be  an                                                                    
amendment or adjustment  to the CS to inject  all $6 million                                                                    
in one year.                                                                                                                    
Representative LeBon  asked about  $80 million in  grants to                                                                    
local governments  for community relief [listed  on the last                                                                    
page of the  document under ARPA funds].  He interpreted the                                                                    
language  to  mean  the funds  were  targeted  to  organized                                                                    
cities,  municipalities,  and  boroughs.  He  asked  if  the                                                                    
distribution formula was population driven.                                                                                     
9:50:03 AM                                                                                                                    
Co-Chair Foster  recalled that  the Alaska  Municipal League                                                                    
(AML) had testified  to the House Finance  Committee that it                                                                    
anticipated receiving about $185 million in ARPA funds.                                                                         
Mr. Anderson agreed.                                                                                                            
Co-Chair  Foster explained  that  even  after receiving  the                                                                    
federal funds,  AML had been  expecting to come up  short by                                                                    
about $133 million.  He stated the idea was to  get as close                                                                    
as  possible in  terms of  providing some  community relief.                                                                    
The  ARPA community  relief funds  added up  to almost  $125                                                                    
million. He used the cruise ship  head tax as an example and                                                                    
stated  that the  amount of  the shortfalls  was clear.  The                                                                    
community relief  funds included $42  million for FY  21 and                                                                    
FY  22  to   address  the  cruise  ship   head  tax  losses.                                                                    
Additionally,  the  funds  included   $2  million  for  fish                                                                    
landing tax shared between state  and local communities. The                                                                    
$80 million  was a  broad amount  to get  close to  the $133                                                                    
million  shortfall. He  noted  that  the federal  guidelines                                                                    
were anticipated to  come out on May 11. He  relayed that in                                                                    
conversations with the  Senate there had been  a decision to                                                                    
move the  budget process  along instead  of waiting  for the                                                                    
federal guidance.  There was an  understanding that  some of                                                                    
the numbers  in the CS  were broad and once  guidelines came                                                                    
out,  the House  would work  with the  Senate to  refine the                                                                    
9:52:40 AM                                                                                                                    
Representative  LeBon  understood  there was  still  limited                                                                    
information. He  wanted to ensure there  was transparency in                                                                    
the process and fairness for all communities.                                                                                   
Co-Chair Foster  referenced Representative  LeBon's question                                                                    
about whether the community  relief distribution formula was                                                                    
population based. He asked if Mr. Anderson had a comment.                                                                       
Mr.   Anderson  followed   up   on  Representative   LeBon's                                                                    
questions. He  informed the committee  that the  $80 million                                                                    
in grants  to local  governments included  an FY  21 capital                                                                    
supplemental  item to  account  for the  current absence  of                                                                    
clarity on  all of the  incoming funding. He  explained that                                                                    
by including  the item as  a capital supplemental  item, the                                                                    
legislature would  have the ability  to go back  with better                                                                    
clarification on the program DCCED  would be required to use                                                                    
for  the  grant  distribution  process.  He  explained  that                                                                    
before a community applied for  grants from the $80 million,                                                                    
a community's shared  taxes and other ARPA  or state funding                                                                    
would   be   factored   into   a   community's   eligibility                                                                    
percentage.  He explained  that  communities  that may  have                                                                    
been hit harder  per capita would be able to  get a piece of                                                                    
the pie comparable  to some of the  "leviathan" lost revenue                                                                    
9:54:46 AM                                                                                                                    
Representative  LeBon  stated  his understanding  that  lost                                                                    
revenue was  a primary  factor for determining  who received                                                                    
the  grant  funding. He  asked  if  his community  would  be                                                                    
disadvantaged in  the formula  if it  did not  have tourism,                                                                    
loss of cruise ship revenue, and other associated items.                                                                        
Mr.  Anderson responded  that  the issue  would  have to  be                                                                    
addressed  when there  was more  communication between  OMB,                                                                    
the Senate,  and the department  to ensure  the distribution                                                                    
was equitable to all communities.                                                                                               
Representative LeBon  remarked that some  communities relied                                                                    
heavily on property taxes. He  noted that rates had remained                                                                    
static,  and  the  collection  of  property  taxes  had  not                                                                    
materially  changed over  the past  year or  two. He  stated                                                                    
that  if a  community  did not  have a  sales  tax or  other                                                                    
revenue  process,   they  relied   on  property   taxes.  He                                                                    
commented there  was a mechanism  to treat  communities with                                                                    
equality  or  equity  if  they  did not  have  a  sales  tax                                                                    
Vice-Chair  Ortiz  addressed  the federal  community  relief                                                                    
funding. He stated  that the $80 million in  grants to local                                                                    
governments  to offset  lost revenue  was intended  to bring                                                                    
relief to  communities that had  lost significant  sales tax                                                                    
revenue due to a loss  of the tourism season. He highlighted                                                                    
that  in prior  federal relief  packages, resources  had not                                                                    
been   available   for   lost   revenue.   He   stated   his                                                                    
understanding  that  it  was   possible  to  use  some  ARPA                                                                    
resources  to backfill  lost  revenue  including lost  sales                                                                    
taxes. He thought  the intent was to  assist communities hit                                                                    
hard by  sales tax revenue  losses in relationship  to COVID                                                                    
and loss of tourism.                                                                                                            
9:57:31 AM                                                                                                                    
Representative Wool  stated his  understanding that  the $80                                                                    
million  could be  used to  fill  gaps left  due to  various                                                                    
shortfalls  in other  funding formulas.  He  knew there  had                                                                    
been various  formulas from the  federal government  and the                                                                    
state  had  distributed  funding  through  an  RPL  [Revised                                                                    
Program Legislative] process, which  used a formula based on                                                                    
lost revenue instead  of per capita. He knew  there had been                                                                    
some discussion  that some communities  without a  sales tax                                                                    
(e.g., Fairbanks) did not fair  as well even though they may                                                                    
have  been impacted.  He  stated the  other  ARPA funds  for                                                                    
communities were strictly  per capita; therefore, Fairbanks,                                                                    
Anchorage,  and some  large communities  faired alright.  He                                                                    
furthered that  communities like  the Denali Borough  with a                                                                    
low population did not have  fish landing tax or cruise ship                                                                    
head  tax and  fell in  a hole  of not  receiving sufficient                                                                    
funding;  however, those  communities  faired alright  under                                                                    
the distribution of CARES funding.                                                                                              
Representative  Wool  wondered  if the  ARPA  grant  program                                                                    
would  consider all  of the  funding previously  received by                                                                    
communities to  determine where it could  assist. He thought                                                                    
the  funds should  be able  to fill  gaps. He  remarked that                                                                    
none of  the funding  mechanisms that  had come  around were                                                                    
perfect  -  some helped  based  on  population, some  helped                                                                    
based  on lost  cruise ship  tax, and  some helped  based on                                                                    
lost sales tax and other. He  hoped the $80 million could be                                                                    
used  in a  more customized  way to  help communities  for a                                                                    
particular need based on past funding they had received.                                                                        
Mr.  Anderson stated  it  was  the hope  and  it would  take                                                                    
cooperation between  both legislative  bodies, OMB,  and the                                                                    
department to work out the specifics related to equity.                                                                         
Co-Chair Foster  shared his intent  and hope to  avoid using                                                                    
the  one-time  $1  billion  in  ARPA  funds  to  create  new                                                                    
programs that would result  in recurring future obligations.                                                                    
He looked at UGF replacement  funding of $410 million at the                                                                    
bottom  of page  4 of  the document.  He detailed  that $235                                                                    
million of  the total had been  set aside for FY  21 capital                                                                    
items  and  $83  million  had  been used  to  offset  FY  22                                                                    
operating expenditures.                                                                                                         
Mr. Anderson added  that he would address the  UGF swaps for                                                                    
the $235 million in the operating supplemental section.                                                                         
Co-Chair  Foster continued  speaking  about UGF  replacement                                                                    
funds on  the last  page of the  document. He  highlighted a                                                                    
$91.5 million  swap with UGF  debt service funds for  FY 22.                                                                    
The  funds could  be  used  to offset  money  being paid  to                                                                    
service  debt  for  correctional  facilities  including  the                                                                    
Goose   Creek  Correctional   Center  and   a  facility   in                                                                    
Anchorage. He  briefly addressed  community relief  funds of                                                                    
$124.5  million. The  total included  $42  million for  lost                                                                    
cruise ship head tax in FY 21 and FY 22.                                                                                        
Co-Chair  Foster discussed  tourism relief  funding totaling                                                                    
$30 million. He detailed that  a portion [$20 million] would                                                                    
go to  ARDORs (economic development entities  throughout the                                                                    
state). The  remaining $10  million would  go to  the Alaska                                                                    
Travel Industry Association (ATIA).                                                                                             
Co-Chair Foster  highlighted that $30 million  in ARPA funds                                                                    
would  go to  small  businesses  in the  form  of grants  to                                                                    
offset lost  revenue. Additionally, $30 million  would go to                                                                    
nonprofits in  the form  of grants  to offset  lost revenue.                                                                    
There was  $310 million allocated for  capital including $75                                                                    
million  in  ARPA funds  and  another  $235 million  already                                                                    
accounted  for  as UGF  offset.  He  relayed the  governor's                                                                    
proposal had included $325 million.  He noted the difference                                                                    
between  the   two  totals   was  not   an  apples-to-apples                                                                    
comparison  because  the  CS allocated  70  percent  to  the                                                                    
current  budget. He  highlighted that  the full  100 percent                                                                    
would be a higher number.  Additionally, it was necessary to                                                                    
add in the  funding from the inflexible part  of the federal                                                                    
10:05:03 AM                                                                                                                   
Co-Chair  Foster  summarized  the expectation  of  receiving                                                                    
about  $1.9  billion in  ARPA  funding,  of which  about  $1                                                                    
billion  had flexible  spending. He  asked Mr.  Anderson for                                                                    
verification  that  $112  million   for  broadband  was  not                                                                    
included in the $310 million for capital projects.                                                                              
Mr. Anderson  agreed. He elaborated that  [the U.S] Treasury                                                                    
had   indicated  that   $112  million   set  aside   in  the                                                                    
Congressional  bill  for  infrastructure related  to  remote                                                                    
education, work,  and other. He  detailed that  Treasury had                                                                    
ruled  the  $112  million  was  specifically  for  broadband                                                                    
expansion.  He explained  the capital  budget would  need to                                                                    
reflect $112 million for broadband only.                                                                                        
Co-Chair  Foster explained  that while  the document  showed                                                                    
$310 million  set aside for  capital, the actual  amount was                                                                    
higher because the $310 million  only reflected the flexible                                                                    
portion or 78 percent of the $1 billion.                                                                                        
Representative  LeBon  highlighted  the  slippery  slope  of                                                                    
using the  words "lost revenue." He  stated that communities                                                                    
had  suffered  economic  setbacks   from  the  COVID  crisis                                                                    
including employment  losses and the closure  of businesses.                                                                    
He referenced many communities relying  on property taxes as                                                                    
a primary revenue  source and explained there  would be some                                                                    
property  tax defaults  and  inability  for individuals  and                                                                    
businesses  to  pay  their property  taxes.  He  thought  it                                                                    
should all be part of the lost revenue debate.                                                                                  
Representative  Josephson stated  his understanding  that in                                                                    
order  to use  the  $1  billion in  CSLFRF  funding, it  was                                                                    
necessary to show a shared  tax or state tax implication. He                                                                    
thought  the  property  taxes referenced  by  Representative                                                                    
LeBon sounded like a local lost  tax rather than a shared or                                                                    
state tax loss. He asked if  he was accurate that it was one                                                                    
of the difficulties in Representative LeBon's suggestion.                                                                       
Mr.  Anderson  answered  that  OMB  was  waiting  on  better                                                                    
clarification on  the term "state lost  revenue" included in                                                                    
the  Congressional  bill.  He explained  there  had  been  a                                                                    
question  about the  community portion  under CSLFRF,  which                                                                    
had yet to be answered.                                                                                                         
10:08:26 AM                                                                                                                   
Representative Josephson  looked at  the nonprofits  line on                                                                    
page  5 of  the document  (also located  on page  61 of  the                                                                    
bill). He asked  whether the grants to  nonprofits line also                                                                    
included funds to assist in  additional burden due to surges                                                                    
in need of service.                                                                                                             
Mr. Anderson replied that the  grants to nonprofits was very                                                                    
similar to the FY 21  capital supplemental item, which would                                                                    
be worked out in more  detail as the process progressed. The                                                                    
issue would  take collaboration between the  two legislative                                                                    
bodies,  OMB,  and the  department.  The  factors should  be                                                                    
taken into consideration for the management of the program.                                                                     
Representative   Josephson   asked  whether   the   governor                                                                    
intended  to  ask for  assistance  for  public defenders  to                                                                    
provide parity  with money the  legislature provided  to the                                                                    
district attorney.                                                                                                              
Mr. Anderson  replied that he  had not heard  anything about                                                                    
the  possibility. He  deferred  to  the Legislative  Finance                                                                    
Division (LFD) for further detail if desired.                                                                                   
Co-Chair Foster remarked  that he did not  recall seeing any                                                                    
governor's  amendments   adding  more  funding   for  public                                                                    
defenders.  He   noted  that  LFD  staff   were  nodding  in                                                                    
Representative   Josephson   referenced  domestic   violence                                                                    
relief funding. He believed the  CS did a good job restoring                                                                    
lost federal funding. He discussed  that the state had begun                                                                    
cutting  grants  to domestic  violence  shelters  in FY  18,                                                                    
which  he characterized  as an  unfortunate policy  call. He                                                                    
asked for verification  that the CS did not  remedy the lost                                                                    
state funds.                                                                                                                    
Mr.   Anderson   answered   that    it   was   his   current                                                                    
10:10:53 AM                                                                                                                   
Representative  Wool referred  to  the $75  million in  ARPA                                                                    
funds allocated to  capital projects [at the  bottom of page                                                                    
5].  He asked  if the  funding  was for  things like  water,                                                                    
sewer, and broadband. He asked  if there were rules attached                                                                    
to the funding.                                                                                                                 
Mr. Anderson answered  that the $75 million  in CSLFRF funds                                                                    
for  the  capital budget  were  reserved  for sewer,  water,                                                                    
and/or broadband.                                                                                                               
Co-Chair  Foster added  that how  the money  would be  spent                                                                    
would be determined in the capital budget process.                                                                              
Representative  Carpenter referenced  the  $1.4 million  UGF                                                                    
capital outlay  for troopers under the  Department of Public                                                                    
Safety  [that  had  been denied  by  the  subcommittee].  He                                                                    
highlighted  the $410  million [in  UGF replacement]  coming                                                                    
from  the federal  government. He  asked if  there was  room                                                                    
withing the  federal funds to  find $1.4 million  for public                                                                    
Co-Chair Foster answered that  the committee could certainly                                                                    
discuss the issue currently or  it could be addressed in the                                                                    
amendment  process.  He  believed  Representative  Carpenter                                                                    
made  a good  point about  the  ARPA funding  coming in.  He                                                                    
explained that during the  budget subcommittee process there                                                                    
had  been  a lot  less  clarity  in  terms of  the  incoming                                                                    
federal funds  and how much  the state could use  to offset.                                                                    
He  thought that  the committee  could be  more open  to the                                                                    
issues  as  more information  was  received.  He opened  the                                                                    
question  up   to  the  DPS  subcommittee   chair,  Co-Chair                                                                    
Co-Chair  Merrick  replied  that the  $1.4  million  capital                                                                    
outlay was  for tasers and different  equipment for troopers                                                                    
that were not hired.                                                                                                            
10:13:15 AM                                                                                                                   
Co-Chair  Foster relayed  that he  was hoping  to allow  the                                                                    
public to get  a better understanding of the  changes in the                                                                    
CS compared  to the  governor's budget. He  highlighted some                                                                    
of the  changes in the bill.  The CS added $3.3  million for                                                                    
public broadcasting,  $450,000 for Alaska Legal  Services to                                                                    
maintain flat  funding, and $370,000  for the  Kuskokwim ice                                                                    
road  starting  in  Bethel.  The  CS  did  not  contain  any                                                                    
education formula  funding as early and  forward funding had                                                                    
been included in a separate  bill. The bill added $5 million                                                                    
for Pre-K.  Under DHSS,  $3.4 million  for a  tribal compact                                                                    
regarding  child welfare  using recidivism  funds. The  bill                                                                    
reversed  the  governor's proposal  to  use  $16 million  in                                                                    
AMHTA funds  and used UGF  instead. Under DOL, the  chief of                                                                    
staff position  was removed and  the Janus funds  of $20,000                                                                    
were  restored.   He  added  that  the   CS  reinstated  the                                                                    
structure and  funds that  had been vetoed  in FY  21. Under                                                                    
DPS,  the  CS denied  $1.4  million  in capital  outlay  for                                                                    
troopers  and  $1.4  million   for  funding  vacant  trooper                                                                    
positions. The  CS added  $210,000 UGF  for two  tax auditor                                                                    
positions under DOR. Under DOT,  the AMHS was forward funded                                                                    
for 18 months  primarily with CRRSA funds and  some UGF. The                                                                    
CS  accepted the  governor's $20  million  decrement to  the                                                                    
University  budget and  backfilled  $15.7  million for  lost                                                                    
revenue relief at  a net decrease to the  University of $4.3                                                                    
Co-Chair Foster  noted the bill  did not contain a  PFD; the                                                                    
governor had a  separate bill, and the committee  may hear a                                                                    
bill on  the topic later  in the  week. He imagined  the PFD                                                                    
would be taken up during  the amendment process in committee                                                                    
and on the House floor.                                                                                                         
10:16:07 AM                                                                                                                   
Co-Chair Foster continued to highlight  the major changes in                                                                    
the  CS.  School bond  debt  and  REAA  were funded  at  100                                                                    
percent.  The CS  fully  funded  community assistance  using                                                                    
$21.3 million  in FY 21  and $17 million  in FY 22  to bring                                                                    
the  fund  back  to  its  fully  capitalized  level  of  $90                                                                    
million. The CS accepted the  governor's proposal to use $60                                                                    
million in AIDEA  reserves. He noted it  had been determined                                                                    
later that the  number needed to be $114  million. He stated                                                                    
the issue  would be taken  up during the  amendment process.                                                                    
The CS added $1 million for the redistricting board.                                                                            
Co-Chair  Foster moved  to ARPA  funding highlights.  The CS                                                                    
included $6 million  for VOCA. He detailed that  the CS used                                                                    
70 percent of  the ARPA funds for the current  budget and 30                                                                    
percent  for  the  following year.  The  CS  allocated  $125                                                                    
million   to  community   relief,  $30   million  to   small                                                                    
businesses, $30 million to small  businesses, $30 million to                                                                    
nonprofits, and a  minimum of $310 million  in capital funds                                                                    
(the inclusion  of broadband  funding increased  the capital                                                                    
number  to  $420  million).  He  asked  if  there  were  any                                                                    
questions  prior  to moving  to  the  capital and  operating                                                                    
items in the supplemental budget.                                                                                               
Representative  Carpenter  asked  about  the  assessment  of                                                                    
where the budget put the state in regard to the deficit.                                                                        
Co-Chair  Foster  replied  that  the budget  was  below  the                                                                    
adjusted  base of  the  previous year  by  $197 million.  He                                                                    
believed the budget was a  good deal below the budget passed                                                                    
the  previous year.  The  budget could  be  compared to  the                                                                    
enacted budget from the previous  year, the management plan,                                                                    
and the  adjusted base. He  explained the adjusted  base was                                                                    
the hardest to get under.  He reiterated that the budget was                                                                    
below the adjusted  base by $197 million. He  noted that the                                                                    
governor's budget used $60 million  in AIDEA reserves and if                                                                    
the legislature swapped that fund  source with UGF, it would                                                                    
mean the  budget was $137  million below the  adjusted base.                                                                    
Additionally, the same  applied for school bond  debt if the                                                                    
legislature  did not  use Medicaid  lapsing  funds it  would                                                                    
also  impact  the  numbers.  He  asked  his  staff  for  any                                                                    
additional comment.                                                                                                             
10:19:39 AM                                                                                                                   
Mr. Anderson  confirmed that  the current CS  for FY  22 was                                                                    
$197.5 million under the FY  21 adjusted base. He elaborated                                                                    
that the way  the governor had funded his  budget would have                                                                    
required a small  draw. The CS was $233.7  million under the                                                                    
governor's budget. There was a  small surplus in the current                                                                    
CS prior  to consideration  of the PFD.  He stated  it could                                                                    
also be  compared in the  spring forecast and  any increased                                                                    
Representative Carpenter  stated his understanding  that the                                                                    
CS was  roughly $200 million  [below the adjusted  base]. He                                                                    
noted the  legislature had not  yet had  conversations about                                                                    
new revenue  measures. He referenced  the deficit  of around                                                                    
$1 billion.  He asked  if the  goal was  to roughly  fix the                                                                    
deficit  by approximately  $200 million  with $1  billion in                                                                    
federal funds coming in. He  surmised that the CS would only                                                                    
dedicate about $200 million in debt reduction.                                                                                  
Co-Chair Foster  answered that it  was in comparison  to the                                                                    
prior year's numbers. He asked  Mr. Anderson to elaborate on                                                                    
the surplus.                                                                                                                    
Mr. Anderson replied that he  did not have the surplus total                                                                    
on  hand.  He  agreed   that  Representative  Carpenter  was                                                                    
correct that  the CS only  designated $410 million  UGF swap                                                                    
to create  room [inaudible]; for  FY 22 the number  was $175                                                                    
million. He stated it was  a decision for the legislature to                                                                    
determine how and where to use  the funds and how to balance                                                                    
what the legislature  had chosen for UGF swaps  to take care                                                                    
of the necessary  items versus money going  directly to take                                                                    
care of  communities and nonprofits  that could not  be used                                                                    
toward a surplus or paying down the deficit.                                                                                    
10:22:56 AM                                                                                                                   
Co-Chair  Foster asked  to hear  from LFD.  He knew  LFD had                                                                    
been working to  identify the surplus, which had  been a bit                                                                    
of a moving target because  it depended what ARPA funds were                                                                    
used to offset  [other funds]. Initially the  issue was that                                                                    
revenue had been  a moving target. He noted  that the spring                                                                    
revenue  forecast  had provided  a  better  idea. They  were                                                                    
working  to  pin  down  the   revenue  number  in  order  to                                                                    
determine how much could be  applied to the PFD for example,                                                                    
and  how much  the legislature  may  want to  draw from  the                                                                    
Constitutional  Budget  Reserve   (CBR)  or  Permanent  Fund                                                                    
Earnings Reserve Account (ERA).                                                                                                 
Representative Carpenter  looked at  the high  level picture                                                                    
and  stated  the  document  did  not  include  a  line  item                                                                    
specifying how much would be  spent on deficit reduction. He                                                                    
remarked it  was not  clear to  him or  the public  that the                                                                    
legislature  was dedicating  a  certain amount  of money  to                                                                    
reduce  the  state's  deficit  by a  given  amount.  He  was                                                                    
curious what the  thinking was when the state  was taking in                                                                    
$1   billion  in   federal  funds   and   one  of   spending                                                                    
requirements was reducing the  deficit. He stressed that the                                                                    
deficit  had to  be addressed  somehow. He  stated that  the                                                                    
deficit reduction  would either  come from revenue  from tax                                                                    
of some sort or in reductions  to services the state did not                                                                    
have  enough  funding  to  pay  for  in  the  long-term.  He                                                                    
wondered if [federal]  funds would help bridge  to either of                                                                    
the solutions. Alternatively, he  wondered whether the money                                                                    
would  be spent  only  on services,  which  would result  in                                                                    
kicking the can down the  road until the federal funding was                                                                    
10:25:25 AM                                                                                                                   
ALEXEI  PAINTER,  DIRECTOR,  LEGISLATIVE  FINANCE  DIVISION,                                                                    
provided  remarks on  the conversation  topic. He  explained                                                                    
that  between the  CS and  the education  funding bill,  not                                                                    
including the capital budget or  PFD, there was a surplus of                                                                    
about $640 million. The governor's  capital budget was about                                                                    
$62  million, which  included over  $100  million of  Alaska                                                                    
Housing  Finance Corporation  (AHFC) bonding.  He noted  the                                                                    
bill had not been heard  by the committee. He estimated that                                                                    
the capital budget could potentially  use up to $200 million                                                                    
of  the $640  million  surplus. He  elaborated  that on  the                                                                    
higher  end, there  would  be $440  million  of the  surplus                                                                    
remaining for a  PFD before draws from  another source would                                                                    
have to be found.                                                                                                               
Mr.  Painter addressed  Representative Carpenter's  question                                                                    
on  the  amount  used  for  debt  reduction  in  FY  22.  He                                                                    
referenced the $83 million of  UGF swap [with ARPA funds] in                                                                    
FY 22  and $91.9  million UGF debt  service swap  [with ARPA                                                                    
funds] for FY 22 [at the bottom  of page 4 and top of page 5                                                                    
of  the  document].  Combined,  the  total  was  about  $175                                                                    
million for deficit reduction in FY 22.                                                                                         
Representative Wool stated that he  did not really know what                                                                    
it meant  when people said  the state's deficit  $1 billion.                                                                    
He noted that  the CS and the governor's  budget were within                                                                    
$200 million  of each  other. He  remarked that  the deficit                                                                    
jumped out when looking at a  statutory PFD at a total of $2                                                                    
billion. He  stated that  the PFD was  not addressed  in the                                                                    
CS, and  it included a  $600 million surplus, some  of which                                                                    
would go to a capital budget and  some would go to a PFD. He                                                                    
continued  that  if  it  was  enough of  a  PFD  to  satisfy                                                                    
legislators  and the  governor, there  would be  no deficit;                                                                    
however, if  it was not  enough, the legislature  would have                                                                    
to find more funds  in the CBR; or in the  ERA, which he did                                                                    
not  support. He  stated that  without the  PFD as  a budget                                                                    
item, there  was no  deficit. He remarked  that it  was even                                                                    
more  difficult to  put a  number  on it  because there  was                                                                    
currently no PFD number.                                                                                                        
Co-Chair  Foster  addressed Representative  Wool's  question                                                                    
about whether there was a  deficit. He stated that even when                                                                    
backing out  the $175 million  in federal funds, the  CS was                                                                    
still below  the prior year  budget by almost  $200 million.                                                                    
He considered  the surplus  of $640  million and  backed out                                                                    
the federal  funds used  to offset UGF,  the money  used for                                                                    
the AHFC bond proposed by  the governor, and the ARPA funds,                                                                    
which still  resulted in  a surplus.  He noted  the scenario                                                                    
assumed  not paying  a PFD.  He  stated that  Representative                                                                    
Wool was  saying there was  no deficit, it just  depended on                                                                    
the  size  of  the  PFD.  He  played  devil's  advocate  and                                                                    
considered the perspective of Alaskans  who wondered why the                                                                    
PFD  was  playing  second  fiddle  to  everything  else.  He                                                                    
highlighted a belief that the PFD  should be paid out at the                                                                    
start;   therefore  cuts   [to  government   services]  were                                                                    
necessary. He  stated that the  issue all depended on  how a                                                                    
person saw the deficit being calculated.                                                                                        
10:30:30 AM                                                                                                                   
Representative  Rasmussen  asked  how  much  the  state  had                                                                    
received in royalties  for FY 21 and  the anticipated amount                                                                    
in FY 22.                                                                                                                       
Mr. Painter  answered that  he did not  have the  numbers on                                                                    
Co-Chair Foster  moved to the supplemental  budget items. He                                                                    
shared that many of the  supplementals had been submitted in                                                                    
the governor's  budget. Additionally,  there were  some ARPA                                                                    
supplementals. He asked Mr. Anderson to provide detail.                                                                         
Mr.  Anderson  referenced   two  documents  titled  "Capital                                                                    
Supplementals"  and  "Operating Budget  FY21  Supplementals"                                                                    
dated  4/27/21,  distributed  by  Co-Chair  Foster's  office                                                                    
(copy  on   file).  He  relayed   that  the   documents  had                                                                    
previously been one document the  committee had received the                                                                    
previous week.                                                                                                                  
Representative  Carpenter  asked  for clarification  on  the                                                                    
documents Mr. Anderson  was speaking about. He  noted he had                                                                    
three documents, two with the same name.                                                                                        
Mr. Anderson  clarified that  the correct  "Operating Budget                                                                    
FY21  Supplementals"   document  included   columns  labeled                                                                    
"item" and  "request." The addition  of the  columns allowed                                                                    
him to  quickly reference the  items. He explained  that the                                                                    
"request"   column    [in   the   Operating    Budget   FY21                                                                    
Supplementals document]  and the "requested" column  [in the                                                                    
"Capital  Supplementals" document]  referred  to where  each                                                                    
item came  up in  the conversation about  being added  to HB
69.  Identifiers included:  governor's  request, ARPA  (with                                                                    
limited   flexibility,   original  governor's   supplemental                                                                    
items, and House Finance  Committee changes (labeled "(H)FIN                                                                    
ARP." [note: there was a  last identifier "(H)FIN" discussed                                                                    
by Mr. Anderson at approximately 10:35 a.m.]                                                                                    
Mr.  Anderson  pointed  to the  document  titled  "Operating                                                                    
Budget  FY21 Supplementals"  and  addressed item  5 for  the                                                                    
Department of  Corrections institution management  under the                                                                    
director's office. He detailed there  was a fund source swap                                                                    
of  $5 million  UGF with  $5  million in  federal funds.  He                                                                    
explained that the  references added up to  the $235 million                                                                    
UGF swapped  with CSLFRF funds [previously  discussed in the                                                                    
document  titled  "FY22  House  Committee  Substitute  (CS1)                                                                    
Summary"].  He highlighted  that the  document showed  where                                                                    
the  CS replaced  funds. He  explained that  the method  had                                                                    
been  used because  the  governor's HB  81  had included  an                                                                    
unallocated  fund source  swap,  specifying the  legislature                                                                    
would give  OMB the  authority to determine  the funds  at a                                                                    
later time.  He elaborated  that Legislative  Legal Services                                                                    
had  advised that  the  method was  not  sound practice  and                                                                    
could  open  the  legislature  to the  risk  of  a  lawsuit.                                                                    
Legislative Legal had  recommended a line item  swap to show                                                                    
OMB and  the governor's office where  the legislature wanted                                                                    
to  swap fund  sources. He  explained that  the fund  source                                                                    
swap items in  the CS were large pots of  money in an effort                                                                    
to avoid a "nickel and dime" approach.                                                                                          
Mr.  Anderson moved  to item  30 on  page 2  related to  the                                                                    
Alaska Psychiatric  Institute with the  identifier "(H)FIN."                                                                    
He explained  the identifier  meant the  change was  a House                                                                    
Finance  decision.   He  detailed  that  the   governor  had                                                                    
requested  a supplemental  item  using $6  million of  AMHTA                                                                    
reserve  funds  to  fund the  Alaska  Psychiatric  Institute                                                                    
(API). He elaborated  that the CS swapped  all AMHTA reserve                                                                    
funds used in the governor's proposed budget with UGF.                                                                          
10:36:04 AM                                                                                                                   
Mr. Anderson  relayed he  would not go  through each  of the                                                                    
line items  unless requested by  the committee. He  moved to                                                                    
the FY  21 "Capital Supplementals" document.  He remarked it                                                                    
was untraditional  to include capital supplemental  items in                                                                    
the operating budget,  albeit it was becoming  less and less                                                                    
untraditional. He  explained that there were  certain things                                                                    
that  worked  better  to roll  into  one  supplemental  with                                                                    
operating and  capital items because of  the relationship FY                                                                    
21 had with the FY 22  budget due to COVID funding including                                                                    
CARES, CRRSA, ARPA, and the  Elementary and Secondary School                                                                    
Emergency Relief  Fund (ESSER).  He added  that some  of the                                                                    
capital  items  had  not  been funded  the  prior  year.  He                                                                    
explained it had  been easier to include  all capital budget                                                                    
items (that were easily taken care of) in one location.                                                                         
Mr.   Anderson   referenced  the   "Capital   Supplementals"                                                                    
document   and   explained   the   identifiers   under   the                                                                    
"requested"  column. The  identifiers were  the same  as the                                                                    
ones used  in the operating supplemental  document, with the                                                                    
addition of one  new identifier shown on lines 13  and 14 on                                                                    
page 2  labeled "Gov/(H)CS  Mod." He explained  the governor                                                                    
had  designated   a  different  fund  source   for  the  two                                                                    
Department    of    Environmental    Conservation    capital                                                                    
supplemental  items.  The  CS swapped  the  funds  with  the                                                                    
traditional AHFC  dividend funding  source per  direction by                                                                    
the co-chairs.  The remainder of the  capital items included                                                                    
were  mostly governor  items that  had been  easy to  accept                                                                    
with no major questions.                                                                                                        
Representative  Josephson asked  about  the  $4 million  the                                                                    
Department of Law sought for  the recruitment and housing of                                                                    
prosecutors. He stated  that the governor had  wanted to use                                                                    
Higher Education  Fund money. He wondered  where the request                                                                    
ended  up and  thought it  would have  been included  in the                                                                    
Mr.  Anderson  answered  that the  item  was  not  currently                                                                    
included in  the budget.  He noted that  the item  was still                                                                    
out  there  for consideration.  He  relayed  there had  been                                                                    
numerous  questions  about  whether  DOL should  be  in  the                                                                    
housing industry.  He detailed that as  the budget increment                                                                    
had been written, DOL would own and operate the housing.                                                                        
Co-Chair  Merrick  interjected  that   the  item  was  being                                                                    
considered for the FY 22 capital budget.                                                                                        
10:40:06 AM                                                                                                                   
Representative LeBon looked at lines 25 and 26.                                                                                 
Vice-Chair   Ortiz  asked   if   Representative  LeBon   was                                                                    
referencing the "Capital Supplementals" document.                                                                               
Representative  LeBon pointed  to  lines 25  and  26 of  the                                                                    
"Capital Supplementals"  document related  to the  AHFC HOME                                                                    
Investment  Partnership  Act in  the  amount  of $5  million                                                                    
[line 25].   He asked if the funding source  was prior COVID                                                                    
funding receipts  or ARPA. He  asked how AHFC  utilized home                                                                    
ownership  assistance.  He  asked if  it  was  supplementing                                                                    
mortgage or rent payments.                                                                                                      
Mr. Anderson deferred the question to LFD.                                                                                      
Mr.  Painter   answered  that  the   funding  was   an  ARPA                                                                    
appropriation. He relayed there had  been a previous RPL for                                                                    
similar funds from CRRSAA; the  bill included a carryforward                                                                    
of  the funds.  He  clarified the  increments referenced  by                                                                    
Representative  LeBon  were  associated with  new  funds  in                                                                    
CRRSA  the governor  submitted as  a separate  amendment. He                                                                    
explained  the funds  were not  included  in the  governor's                                                                    
ARPA  bill  because  he  had  already  submitted  it  as  an                                                                    
amendment;  therefore, the  committee  added the  governor's                                                                    
amendment to the  bill. He did not know how  AHFC planned to                                                                    
administer the  program. He  remarked that  nationally there                                                                    
had been  discussion in  many states  about how  the program                                                                    
would work because it was  a new funding source. He believed                                                                    
someone from AHFC could answer the question.                                                                                    
Representative  LeBon  stated  that  the devil  was  in  the                                                                    
details.  He   looked  at  the  home   ownership  assistance                                                                    
increment  [on line  26]. He  asked  if the  state would  be                                                                    
helping  people to  purchase  a  home and  stay  in a  home.                                                                    
Additionally, he wondered if the  state would look to see if                                                                    
there  was a  claim made  on the  money by  a homeowner.  He                                                                    
stated it  could be statewide  and was not targeted  for one                                                                    
community.  He highlighted  that  AFHC  was responsible  for                                                                    
underwriting mortgages  statewide. He  asked if  a homeowner                                                                    
was  required  to   be  in  default  in   order  to  receive                                                                    
assistance. He  wondered whether a homeowner  was ineligible                                                                    
for  assistance if  they  had been  able  to maintain  their                                                                    
current  payment  to protect  their  credit  rating but  had                                                                    
struggled in other ways. He noted  he was not looking for an                                                                    
answer  at present,  but the  increment brought  forward the                                                                    
10:43:19 AM                                                                                                                   
Representative  Carpenter  looked  at   line  77  under  the                                                                    
"Operating Budget  FY 21  Supplementals" document  showing a                                                                    
reduction of $21  million of other funds.  The increment was                                                                    
classified as  "(H)FIN ARP." He observed  that the increment                                                                    
related to  Commercial Passenger Vessel (CPV)  tax. He asked                                                                    
for an explanation related to the fund source.                                                                                  
Mr.  Painter clarified  that item  77 should  be labeled  as                                                                    
governor [instead of  (H)FIN ARP]. The item was  part of the                                                                    
governor's  budget,  correcting  an   error  in  the  FY  21                                                                    
appropriation bill.  He explained  that the FY  21 operating                                                                    
budget  inadvertently  funded  the incorrect  year  for  the                                                                    
shared taxes  for the CPV  tax. He detailed that  instead of                                                                    
funding  the calendar  year 2020,  the budget  inadvertently                                                                    
funded calendar  year 2019 for the  second consecutive year.                                                                    
Item 77 corrected  the error. He furthered  that in calendar                                                                    
year 2020 there  were no cruise ship  sailings, resulting in                                                                    
a reduction  of $21.2 million.  The House Finance  bill used                                                                    
ARPA  funding   to  backfill   lost  revenue,   whereas  the                                                                    
governor's  bill  had only  included  the  reduction due  to                                                                    
correction of the error from the previous year.                                                                                 
Representative  Wool  referenced  lost revenue  from  cruise                                                                    
ship  gambling  receipts.  He  asked  where  the  money  was                                                                    
normally  used. He  wondered whether  it was  being made  up                                                                    
with federal funds.                                                                                                             
Mr. Painter answered that it was  a UGF fund source that was                                                                    
allocated various  places determined by the  legislature. He                                                                    
detailed  that the  funding was  deposited into  the General                                                                    
Fund in  FY 20 and in  some years, there had  been proposals                                                                    
to  use the  funds in  the  Capital Income  Fund or  another                                                                    
source.  He  explained  it  was   included  in  the  broader                                                                    
calculation of lost revenue as it was a UGF source.                                                                             
Co-Chair Foster shared  that he wanted to  give members time                                                                    
to look  over the  documents. He  relayed members  could ask                                                                    
additional  questions  during   the  afternoon  meeting.  He                                                                    
proposed  pushing the  amendment deadline  to the  following                                                                    
day  at  noon with  the  intent  to  take up  amendments  on                                                                    
10:47:57 AM                                                                                                                   
Representative    Thompson   appreciated    the   additional                                                                    
information provided during the  meeting and believed it was                                                                    
helpful for the public process.                                                                                                 
Co-Chair Foster  thanked Representative Thompson  for making                                                                    
the request  [to hear  additional information].  He believed                                                                    
it  was important  for  the public  to  understand the  work                                                                    
being done by the legislature.                                                                                                  
Representative Wool asked what CSLFRF stood for.                                                                                
Mr.  Anderson replied  that CSLFRF  stood for  [Coronavirus]                                                                    
State and Local Fiscal Relief [Recovery] Funds.                                                                                 
Mr. Anderson  responded to a  question [that  was inaudible]                                                                    
by confirming  CSLFRF was one  fund source from  the federal                                                                    
legislation that had passed.                                                                                                    
Representative Edgmon asked for  verification CSLFRF was the                                                                    
$1 billion [in federal funding coming to Alaska].                                                                               
Mr. Anderson  confirmed that the  funding was $1  billion in                                                                    
what some people termed to be discretionary funding.                                                                            
Representative Wool  understood the guidance was  coming out                                                                    
from the federal  government on May 10  [11]. He interpreted                                                                    
that  the words  state  and local  [in  the acronym  CSLFRF]                                                                    
implied it  was possible the  funds could be used  to offset                                                                    
local lost  revenue in  addition to  state lost  revenue. He                                                                    
referenced the $80 million [in  grants to local governments]                                                                    
for  community  relief.  He  thought  it  sounded  like  the                                                                    
distribution  rules  may allow  funding  to  offset a  local                                                                    
revenue loss.                                                                                                                   
Mr.   Anderson   answered   that   everyone   was   awaiting                                                                    
clarification  on the  issue. He  noted there  was a  bit of                                                                    
concern about how  much to trust the  current information on                                                                    
the  topic.  He shared  that  he  had  spoken with  OMB  the                                                                    
previous day and highlighted an  example related to bed tax.                                                                    
He detailed that communities had  lost bed taxes due to lost                                                                    
tourism.  He noted  there was  not a  statewide bed  tax. He                                                                    
explained that  rating the  risk of allowing  bed tax  to be                                                                    
used  as  lost revenue,  there  was  a chance  Treasury  may                                                                    
determine bed  tax was  not an allowable  use of  the funds,                                                                    
which  would  mean  communities  would  be  responsible  for                                                                    
paying  the money  back. He  explained  there was  currently                                                                    
some caution  on the  parameters and OMB  was trying  to get                                                                    
clarification and  was working with LFD.  He highlighted the                                                                    
importance  of  collaboration  between the  legislature  and                                                                    
administration in  terms of  the sideboards  the legislature                                                                    
would implement for the grant programs.                                                                                         
HB  69  was   HEARD  and  HELD  in   committee  for  further                                                                    
HB  71  was   HEARD  and  HELD  in   committee  for  further                                                                    
10:52:13 AM                                                                                                                   
AT EASE                                                                                                                         
11:14:46 AM                                                                                                                   
Co-Chair  Foster announced  that LFD  was available  to help                                                                    
committee  members with  the amendment  writing process.  He                                                                    
noted  there were  no  bills on  the  afternoon meeting.  He                                                                    
intended  to   answer  any   additional  questions   on  the                                                                    
operating budget that afternoon. He  handed the gavel to Co-                                                                    
Chair Merrick.                                                                                                                  
11:15:55 AM                                                                                                                   
AT EASE                                                                                                                         
11:15:59 AM                                                                                                                   
HOUSE BILL NO. 92                                                                                                             
     "An  Act  relating  to  borrowing  in  anticipation  of                                                                    
     revenues;  relating  to   revenue  anticipation  notes;                                                                    
     relating to  line of  credit agreements;  and providing                                                                    
     for an effective date."                                                                                                    
11:16:15 AM                                                                                                                   
Representative  LeBon  MOVED  to   ADOPT  Amendment  2,  32-                                                                    
GH1707\A.3 (Wallace, 4/23/21) (copy on file):                                                                                   
     Page 3, following line 5:                                                                                                  
     Insert a new bill section to read:                                                                                         
     "*Sec.  7. AS  43.08.050  is amended  by  adding a  new                                                                    
     subsection to read:                                                                                                        
     (b) Within 30  days after an agreement  to borrow money                                                                    
     is executed under this  chapter, the commissioner shall                                                                    
     notify the Legislative Budget  and Audit Committee that                                                                    
     an agreement has been entered into and include                                                                             
          (1) the financial terms of the agreement; and                                                                         
          (2) an explanation for the determination that the                                                                     
          agreement was in the best financial interests of                                                                      
          the state."                                                                                                           
     Renumber the following bill sections accordingly.                                                                          
Representative Rasmussen OBJECTED for discussion.                                                                               
Representative LeBon  explained the amendment  would require                                                                    
the Department  of Revenue (DOR)  report to  the Legislative                                                                    
Budget and Audit Committee on  the details of any agreements                                                                    
entered into related  to current asset financing,  a line of                                                                    
credit,  working  capital  loans  or  whatever  process  may                                                                    
follow.  He  explained  that the  notification  would  occur                                                                    
within  30  days  of  the  execution  of  an  agreement.  He                                                                    
detailed that  the report  should include  a summary  of the                                                                    
financial terms of the agreement  and an explanation for the                                                                    
determination  the  agreement  was  in  the  best  financial                                                                    
interest of the state.                                                                                                          
11:17:32 AM                                                                                                                   
Co-Chair  Merrick clarified  the  amendment  number was  32-                                                                    
Representative Rasmussen WITHDREW her OBJECTION.                                                                                
There being NO further OBJECTION, Amendment 2 was ADOPTED.                                                                      
11:18:07 AM                                                                                                                   
Representative   LeBon   MOVED   to   ADOPT   Amendment   1,                                                                    
32-GH1707\A.2 (Wallace, 4/22/21) (copy on file):                                                                                
     Page 1, line 2:                                                                                                            
     Delete "line of credit agreements"                                                                                         
     Insert "short-term borrowing"                                                                                              
     Page 1, line 12:                                                                                                           
     Delete "line of credit agreements"                                                                                         
     Insert "other forms of short-term borrowing"                                                                               
Representative Rasmussen OBJECTED for discussion.                                                                               
Representative  LeBon explained  that the  amendment cleaned                                                                    
up bill  language. He detailed  that page  1, line 2  of the                                                                    
amendment   would  delete   the  phrase   "line  of   credit                                                                    
agreements"  and insert  the phrase  "short-term borrowing."                                                                    
Additionally, page 1, line 12  would delete the phrase "line                                                                    
of credit agreements" and insert  the phrase "other forms of                                                                    
short-term borrowing."  He stated  the reason for  the clean                                                                    
up was the  legislature did not know  precisely what pathway                                                                    
the DOR would follow  to secure short-term financing options                                                                    
such  as  lines  of  credit or  other  short-term  borrowing                                                                    
Co-Chair  Merrick clarified  the  amendment  number was  32-                                                                    
Representative  Rasmussen asked  for  verification that  the                                                                    
other  forms of  short-term  borrowing  would encompass  the                                                                    
line of credit agreements.                                                                                                      
Representative   LeBon  replied   in  the   affirmative.  He                                                                    
explained  that  the  amendment broadened  the  options.  He                                                                    
detailed there were  a variety of municipal  market and bank                                                                    
options  for   short-term  borrowing   with  a   variety  of                                                                    
flexibility,  interest   rates,  and   the  ease   in  which                                                                    
temporary  financing was  secured  for  the state's  working                                                                    
capital needs. The  language change was to give  DOR as much                                                                    
flexibility as possible to achieve its goal.                                                                                    
Representative  Rasmussen asked  for verification  that line                                                                    
of  credit agreements  would be  included under  one of  the                                                                    
other forms of short-term borrowing.                                                                                            
Representative LeBon  replied affirmatively.  He interpreted                                                                    
the  phrase  short-term  borrowing  to be  broad  enough  to                                                                    
include a line of credit agreement.                                                                                             
Representative Rasmussen WITHDREW her OBJECTION.                                                                                
There being NO further OBJECTION, Amendment 1 was ADOPTED.                                                                      
11:20:50 AM                                                                                                                   
Representative Rasmussen appreciated  the amendments to make                                                                    
the legislation a bit stronger.  She thought the bill was an                                                                    
important  tool to  give  DOR  to enable  it  to manage  the                                                                    
financial interests of the state in the best way possible.                                                                      
Co-Chair  Foster  MOVED  to  REPORT   CSHB  92(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
There being NO OBJECTION, it was so ordered.                                                                                    
CSHB 92(FIN) was REPORTED out  of committee with a "do pass"                                                                    
recommendation and  with one  new indeterminate  fiscal note                                                                    
from the Department of Revenue.                                                                                                 
11:21:36 AM                                                                                                                   
AT EASE                                                                                                                         
11:24:47 AM                                                                                                                   
HOUSE BILL NO. 55                                                                                                             
     "An  Act relating  to  participation  of certain  peace                                                                    
     officers and  firefighters in  the defined  benefit and                                                                    
     defined  contribution plans  of  the Public  Employees'                                                                    
     Retirement  System of  Alaska; relating  to eligibility                                                                    
     of  peace   officers  and  firefighters   for  medical,                                                                    
     disability, and  death benefits; relating  to liability                                                                    
     of the  Public Employees' Retirement System  of Alaska;                                                                    
     and providing for an effective date."                                                                                      
11:24:53 AM                                                                                                                   
Co-Chair Merrick OPENED public testimony.                                                                                       
11:25:19 AM                                                                                                                   
JEFF JONES, SELF,  KETCHIKAN (via teleconference), testified                                                                    
in support of the legislation. He  shared that he was a fire                                                                    
medic and had been with  the Ketchikan Fire Department since                                                                    
2007.  He stated  a return  to a  DB [defined  benefit] plan                                                                    
could help  the state  and municipalities mitigate  the cost                                                                    
the associated  with training and turnover  with existing DB                                                                    
plans. He  provided information about the  various positions                                                                    
he had  held with  the [fire] department.  He stated  he was                                                                    
not irreplaceable; however,  it would be a  long time before                                                                    
someone  new could  receive the  numerous certifications  he                                                                    
had  obtained. He  did not  want to  relocate his  family to                                                                    
another state  with a  DB program. He  remarked it  was well                                                                    
known  that firefighters  working after  the age  of 55  put                                                                    
them in greater risk of dying.  He wanted to be able to hold                                                                    
his grandchildren  and enjoy his retirement.  He started his                                                                    
career when he was 28 years old  and at 58, he would have 30                                                                    
years  with the  department, but  not enough  to retire.  He                                                                    
emphasized that  responding to  a fire at  that age  put the                                                                    
employee,  coworkers, and  the  public at  greater risk.  He                                                                    
believed the  relatively small increase  for the  DB program                                                                    
would  be money  well spent  when considering  the value  of                                                                    
retaining employees  throughout their career.  He encouraged                                                                    
the committee to pass the bill.                                                                                                 
11:27:24 AM                                                                                                                   
GERARD  ASSELIN,   CAPTAIN,  ANCHORAGE   POLICE  DEPARTMENT,                                                                    
ANCHORAGE  (via   teleconference),  shared  that  he   is  a                                                                    
lifelong Alaska  resident. He supported the  legislation. He                                                                    
had been honored to serve  his friends and neighbors for the                                                                    
past 23  years with the department.  He provided information                                                                    
about  his job  duties.  He worked  with  over 200  officers                                                                    
providing critical  service around the  clock. Additionally,                                                                    
he oversaw  the field  training program.  He saw  the direct                                                                    
impacts  of the  recruitment and  retention challenges  that                                                                    
existed  within the  profession  in  Alaska. He  highlighted                                                                    
that the  department was  fundamentally and  increasingly in                                                                    
search of  qualified, educated professionals to  work in the                                                                    
career. He stressed that demands  on the policing profession                                                                    
had increased,  making it more  difficult to  recruit people                                                                    
into  the  profession  and causing  officers  to  reevaluate                                                                    
their  desire  to  stay. He  detailed  that  after  officers                                                                    
received training, they became a valuable commodity.                                                                            
Mr.  Asselin   shared  that  recruitment  had   become  more                                                                    
competitive   and   challenging   than  ever   before.   The                                                                    
department  saw  officers  leave  on  a  monthly  basis  for                                                                    
departments  in  other  states.  He spoke  to  the  loss  of                                                                    
productivity that  occurred with academy and  field training                                                                    
and the proficiency that came  with experience. He witnessed                                                                    
the  loss  of  productivity   daily  with  the  department's                                                                    
training programs. He  reported that over the  past month he                                                                    
had  interviewed  20 patrol  sergeants  and  almost all  had                                                                    
vocalized  the number  one problem  was  young officers  and                                                                    
recruitment   and   retention.    The   situation   led   to                                                                    
inexperience and a loss of  productivity. He appreciated any                                                                    
tools  that  could  be  given  to  improve  recruitment  and                                                                    
retention  for  the  department.  He stated  that  the  bill                                                                    
provided  an  opportunity to  put  Alaska  in a  competitive                                                                    
position to  maintain the best public  safety professionals.                                                                    
He urged support of the bill.                                                                                                   
11:31:14 AM                                                                                                                   
JODIE  HETTRICK,  FIRE  CHIEF,  ANCHORAGE  FIRE  DEPARTMENT,                                                                    
ANCHORAGE  (via teleconference),  spoke  in  support of  the                                                                    
bill. She  detailed that the  Anchorage Fire  Department was                                                                    
the  largest in  the  state with  about  400 employees.  She                                                                    
shared  that  one  of  the  department's  biggest  stumbling                                                                    
blocks  for recruitment  and retention  of  members was  the                                                                    
retirement system. The situation  was compounded by members'                                                                    
ineligibility for  social security.  She explained  that the                                                                    
department was trying to get people  to spend 20 to 25 years                                                                    
serving the  community and when  they left, they only  had a                                                                    
401k. She  explained it had  significantly contributed  to a                                                                    
reduction  in recruitment  opportunities. She  reported that                                                                    
the department's  application numbers were  approximately 25                                                                    
percent  of what  they had  been pre-Tier  IV. Additionally,                                                                    
employees were leaving typically  within their first five to                                                                    
seven years.  She shared  that an  employee had  reached his                                                                    
benchmark  for his  401k under  the  Tier IV  system, so  he                                                                    
retired at the  age of 34 after working  with the department                                                                    
just under 10  years. She explained it was  an investment of                                                                    
close  to  $2 million  the  municipality  had put  into  the                                                                    
individual for training and other  and it had gone right out                                                                    
the  door. She  detailed that  the department  was not  only                                                                    
losing employees to other states,  but to retirement because                                                                    
they were  comfortable living at  a fairly low  wage without                                                                    
having  to deal  with the  negative effects  of a  career in                                                                    
emergency services.                                                                                                             
Ms.  Hettrick stated  that  without  an adequate  retirement                                                                    
system in place, it would  be even more difficult to recruit                                                                    
and retain  valuable employees to  serve the  community. She                                                                    
believed  the  bill went  in  the  right direction  and  she                                                                    
strongly urged support for its passage.                                                                                         
Representative LeBon referenced the  retirement of the young                                                                    
individual  in  Ms.  Hettrick's example.  He  asked  if  the                                                                    
individual   had  left   the   profession   to  seek   other                                                                    
employment. He remarked that retiring  and drawing on a 401k                                                                    
at the age  of 34 would be very unusual.  He wondered if the                                                                    
individual  had   moved  to  another  employer   within  the                                                                    
profession or left the profession completely.                                                                                   
Ms. Hettrick answered that the  specific individual had left                                                                    
the  profession   entirely.  The  person  had   moved  to  a                                                                    
community in the Lower 48 where  he could live for much less                                                                    
stable income.  The individual had  another career  field in                                                                    
woodworking and photography and  would supplement his income                                                                    
with   retirement   income.   The   department   had   never                                                                    
experienced  someone  leaving  that early  for  an  official                                                                    
11:36:10 AM                                                                                                                   
ANGIE  FRAIZE,  OFFICER, COMMUNICATIONS  OFFICER,  ANCHORAGE                                                                    
POLICE  DEPARTMENT  EMPLOYEES' ASSOCIATION,  ANCHORAGE  (via                                                                    
teleconference),  spoke in  favor  of  the legislation.  She                                                                    
shared  that the  organization represented  over 570  police                                                                    
employees. She  stated that the  committee's support  of the                                                                    
legislation  would   directly  and  indirectly   impact  the                                                                    
department's employees  and the greater Anchorage  area. She                                                                    
shared it was  her 20th year and she was  eligible to retire                                                                    
with a  pension. Additionally, she loved  the department and                                                                    
was  born and  raised  in Alaska.  She  emphasized that  the                                                                    
department was  seeing its employees  leave in  droves after                                                                    
their  first five  years. She  relayed  that the  department                                                                    
recruited a  high number of  military employees  leaving the                                                                    
military.  She  noted that  the  individuals  were not  from                                                                    
Alaska and  did not have  extended family in the  state, but                                                                    
they were  starting their families with  the department. She                                                                    
detailed that  after about five  years the  officers started                                                                    
having young children and were  pulled away by family in the                                                                    
Lower 48  and by  lucrative offers from  lateral departments                                                                    
out-of-state   offering  more   money   and  pensions.   She                                                                    
emphasized that  the department  was spending  a substantial                                                                    
amount  on  the  employees.  She  added  that  the  loss  of                                                                    
employees  had  resulted in  a  very  young department.  She                                                                    
explained  that  it   would  have  a  huge   impact  on  the                                                                    
community. Additionally, due to  the national narrative that                                                                    
police were facing,  professional, experienced, and educated                                                                    
officers were needed.                                                                                                           
She shared  that there  were only two  officers left  in the                                                                    
department from  her 2007 academy.  She emphasized  that the                                                                    
department  was  hurting  for experienced  and  professional                                                                    
police   officers.  She   hoped  the   committee  considered                                                                    
supporting the legislation.                                                                                                     
Representative Rasmussen  asked Ms.  Fraize to speak  to the                                                                    
benefit   a  more   experienced  officer   could  bring   in                                                                    
situational awareness.                                                                                                          
Ms. Fraize replied that there  were many studies showing the                                                                    
more education  experience, the less force  an officer used.                                                                    
She  noted it  was a  topic nationwide  and fortunately  the                                                                    
department  had not  experienced the  situation. She  shared                                                                    
that the  department had a  very junior patrol  division and                                                                    
over 80 percent had been there  for three to five years. She                                                                    
shared that when  she had worked as an  officer downtown, it                                                                    
had taken her about five  years to feel completely confident                                                                    
in her  handling of all  situations. She explained  that the                                                                    
junior  officers did  not have  the  experience, through  no                                                                    
fault  of their  own. She  stressed the  need to  continue a                                                                    
highly  educated  and  experienced department  in  order  to                                                                    
avoid  seeing   the  community  suffer  like   Ferguson  and                                                                    
Representative  Rasmussen  stated  she found  it  astounding                                                                    
there was  only 20 percent  of the department that  had over                                                                    
five  years  of  experience.   She  observed  that  incoming                                                                    
officers likely  were not receiving the  training they could                                                                    
if there were more experienced officers serving as mentors.                                                                     
11:41:18 AM                                                                                                                   
JUSTIN MACK, ALASKA  PROFESSIONAL FIREFIGHTERS' ASSOCIATION,                                                                    
ANCHORAGE (via  teleconference), supported  the legislation.                                                                    
He  shared  that  he  had  worked  for  the  Anchorage  Fire                                                                    
Department for  10 years and  currently served as  a captain                                                                    
for Fire Station 3. He  relayed there was widespread support                                                                    
for   the  bill   within  the   organization  of   over  500                                                                    
professional fire fighters and  EMS personnel throughout the                                                                    
state.  The association  had been  advocating  for a  shared                                                                    
risk solution  where employees, employers, and  the State of                                                                    
Alaska shared a responsibility  in addressing recruiting and                                                                    
retention. He  detailed that  since the  change to  Tier IV,                                                                    
there had been many  unintended consequences. He stated that                                                                    
perhaps  the   clearest  consequence  was   the  competitive                                                                    
disadvantage Alaska  faced in recruitment and  retention. He                                                                    
reported  that the  problem  was  widespread throughout  the                                                                    
state's  fire departments.  He pointed  out that  Alaska was                                                                    
one  of  the  only  states  to  offer  a  mandatory  defined                                                                    
contribution (DC) for public safety employees.                                                                                  
Mr. Mack  relayed other states  had switched back from  a DC                                                                    
plan  to a  DB  plan specifically  to  address the  problems                                                                    
currently  happening  in  Alaska.  The bill  aimed  to  make                                                                    
Alaska  competitive in  the hiring  and retaining  of public                                                                    
safety  employees.  He stated  it  was  a conservative  plan                                                                    
built by  incorporating best practices  of some of  the most                                                                    
successful plans  in the  country, including  establishing a                                                                    
minimum  retirement age,  removing DB  medical, and  using a                                                                    
five-year  average  rather  than a  three-year  average.  He                                                                    
remarked that  the changes  drastically reduced  the state's                                                                    
liability.   He  detailed   that  the   plan  also   offered                                                                    
mechanisms to  address any adverse  experience the  plan may                                                                    
have,   including    increasing   employee    and   employer                                                                    
contributions and withholding inflation proofing.                                                                               
Mr.  Mack stressed  there was  a significant  cost of  doing                                                                    
nothing.  He   highlighted  that  too  many   public  safety                                                                    
employees had  left the state  who cited lack  of retirement                                                                    
as a  primary cause. He  stated that departments  across the                                                                    
state  were hiring  police, fire,  and corrections  officers                                                                    
who would  receive excellent training, yet  had no long-term                                                                    
plans to remain in Alaska.  He informed the committee it was                                                                    
becoming well known that Alaska  employees were ripe for the                                                                    
picking;  the department  received  emails  and flyers  from                                                                    
other states attempting to  recruit its employees. Employers                                                                    
were having  to reinvest  recruitment and  retention dollars                                                                    
several  times  over, which  was  wreaking  havoc on  public                                                                    
safety  budgets.  He  pointed  out that  the  most  talented                                                                    
public  safety   officers  were   leaving  the   state.  The                                                                    
organization strongly supported the bill.                                                                                       
11:44:35 AM                                                                                                                   
NICK  DAVIS,  SENIOR  CAPTAIN,  ANCHORAGE  FIRE  DEPARTMENT,                                                                    
ANCHORAGE (via teleconference), shared  that he had about 17                                                                    
years with the Anchorage Fire  Department and was one of the                                                                    
lead  recruiters and  testers for  the department.  He added                                                                    
that he was  in the Tier III retirement  system. He detailed                                                                    
that he  had left  for commercial  fishing but  had returned                                                                    
for the Tier III defined benefits.  He relayed it was one of                                                                    
the  only reasons  he  was  in Alaska.  He  stated that  his                                                                    
retirement  benefits  kept  him   with  the  department.  He                                                                    
stressed it was  very challenging to work in  a fire station                                                                    
where half  the employees had  retirement and half  did not.                                                                    
He underscored that the job  was dangerous. He supported the                                                                    
bill and plead with the committee to pass the legislation.                                                                      
11:46:47 AM                                                                                                                   
JACOB  WILSON, BUSINESS  AGENT,  ALASKA CORRECTION  OFFICERS                                                                    
ASSOCIATION,  ANCHORAGE   (via  teleconference),   spoke  in                                                                    
support   of  the   legislation.   He   detailed  that   the                                                                    
organization  represented  over  900  correctional  officers                                                                    
across the state. He shared  that throughout his 10 years in                                                                    
the  job  he  had  spoken  with  thousands  of  correctional                                                                    
officers  concerning their  retirement and  the reason  they                                                                    
came   and  left   the   profession.   He  emphasized   that                                                                    
correctional  officers put  their  lives on  the line  every                                                                    
day. He stressed that there  was currently a recruitment and                                                                    
retention crisis. He shared that  one of the root causes was                                                                    
the state's DC retirement  system, which was not competitive                                                                    
with  other law  enforcement retirement  systems around  the                                                                    
country. He  detailed that between January  2015 and January                                                                    
2021, 650 correctional officers or  just under 70 percent of                                                                    
the total workforce had left the bargaining unit.                                                                               
Mr.  Wilson emphasized  the high  turnover  had serious  and                                                                    
negative  safety, security,  and  financial  impacts on  the                                                                    
state. Every time an experienced  officer left, the position                                                                    
was  backfilled  with  an   inexperienced  new  officer.  He                                                                    
stressed  there  was  significant  cost  to  the  state  for                                                                    
recruitment  and training.  He emphasized  that hiring  over                                                                    
100 new  recruits per year  compromised safety  and security                                                                    
in the institutions. The DOC  was not currently able to keep                                                                    
up with  demand for new  officers. He reported that  a study                                                                    
published  five years  earlier found  the institutions  were                                                                    
currently  operating with  insufficient  staffing levels  to                                                                    
meet   basic   security    operational   requirements.   The                                                                    
legislation  would  help   with  recruitment  and  retention                                                                    
problems.  He  stated the  bill  was  a  step in  the  right                                                                    
direction. He  reported that the  Tier IV  retirement system                                                                    
did not  offer enough  incentive for  officers to  stay past                                                                    
their five  year mark. The  association fully  supported the                                                                    
11:49:36 AM                                                                                                                   
Co-Chair  Merrick asked  how the  problems with  recruitment                                                                    
and retention lead to overtime.                                                                                                 
Mr. Wilson  replied there had  been a substantial  uptick in                                                                    
overtime over the  past five or so years.  He explained that                                                                    
the amount  of mandatory  overtime could  result in  16 hour                                                                    
days. He detailed  officers serving 12 hour  shifts could be                                                                    
instructed to stay for  four additional hours. Additionally,                                                                    
officers  being ordered  to come  in for  work on  their off                                                                    
week  had significantly  increased  over the  last year.  He                                                                    
highlighted  that  COVID-19   illustrated  the  department's                                                                    
Co-Chair  Merrick asked  Mr. Wilson  to share  the [written]                                                                    
data with the committee.                                                                                                        
11:50:48 AM                                                                                                                   
NICK  CLARK,  PARAMEDIC  AND FIRE  FIGHTER,  FAIRBANKS  FIRE                                                                    
DEPARTMENT, FAIRBANKS  (via teleconference), shared  that he                                                                    
is a  Tier IV member  and had  been with the  Fairbanks Fire                                                                    
Department for  almost 10 years. He  reported that currently                                                                    
34 out  of 45 of the  department's members were Tier  IV. He                                                                    
detailed  that within  nine years,  the last  seven Tier  IV                                                                    
members would be eligible to  retire with their 25 years. He                                                                    
elaborated that five  of the Tier IV  members were currently                                                                    
in or  moving into  officer positions.  He pointed  out that                                                                    
the top leadership  of the department was about  to be under                                                                    
Tier IV.  He shared  that the academy  had six  new recruits                                                                    
the past year, which was  the largest group since the 1990s.                                                                    
He shared  that the  department had  hired four  new members                                                                    
and was  on track to  hire a total  of eight in  the current                                                                    
year. He  reported the department  was running at  least two                                                                    
academies per  year. Prior  to Tier  IV, the  department ran                                                                    
one  academy  every  two  years.  He  stated  that  Tier  IV                                                                    
employees who had left the  department had lasted an average                                                                    
of 2.3  years. The  current Tier  IV employees  averaged 2.8                                                                    
years with the department. He  stressed the situation left a                                                                    
large  knowledge gap  in  the  department. Additionally,  it                                                                    
cost  the department  approximately  $120,000  in the  first                                                                    
year of bringing on a new recruit.                                                                                              
Mr. Clark explained  that seeing so many people  leave was a                                                                    
morale  killer.  He reported  that  the  candidate pool  was                                                                    
shrinking as people left the  state. He relayed there was no                                                                    
security  with  the  Tier  IV  retirement,  with  no  social                                                                    
security,  supplemental benefits  system, and  no chance  of                                                                    
successful retirement  income. He shared that  he had worked                                                                    
with the  department for  nearly 10  years because  he loved                                                                    
Fairbanks and  Alaska. Additionally, he was  confident there                                                                    
would be  a return  to a  modified DB  system. He  wanted to                                                                    
move  away  from  Tier  IV and  improve  things  for  future                                                                    
generations. He urged the committee to pass the bill.                                                                           
11:55:26 AM                                                                                                                   
Representative LeBon  thanked Mr.  Clark for calling  in. He                                                                    
referenced  Mr. Clark's  testimony  that 38  members of  the                                                                    
Fairbanks Fire Department  were in Tier IV. He  asked if the                                                                    
members were waiting  for the legislation to  pass to commit                                                                    
to working for  the department long-term. He  asked if there                                                                    
was  a sense  of  what the  response would  be  if the  bill                                                                    
Mr.  Clark   answered  that   the  department   had  several                                                                    
employees  currently  testing   for  jobs  out-of-state.  He                                                                    
reported  that many  members were  asking  whether the  bill                                                                    
would pass and wanted to  stay but were thinking about their                                                                    
future. He believed  the bill would help  retain members. He                                                                    
was confident  the passage of  the bill would give  him more                                                                    
security  and help  him feel  more  comfortable staying.  He                                                                    
stressed  the  turnover  was hard  on  morale.  He  believed                                                                    
members would stay.                                                                                                             
Representative Thompson  thanked Mr.  Clark for  calling in.                                                                    
He  asked  how  the  large turnover  within  the  department                                                                    
impacted having experienced people move  up the ranks in the                                                                    
department.   He  asked   if  the   department  had   enough                                                                    
experienced members to move up to leadership positions.                                                                         
Mr.  Clark replied  that there  would  be a  big impact.  He                                                                    
reported  there was  currently  one Tier  IV  employee in  a                                                                    
captain position and likely there  would be a couple more in                                                                    
the coming months. He explained  that about half the captain                                                                    
positions would  be held by  Tier IV members in  the current                                                                    
year. He  noted that  those four members  had been  with the                                                                    
department  the  longest.  He explained  that  beyond  those                                                                    
members, the  experience gap dropped off  substantially. The                                                                    
knowledge the  department was losing  due to  retirement and                                                                    
the departure  of employees was  substantial. He  stated the                                                                    
situation would continue if turnover persisted.                                                                                 
Co-Chair Merrick  CLOSED public  testimony. She  thanked the                                                                    
testifiers for their service and testimony.                                                                                     
12:00:08 PM                                                                                                                   
Co-Chair Merrick  asked to hear  the Division  of Retirement                                                                    
and Benefits' perspective on the bill.                                                                                          
JIM  PUCKETT, DEPUTY  DIRECTOR, DIVISION  OF RETIREMENT  AND                                                                    
BENEFITS,     DEPARTMENT      OF     ADMINISTRATION     (via                                                                    
teleconference), shared  that he  did not have  any prepared                                                                    
remarks. He was available for questions.                                                                                        
Representative LeBon  stated that the shared  upside risk in                                                                    
a DB program  was capped at 10 percent  for participants. He                                                                    
noted  the  initial  employee contribution  rate  was  at  8                                                                    
percent. He asked what the  financial impact would be if the                                                                    
ceiling was raised to 12 percent.                                                                                               
Mr.  Puckett replied  that  the question  should  go to  the                                                                    
division's chief financial officer.  He would follow up with                                                                    
the answer.                                                                                                                     
Representative  Josephson remarked  that  Buck, the  state's                                                                    
actuary,  had  stated  the  plan  was  around  99.3  percent                                                                    
solvent in  the past  year. He asked  if there  was anything                                                                    
that would change the number.                                                                                                   
Mr. Puckett was not aware  of anything that would change the                                                                    
number.  The division  would hear  an  updated analysis  the                                                                    
following day  and he would  provide the information  to the                                                                    
HB 55 was HEARD and HELD in committee for further                                                                               
Co-Chair Foster announced that the Legislative Finance                                                                          
Division could help members with amendments.                                                                                    
Co-Chair Merrick reviewed the schedule for the following                                                                        
12:03:42 PM                                                                                                                   
The meeting was adjourned at 12:03 p.m.                                                                                         

Document Name Date/Time Subjects
HB 92 Amendments 1-2 LeBon 042221.pdf HFIN 4/27/2021 9:00:00 AM
HB 92
HB 69 FY21 Supp Transactions by Agency Cap 042721.pdf HFIN 4/27/2021 9:00:00 AM
HB 69
HB 69 21-04-26 House CS1 Summary.pdf HFIN 4/27/2021 9:00:00 AM
HB 69
HB 69 FY21 Supp Transactions by Agency Op 042721.pdf HFIN 4/27/2021 9:00:00 AM
HB 69
HB 55 Public Testimony 042721.pdf HFIN 4/27/2021 9:00:00 AM
HB 55