Legislature(2019 - 2020)ADAMS ROOM 519
07/09/2019 01:00 PM House FINANCE
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| Impact of Veto Override | |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
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HOUSE FINANCE COMMITTEE
SECOND SPECIAL SESSION
July 9, 2019
1:01 p.m.
1:01:02 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:01 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Tammie Wilson, Co-Chair
Representative Jennifer Johnston, Vice-Chair
Representative Dan Ortiz, Vice-Chair
Representative Andy Josephson
Representative Gary Knopp
Representative Bart LeBon
MEMBERS ABSENT
Representative Ben Carpenter
Representative Kelly Merrick
Representative Colleen Sullivan-Leonard
Representative Cathy Tilton
ALSO PRESENT
Nils Andreassen, Executive Director, Alaska Municipal
League, Juneau; Representative Sara Hannan; Representative
Grier Hopkins, Representative Andi Story; Representative
Harriet Drummond; Representative Louise Stutes;
Representative Adam Wool.
PRESENT VIA TELECONFERENCE
Jim Johnsen, President, University of Alaska, Anchorage;
Marissa Sharrah, President, Fairbanks Chamber of Commerce,
Fairbanks; Laurie Wolf, President, Foraker Group,
Anchorage; Diane Kaplan, President and Chief Executive
Officer, Rasmuson Foundation, Anchorage; Steve Lundgren,
Member, Alaska Banker's Association, Fairbanks; Jeff Twait,
Alaska State Homebuilding Association, Kenai; Becky
Hultberg, President, Alaska State Hospital and Nursing Home
Association, Anchorage; Jim Roberts, Senior Executive
Liason, Alaska Native Tribal Health Consortium, Anchorage;
Ken Helander, Advocacy Director, AARP, Anchorage; Melanie
Bahnke, President and CEO, Kawerak Inc., Nome; Dave Landis,
Mayor, Ketchikan Gateway Borough, Kenai; Benjamin Mallott,
Vice President, Alaska Federation of Natives, Anchorage;
SUMMARY
IMPACT OF VETO OVERRIDE
Co-Chair Foster indicated that the committee would be
taking invited testimony from fourteen organizations.
^IMPACT OF VETO OVERRIDE
1:02:43 PM
JIM JOHNSEN, PRESIDENT, UNIVERSITY OF ALASKA, ANCHORAGE
(via teleconference), spoke to the negative effects of the
potential vetoes. He referred to the document, "Impacts of
Budget Vetoes on University of Alaska" (copy on file):
Historically Unpreceded Divestment in Higher
Education ? Veto resulted in a $135 million GF
cut - the largest reduction in UA's history
? Unprecedented within higher education and
historically unparalleled in magnitude amongst
public universities nationally
? UA represented 32 percent of the total $$
Governor vetoed
? 41 percent reduction to the state portion of
UA's budget
? Single action sudden, untenable and
devastating reduction implemented 3 days before
start of fiscal year
? When combined with $51 million in prior year
cuts, cumulative reduction of $186 million (49
percent) over the last 6 years:
o State funding has dropped from $378
million to $192 million
? Over 1,200 faculty and staff already gone
? Over 50 academic and degree programs already
gone
Key Points
? Vetoes strike an institutional and reputational
blow from which UA may likely never recover
? Cripples one of Alaska's most important tools
for economic growth and diversity just when we
need both.
? Impacts the ability of employers to hire
skilled graduates harming Alaska's economic
potential
? Every university and campus will be impacted,
and will likely result in the need to shutter
some community campuses outright
? Impacts every student and program in the state
and calls into question UA's ability to fulfill
its constitutional mission
? State's annual investment is critical allows
UA to go get the other 60 percent of its budget
? A $135 million UGF cut will actually create a
$200 million revenue hole when the impacts on all
non-state revenue sources are factored in: i.e.
enrollment declines, tuition and fee revenue
losses, research, federal and private giving
o UA estimates a related loss of $45 million (-
37 percent) in federal funds
Immediate Impacts
? Immediate hiring, travel and contract freeze
have been instituted
? 60 day furlough notices have already been
issued to university staff system wide
? Moody's placed UA ratings under review for
downgrade on July 2nd
o The review will focus on the Special
Session outcome and the magnitude of the
final budget reduction
? Board of Regents directed management to prepare
a declaration of Financial Exigency to be
considered at the emergency Board meeting next
Monday July 15th
? What is Financial Exigency?
o Rarely used procedure which permits the
rapid downsizing and/or discontinue of
units, programs, services, and personnel
o Permits unilateral decisions to reduce
salaries or modify terms of employment, to
include termination
o Permits the unprecedented removal of
tenured faculty (whose tenure normally
provides lifetime guarantee of employment)
? Financial Exigency is a drastic action, due to
the potential for creating severe reputational
harm with students, alumni, faculty, employers,
donors, and investors
If veto is not overturned?
? An additional 1,300-2,000 staff and faculty
will lose their jobs o UAA alone is estimating
the loss of 700 jobs and 40 degree programs o
2,000+ total loss, when direct and indirect
employment impacts are combined (ISER)
? According to ISER, UA direct losses alone, will
offset gains from other sector of Alaska's
economy
? Further consolidation of programs and academic
options across the system; reduce or discontinue
programs outside core
? Current students will see academic disruptions,
program closures and possible need to transfer to
other campuses within the UA System or
universities outside of Alaska
? Potential closure of some community campuses
o Community campuses receive significant
administrative and overhead support from
UAF, UAA and Statewide against which the
entire veto was levied
? Significant accreditation risk due to the speed
and urgency with which programs and campuses will
have to be reorganized
? University athletics possibly eliminated in
entirety
Continued increase in tuition and student fees
in the face of already declining enrollment -
making post-secondary education in Alaska less
accessible and affordable
o UA's fall 2019 semester shows a systemwide
(-5.9 percent) decline in applications
? UA Anchorage (-5.1 percent);
? UA Fairbanks (-8.1 percent);
? UA Southeast (-0.7 percent)
? Immediate damage to UA's standing as the
world's leading Arctic research institution
offering international expertise in physical,
biological and social sciences
o Leader in studying the changing Arctic -
impacts on our people, culture, environment
and economic livelihood
o Loss of faculty and graduate students, and
accompanying funding
o Diminishes success of receiving federal
grants agencies uncertain about UA's
future
? Impacts go far beyond Alaska's borders; UA's
world class research institutions like the
International Arctic Research Center (IARC), the
Institute of Arctic Biology (IAB), Institute of
Northern Engineering (INE) and Geophysical
Institute (GI) and are players on the world stage
addressing international scientific issues,
defense and homeland security
? May require merging or elimination of major
research institutes which are solving important
real-world problems and in many cases bringing
in significant third-party investment to our
state.
? Jeopardizes retention of major research assets
such R/V Sikuliaq and the Toolik Field Station
operated on behalf of the National Science
Foundation
Order of Magnitude Operating Amounts (UGF)
Current annual tuition revenue: $135 million
? Fairbanks campus total state operating: $126
million
? Anchorage campus total state operating: $104
million
? Facilities Maintenance: $45 million
? All community campuses: $36 million
? UAS total state operating: $21 million
? Statewide: $18 million
? UA athletics programs: $13 million
UA has already discontinued or suspended over 50
degree and certificate programs in the last four year:
Discontinued
? GC Clinical Social Work Practice (UAA)
? MS Applied Environmental Science and Technology
(UAA)
? MS Engineering Management (UAA)
? MS Science Management (UAA)
? AAS Computer Information and Office Systems
(UAA)
? PhD Clinical-Community Psychology (UAF)
? BA and BBA Economics (UAF)
? AAS Apprenticeship Technology (UAS)
? Certificate Automotive Technology (UAS)
? Assoc. of Business (UAS)
Suspended
? MS Arctic Engineering (UAA)
? OEC Sustainable Energy (UAA)
? AAS Small Business Administration (UAA)
? MS Resource Economics (UAF)
? BA and BS Sociology (UAF)
? BS General Science (UAF)
? BA Chemistry (UAF)
? Educational Technology (UAS)
? AAS Law Enforcement (UAS)
1:13:28 PM
Co-Chair Wilson thanked the University president for his
testimony. She queried the state and federal funding levels
from three years prior; the cost of tuition; and compare
those numbers to the current year.
President Johnsen agreed to provide that information. He
stated that the numbers had declined over that period of
time. He stated that he had the UGF numbers, but did not
have the DGF or other fund numbers.
Co-Chair Wilson wondered whether President Johnson had the
state funding numbers from three years prior and the
current funding.
President Johnsen replied that there was $378 million in
UGF in FY 14; $375 million in FY 15; $350 million in FY 16;
$325 million in FY 17; $317 million in FY 18; and $327
million in the current year.
Co-Chair Wilson encouraged him to provide the numbers to
the committee.
President Johnsen noted that the rate had increased, but
the revenue had declined along with enrollment.
Co-Chair Wilson asked whether scholarship recipients were
included in the numbers.
President Johnsen responded that they were included. He
clarified that a tuition dollar was a tuition dollar.
Representative Josephson asked if the actual cut was
because of the failure to exceed money for grants.
President Johnsen thought Representative Josephson was
correct.
1:17:53 PM
Representative Josephson wondered whether President Johnson
could wait until early August to give a last chance to
provide aide to the University.
President Johnsen replied that the University needed to
take action as soon as possible. He remarked that furlough
notices had been sent to 2500 staff members. He remarked
that the notice could be withdrawn, but there needed to be
action taken in the event of there being no options.
Representative Josephson surmised that the extreme scenario
that may be considered could not be shared with the
committee, because there was an attempt to not cause
further anxiety.
President Johnsen agreed. He explained that there was an
attempt to lead a critically important Alaskan institution,
which required the faculty, students, and staff to stay and
be positive. He furthered that they were the fiduciaries,
so it would be irresponsible to not plan for all
possibilities.
1:20:54 PM
MARISSA SHARRAH, PRESIDENT, FAIRBANKS CHAMBER OF COMMERCE,
FAIRBANKS (via teleconference), read from a prepared
statement:
My name is Marisa Sharrah and I'm the president and
CEO of the Greater Fairbanks Chamber of Commerce.
The Fairbanks Chamber is a business advocacy
organization that represents 700 businesses mostly in
the Interior but also scattered throughout Alaska.
The Fairbanks Chamber has advocated for a Long-Term
Fiscal Plan for Alaska for 6 straight years. We want
government to be more efficient and reduce spending.
We want policies that encourage resource development
and business friendly practices that communication
Alaska in "Open For Business". In 2017, we added
language to our legislative priority to call for an
appropriate and timely capital budget annually.
The Fairbanks Chamber also has a long history of
advocating for the University of Alaska. We
recognizing the Fairbanks campus is an integral part
of our community that produces highly trained talent
that our businesses rely on to fill jobs and remain
competitive and successful. UAF is a vibrant
university that is crucial not only for the training
of our community's workplace professionals, but also
the research and development endeavors necessary to
address our state's crucial challenges. I cannot
count the number of times I've listened to a
presentation or been in a conversation with one of our
business members where they've been talking about the
innovative work and research that their company has
partnered with the University of Alaska Fairbanks onto
tackle industry challenges that turn into economic
wins for their companies, our communities and the
state.
Back in February, when the Governor dropped the
revised budget, a sense of urgency started to grow
from across the business community here in Fairbanks.
Many businesses began to imagine what UAF might look
like after such a drastic cut to their budget. As
imagery of a smaller, less responsive, and less
productive University began to take shape, the ripple
effects that would be felt in our community could not
be ignored. UAF is known for producing our engineers,
accountants, scientists, bankers, medical
professionals, teachers, social workers, firefighters,
business professionals, construction managers,
paralegals, process technicians, early childhood
educators, pilots, biologists, counselors, artists,
conservationists, special education teachers, and
community leaders of all types. Jeopardizing UAF is
jeopardizing our future professionals and the future
of much our business.
The vetoes are staggering and are not at all in-line
with the Fairbanks Chamber's position that we need a
soft-landing approach. While it's true the Fairbanks
Chamber supports downward pressure on government
spending, we also realize that if these cuts aren't
methodical and strategic, we stand to lose more than
we gain. There is real concern that tremendous and
immediate job losses created by the vetoes will spur a
series of continued job losses induced by the slowdown
of our economy. There is also real concern of an
influx of people leaving Fairbanks and the state in
search of abundant opportunities in other parts of our
country. That would put our job market in distress.
These drastic cuts will create measurable negative
consequences for businesses.
We urge our legislature to keep Alaska Open for
business. We need and expect our legislature to work
collaboratively to find compromises that get Alaskans
a reasonable dividend, a balanced budget with
responsible cuts, and a capital budget that doesn't
leave hundreds of millions of dollars in federal match
money on the table. These vetoes need to be
overridden for the benefit of all Alaskans.
1:24:42 PM
LAURIE WOLF, PRESIDENT, FORAKER GROUP, ANCHORAGE (via
teleconference), provided information about the Foraker
Group and its mission. She talked about working in strong
partnership with the State of Alaska. She stressed that the
vetoes would have a broad and deep detrimental impact on
the people of Alaska. She stated that the non-profit sector
represented a wide variety of organizations that provided
public service. She remarked that every Alaskan family was
the beneficiary of a non-profit, because non-profits were
woven into the fabric of the communities. She shared that
non-profits played a critical role in the state's economy,
both as major employers and as revenue generators. She
stated that nationwide non-profits employed 10 percent of
the workforce, and made up an average 17 percent of all
employment in Alaska. She stated that over one-quarter of
the non-government employment in the state was tied to non-
profits in both indirect and direct effect. She stressed
that no industry in Alaska could prosper without the
strength of the non-profit sector. The non-profit sector
provided a return on investment by leveraging public and
private resources.
Co-Chair Foster indicated Representative Wool had joined
the meeting.
1:33:29 PM
DIANE KAPLAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
RASMUSON FOUNDATION, ANCHORAGE (via teleconference), gave a
brief background of the Rasmuson Foundation. She stressed
that the Rasmuson Foundation had never tried to impose its
agenda on the legislature or on any administration. She
stressed that there was always work to find common ground
and areas of alignment to work on together. She shared
that, currently there were many areas in which Rasmuson and
the state work in collaboration. She announced that in the
most recent years, both the state and Rasmuson Foundation
donors combined forces to generate $6 million for
renovations for every domestic violence shelter in the
state, for which they did a dollar for dollar match to the
state. She shared that, over the last several years,
Rasmuson Foundation had provided $5 million in matching
money to the Alaska Housing Finance Corporation (AHFC) in
grants for teacher, health professional, and public safety
housing; and the Senior Citizen Housing Development fund.
She shared that the Rasmuson Foundation was poised to give
another $5 million to AHFC for matching funds for all of
its programs, elderly funding, disability funding, public
safety, and health profession funding in January; but were
waiting for a signal from the administration for a desire
to continue the partnership with the Rasmuson Foundation.
She shared that the State Council on the Arts currently had
a budget of $1.6 million, and Rasmuson Foundation provided
one-third of that total, which was more that the state
contributed. She shared that she was surprised to find that
the Rasmuson dollars were also vetoed, which would result
no more arts in education. She stated that all of the
Rasmuson funding in the council was for education and
artists in schools. She shared that there was a partnership
with the state to work on reducing the harm caused by
alcohol. She stated that Rasmuson Foundation provided 100
percent of the start up costs for Pick.Click.Give, and it
has continued to operate without state financial support,
but with state cooperation generating approximately $3
million per year for non-profits. She shared that Rasmuson
had matched the state dollar for dollar for the Alaska
comprehensive health care blueprint transformation
initiative.
1:43:52 PM
Representative Josephson surmised that one-third of $1.6
million was from Rasmuson for the arts grant. He also noted
the testimony that asserted that, along with the veto of
the state's portion, the Rasmuson money was also vetoed. He
wondered whether the money was contingent on the state's
match.
Ms. Kaplan responded that he was correct.
Representative Josephson surmised that Rasmuson, no strings
attached, said that they would give one-third of $1.6
million, and the governor responded, "we don't want it."
Ms. Kaplan responded that the Rasmuson Foundation had not
had that conversation. She stated that there was a hope to
meet with the administration since December, so she did not
know the intention of that veto. She explained that the
programs were not created by the Rasmuson Foundation,
rather were programs created by the state where the
foundation added additional money for the served
communities operated by the State Arts Council.
Representative Josephson extrapolated that from Ms.
Kaplan's testimony about organizations such as Claire
House, there was an indication that some people would die
as a consequence of the descriptions. He surmised that some
people would not get the shelter and needed protections.
Ms. Kaplan indicated that no one wanted to be at Claire
House, because the residents only ended up there out of
desperation. She wondered where those people would go, if
they were told that they could only be there in limited
hours. She did not know the answer to the problem created
with the vetoes.
1:47:20 PM
STEVE LUNDGREN, MEMBER, ALASKA BANKER'S ASSOCIATION,
FAIRBANKS (via teleconference), read from a prepared
statement:
My name is Steve Lundgren, I'm president and CEO of
Denali State Bank in Fairbanks, Alaska.
I appreciate the opportunity to address you today on
behalf of the Alaska Bankers Association.
The Alaska Bankers Association represents all 7 banks
that have physical offices in Alaska.
Combined, we hold over $12 billion in deposits, and
employ more than 2,500 banking professionals across
127 branch offices statewide.
We compete head-to-head with each other for deposits,
loans, and customers, however we come together thru
the Alaska Bankers Association to monitor and weigh-in
on issues that impact the Alaska economy and our
banking industry as a whole.
We rally to support issues we believe are good for
Alaska, and we rally against issues we believe will
harm Alaska, Alaska residents, the Alaska economy, and
our customers.
We travel as an association to Juneau every year, and
we've met with many of you. Our primary speaking
point over the last several years is to advocate for a
stable budget climate and a long term fiscal plan, I
emphasize "long term", that includes withdrawals from
the permanent fund, and that results in in soft
landing for our economy.
My purpose for speaking to you today is to tell you
that all 7 banks in Alaska are aligned in our request
that the Legislature override the governors vetoes.
At our nature, we're fiscal conservatives and we
support right-sized government. We believe the
legislature has moved in this direction in recent
years, and we support the legislature's budget.
We believe that a "long term" plan that allows time to
absorb budget reductions with a planned approach is
better than an immediate budget shock to the state
that we believe will result in immediate and enduring
economic harm.
We're concerned about the extreme consequences to our
local and state economies if no action is taken to
override the governor's vetoes. The impact of these
vetoes to our university, public health system and
local communities is too much too soon. Fewer
employees and students means fewer residents and fewer
dollars circulating through our economy, and reduced
business activity. There will be downstream effects,
prolonging uncertainty and increasing risk, leading to
higher costs for Alaska's businesses and families and
a lower level of economic opportunity in the future.
Private capital investment needs a stable state budget
climate utilizing a combination of spending less, a
rules based framework for withdrawals from the
Permanent Fund, and securing new revenues.
We support a comprehensive, stable and sustainable
approach employing these options over a more measured
time frame to avoid erosion of our education and
public assistance institutions, and business and
consumer confidence.
Our future depends on our leaders reaching consensus
on a stable, sustainable budget solution amid wildly
diverse and passionate opinions. The legislature took
the bold step of reducing the budget by $190 million
in one year, an additional $379 million in vetoes goes
too far.
We have heard that private spending will migrate to
the state to offset the decrease in public spending.
We don't believe private spending will be available to
offset the loss of funding to the university and to
other programs either cut or lost through the vetoes.
Our member banks have many individual concerns that
may impact one bank differently than other banks,
however we all come together to support a full veto
override.
As an example, I'll share 2 individual concerns of my
bank.
Of our 77 employees, 21 have either graduated from or
have attended University of Alaska Fairbanks. The
budget vetoes put the future of UAF at risk. I don't
know where my bank will find the local educated talent
I need to run Denali State Bank without UAF. Many of
my bank business customers have the same concern.
Secondly, all banks have a significant investment
portfolio of many millions of dollars. Our portfolio
includes government bonds issued in Alaska, as does
all our member banks. I received this unsettling
communication Monday from one of our outside
investment advisors.
"Denali State Bank owns a University of Alaska Bond.
Last week, the governor vetoed $135mm in state funding
dollars due to the university for FY2020. This would
be a 41 percent YoY decrease in state funding and will
have an enormous impact on the university and will
lead to various downgrades if the state legislation
approves of this veto. Both S and P and Moody's have
already put the underlying rating on reviews for
downgrade. No precedent stands for a YoY funding cut
such as this, especially for a state's flagship
university. The only somewhat similar situation
happened in Illinois during their budget impasse, when
various colleges and community colleges experienced
multi-notch downgrades after their state funding
dollars were cut. We wouldn't be surprised to see the
University carrying a BBB rating if this is their new
normal."
So you can see that people are watching, and this is a
current example of the potential far reaching negative
impacts if the vetoes are not overridden.
In closing, I can't put into words how serious this is
and how important it is to override the governor's
veto package. Please vote for a full veto override.
Thank you for the opportunity to talk with you, and
I'm happy to respond to questions if you have any.
Co-Chair Foster asked testifiers to submit their prepared
statements to housefinance@akleg.gov.
1:55:29 PM
Vice-Chair Johnston felt that there was quite a bit of
economic activity going on in Fairbanks with mining and the
military bases. She wondered whether there was an increase
in capital investment in Fairbanks over the year.
Mr. Lundgren replied in the affirmative. He said that the
Banker's Association had experienced a soft and flat
economy in Alaska over recent years. He stated that
Fairbanks was a bright spot, because of the military base.
He shared that tourism was also experiencing a strong year.
He remarked that mining was looking favorable. He noted
increased activity on the North Slope, which was positive
for Fairbanks.
Vice-Chair Johnston wondered whether the budget would be
rewritten with smaller portfolio of loans, if the vetoes
were to remain.
Mr. Lundgren replied that he had concerns and the board
would be meeting to discuss its options. He suggested that
unless the vetoes were overridden, the bonds would be
impacted.
Vice-Chair Johnston asked if Mr. Lundgren had heard
anything regarding municipal bonds.
Mr. Lundgren responded that the rating agencies and
investment advisors were likely just finding out what was
happening in Alaska.
Vice-Chair Johnston wondered about breaking the Permanent
Fund unstructured draw. She wondered if it would affect the
banking industry.
Mr. Lundgren suspected that it would not have a full
negative impact.
Vice-Chair Johnston expressed her appreciation for Mr.
Lundgren's testimony.
2:00:43 PM
Co-Chair Wilson asked whether Alaska's bond rating would be
affected if the state kept having a deficit and filling its
deficit.
Mr. Lundgren suspected that the rating agencies would have
a problem.
Co-Chair Wilson asked if Mr. Lundgren was advocating a
step-down approach.
Mr. Lundgren indicated his organization would support a
step-down approach.
Representative LeBon asked if the Alaska Banking
Association had taken a position on a way to fill budget
gaps.
Mr. Lundgren responded that he supported a rules-based
approach in order to support state government.
Representative Josephson asked if Mr. Lundgren had stated
that Mr. Lundgren supports the operating budget as written.
Mr. Lundgren replied that the association supported the
budget approved by the legislature.
Representative Josephson surmised that the association
supported a budget without a deficit, with a $600 million
surplus.
Mr. Lundgren responded, "That's correct."
2:05:55 PM
JEFF TWAIT, ALASKA STATE HOMEBUILDING ASSOCIATION, KENAI
(via teleconference), read a letter submitted to members on
the prior day:
As I stated at the beginning of this letter, we met
last week as a legislative committee to discuss these
vetoes. For those that aren't familiar with our
association, we are a trade association made up of
builders, remodelers, suppliers, lending institutes,
title companies and other support businesses that
involve housing. We have 6 local associations from
across the state including, The Kenai Peninsula,
Anchorage, The Matsu Valley, Fairbanks, Juneau and
Ketchikan. Our legislative committee is made up of
members from each of these local associations. As you
can see we are made up of areas with diverse industry
that affects each local economy, so, to have met last
week and voted almost unanimously to weigh in opposing
these veto's is somewhat telling. Now that housing
isn't directly targeted in these cuts is also worth
noting. "you might ask why are we so opposed then
since we aren't a special interest group with a dog in
the direct fight and are typically thought of as a
more right leaning organization. I think that can be
summed up best this way. When we go out to DC or come
to Juneau to talk about housing issues we are neither
R's or D's or I's we are simply H's We are for
housing, for shelter for our friends and fellow
Alaskans. This economic recovery that we are starting
to realize in Alaska is at best fragile in its
beginning. Several things are needed to sustain a
recovery and yet one significant event can send it
back the other way or extend the bobbing along the
bottom. I will tout the housing industry as being the
best indicator as to economic recovery. Enticing new
people into the state can easily be broken down to a
few simple categories, ones I think we would all look
at if we were a business or a family looking to make a
move here. 1.) Job Opportunities, 2) The cost of
living, 3) Public Safety, 4) the quality of education,
and 5) the quality of health care. These deep cuts
will affect each of these categories negatively. The
governor has stated that the private sector will lead
the recovery after these cuts go into effect. I
believe what he isn't taking into account is one very
important factor that we all need to be cognizant of,
it is Consumer Confidence. Consumer confidence is a
very hard to quantify aspect of an economy, yet one
that our industry keeps its finger on the pulse of all
the time. People will buy groceries, clothes and
essential necessities without consumer confidence, but
they will not buy automobiles, remodel, buy or build a
house and probably not even keep up on the maintenance
of their properties if their confidence is not
present. I saw this first hand when the Governor
rolled out his proposed budget at the beginning of
this session when Wildwood Prison in Kenai was in the
crosshairs. The immediate reaction was one of panic
and fear by the people personally impacted followed by
tightening by those people that were looking to invest
in a new home or remodeling their existing house. As
it was stated in the earlier letter, every dollar
spent on housing is circulated into the local economy
7 times before that dollar leaves the area, those
dollars are spent on going out to dinner, going to a
movie, signing your child up for dance classes or
youth hockey. All things that stimulate a local
economy. And finally I hesitate to dip my toe in the
PFD water, and I do so from my own beliefs not
necessarily from the Builders Association. I feel
there are 2 types of people regarding the PFD, either
you want your dividend or you need it. For those that
truly need it, I believe they will feel more than
$1,400.00 in diminished services if they receive a
full dividend and services are cut. Now I am in almost
every way are right wing republican, but I am also
aware that services in in which the government is here
to provide must be funded. Can these services be
tasked with running more efficiently? Absolutely, and
they need to be. But this deficit wasn't created
overnight and the fix should not and cannot be done
overnight as well. You all have a heavy lift ahead of
you and appreciate the job you do for the good people
of this state. And I thank you for inviting the Alaska
State Homebuilding Association to testify today.
2:13:39 PM
Representative LeBon noted that homebuilders in Alaska were
in their construction season. He wondered how the potential
client list was viewing the future, with potential home
building starting in 2020.
Mr. Twait replied that the positive environment had been
withdrawn slightly. He shared that low interest rates had
propped up the environment, so there was still momentum. He
shared that Kenai was doing fairly well, but had talked to
some communities that were still struggling.
Representative LeBon wondered whether the number of homes
that were started on a spec-basis would go to near zero as
builders would not want to take the financial risk to build
a home in the hope that a builder would materialize in the
next six to nine months.
Mr. Twait Responded replied that there was minimal
speculative building in the state, especially in the
smaller communities.
Representative Knopp asked about members that were not in
agreement. He wondered what they thought about the
potential impacts. He asked the reasoning behind the non-
support of the letter.
Mr. Twiat responded that there was one vote that was not in
support of the letter, but felt that the reason was
probably due to location.
2:17:29 PM
BECKY HULTBERG, PRESIDENT, ALASKA STATE HOSPITAL AND
NURSING HOME ASSOCIATION, ANCHORAGE (via teleconference),
read from a prepared statement:
For the record, my name is Becky Hultberg. I am the
President/CEO of the Alaska State Hospital and Nursing
Home Association. I am also a lifelong Alaskan born in
Anchorage and raised in Kenai.
A recent letter to the editor in the Washington Post
written in response to Alaska's budget situation was
entitled "Memo to Alaskans: Things Cost Money. " It
went on to talk about how you can't expect to have
services without paying for them. I want to talk from
an economic and health care perspective about what it
will mean if we stop paying for these public "things
that cost money."
It's hard to have this conversation without addressing
the narrative that government spending is 'out of
control'. For context, in a March 24 presentation to
the Alaska council of school administrators,
Legislative Finance Director David Teal provided a
graphic showing that Alaska's per capita inflation-
adjusted spending today is at about the same level it
was in 1980. We are spending more in total today than
we were in 1980, because of inflation and because more
people live here. But on a per person, inflation-
adjusted basis we are spending about the same. In the
late 1970's, oil fields were coming online. It was a
new era for Alaska, but the boom years were still
ahead of us. Today, the boom is behind us, but we
still have good years ahead if we're smart. So what
can we learn from that chart? Can government be more
efficient? Yes. Can we manage costs better? Most
definitely. By historical standards, do we have an
out-of-control budget? Data simply does not support
that conclusion.
We've managed general fund cost growth in Medicaid
through collaboration with the Legislature, DHSS and
the provider community. From FY 2015 FY 2018,
general fund spending in Medicaid was relatively flat,
while we provided coverage for tens of thousands of
additional Alaskans. The Medicaid cost growth curve
also flattened. These are successes that the
governor's cuts put in jeopardy. Let's talk about a
few of those cuts.
First, the governor has cut an additional $50 million
in Medicaid general funds above the $70 million
reduced by the legislature. This does not account for
lost federal funds, which roughly doubles that amount.
DHSS presented a plan to the Legislature for
reductions of about $100 million, but much of that
plan is unattainable. There is no plan for the balance
of the reduction, except for vague promises of "CMS
waivers." First, the Medicaid program is in statute,
so benefits must be provided to eligible individuals.
Second, CMS does not have a magic wand to waive that
will allow the state to massively reduce costs without
significant changes to eligibility, utilization or
rates.
We don't know what the impacts of these cuts will be,
because there is no plan, but given the dollar amount,
they could be extreme. They will affect vulnerable
Alaskans, because children, the elderly and the
disabled are the populations driving Medicaid costs.
Yesterday, DHSS put out an RFP for an advisor to help
them achieve these cost savings. That makes it
apparent that they do not have a plan. Let me be very
clear, a cut of this magnitude without a plan or
analysis of the impact on people is the height of
irresponsibility. It is likely that Medicaid will need
a significant supplemental next year or that the
governor will make unwise and arbitrary administrative
reductions.
We are concerned about other cuts affecting the safety
net. First, cuts to homelessness assistance, while a
relatively small amount of money will have huge
impacts. According to Catholic Social Services, these
cuts will cause a 48 percent increase in homelessness
in Anchorage. Some people will lose access to
permanent housing, and shelter beds will close. An
increase in homelessness will also mean an increase in
crime and emergency department costs.
It is widely acknowledged that we already have
behavioral health system in crisis. Demand has
increased, while state services, such as capacity at
API, have decreased. As we work to improve the system
and transform care, cuts in behavioral health grants
will further strain a system already at the breaking
point. These, combined with other state administrative
reductions, will not only set back much of the good
work that has occurred, but will result in fewer
Alaskans getting treatment. The consequences?
Increases in substance abuse, homelessness and crime
as well as emergency departments at capacity.
Cuts to the university will also have consequences on
health care. Our industry relies on the university to
provide a trained workforce. Given the magnitude of
the budget reduction, it is hard to see how these
programs are held harmless. Health care is a labor-
intensive business. If staffing and recruitment costs
go up, health care costs for all will increase.
Finally, the elimination of adult preventive dental
demonstrates the governor's willingness to take a
penny-wise but pound-foolish approach. How does it
make sense to pay for dental care in the emergency
department, but not for preventive services?
For those who believe government is too big, there is
another path. You can believe in the need for budget
cuts AND believe that the governor's chosen methods
will wreak havoc on the state. If the goal is to
reduce costs strategically AND maintain a livable
place, responsible reductions are achievable on a
glidepath, giving organizations, the economy and
people time to adjust.
This body has endorsed that approach. The Legislature
has worked with stakeholders and industry to reduce
the size of state government, while helping our
economy emerge from a recession. I want to thank every
legislator sitting here today and some who are not in
the room. You have reduced the size of government
responsibly and thoughtfully, without destroying our
economy and the state we love. We can continue that
work together, with industry, stakeholders and
government working collectively for the good of the
state. Or we can choose the governor's blunt approach,
which will bring recession and pain. The governor's
vetoes put that choice in stark relief.
It's misleading to talk about these cuts in isolation,
as if they exist in silos. In fact, the complexity of
health care means that there are interacting and
compounding effects.
Our economy is like a pond. When you drop a large
boulder in a small pond, it creates a wave that
affects the entire shoreline. The ripple effects of
disruption will mark everything in their path. Those
who will believe their lives and their quality of life
will be unaffected by the governor's cuts are na?ve at
best. We are all impacted by homelessness and crime.
We all count on open emergency departments in our
community to provide lifesaving care. Businesses rely
on a functioning public infrastructure so that their
employees have access to health care, education and
livable communities. The governor's cuts put these
things, which we take for granted, in jeopardy.
I want to thank this body, other legislators and all
Alaskans who have weighed in during this critical
time. You have charted a responsible course. You have
reduced the state budget in a responsible way. This is
not a time for soundbites, but a time to reflect on
real impacts on people and on our community. This is
about our economy, our livelihoods, our communities
and the future of our state.
Thank you for your time and for the opportunity to
testify.
2:25:32 PM
Vice-Chair Johnston wondered whether the state was
responsible for the bill until there was a different
relationship established if a provider gave treatment to a
Medicaid patient.
Ms. Hultberg replied in the affirmative. She explained
that, in an environment where the department was reducing
the budget for the department, and the department runs out
of funding, the providers would still provide services and
the state must pay the bill. She explained that there would
be a situation where the state would need a supplemental
appropriation to enable the program to continue to pay
providers, or the state would stop paying providers. She
stressed that the money would still be owed.
Vice-Chair Johnston noted the billing program from a couple
of years prior. She wondered if the billing problem
affected the larger or smaller providers. She asked if any
provider business closed due to a lack of the state's
payments.
Ms. Hultberg replied that thought that there were providers
that had to shut their doors as a result of a lack of
prompt payment.
2:28:40 PM
JIM ROBERTS, SENIOR EXECUTIVE LIASON, ALASKA NATIVE TRIBAL
HEALTH CONSORTIUM, ANCHORAGE (via teleconference), read
from a prepared statement:
Members of the Committee, my name is Jim Roberts, I
serve as Senior Executive Liaison, in the
Intergovernmental Affairs Department for the Alaska
Native Tribal Health Consortium (ANTHC).
ANTHC and Southcentral Foundation co-manage the Alaska
Native Medical Center, the tertiary care hospital for
over 173,000 AN/AI people in Alaska. ANTHC also
provides a wide range of statewide public, community
and environmental health programs and services
throughout the state. ANTHC directly employs over
3,000 employees and contributes indirectly to the
employment of many other people throughout the health
and other economic sectors of our State.
It is important to note that Congress has established
a special statutory framework for the participation of
the Tribal health system in Medicaid. Congress
created a unique financing arrangement in Medicaid to
allow states to claim 100 percent Federal Medical
Assistance Percentage (FMAP) for services provided
through tribal facilities in recognition of the
federal government's obligation to fund tribal health
care.
The important point here is that Congress established
this framework to not burden the States with the cost
of health care delivered through the Tribal health
system. The result of this policy is that Medicaid
services delivered through the ATHS are budget neutral
to the State; and any type of Medicaid reductions will
have an adverse impact on tribal providers as Congress
intended Medicaid collections to supplement
appropriations provided to the Tribal health system.
After extensive legislative hearings, debate and
public input, the Legislature arrived at a painful
$70.2 million cut in Medicaid funding for FY 2020. We
are concerned that rather than working with the
Legislature to achieve additional cost savings, the
Governor has unilaterally cut the Medicaid program by
$50 million and eliminated Adult Dental. The
financial impact will be greater when the lost federal
matching funds are considered. The $50 million cut by
the Governor, on top of the $70 million reduction by
the Legislature, will have a harmful impact on the
ATHS and the rural communities we serve. These
reductions will result in less services being provided
by the ATHS and result in higher emergency room
utilization, more emergency travel being required, the
elimination of behavioral health services will result
in other costs presenting in law enforcement and court
costs.
Tribal health providers have utilized Medicaid
resources to increase the capacity to deliver care and
provide additional services previously available only
through non-tribal providers at reduced FMAP to the
State. This increased capacity to deliver care within
the tribal health system provides ongoing savings to
the State's general fund and will be diminished by the
current reductions.
In addition, the increased capacity provides savings
to the State for non-Native Medicaid beneficiaries
residing in rural areas where few non-tribal providers
are available, thereby decreasing costs associated
with travel and higher-acuity care that might result
due to the lack of locally-available care. This will
have a significant impact on the economy of our State.
It will result in less employment opportunities and it
will reduce the level of goods and services that ANTHC
purchases from the private sector when providing
health care. Important to note is that the
governor's $50 million veto does not come with any
type of implementation plan on how these reductions
would be achieved. It is irresponsible to put forward
such significant cuts without a plan or consideration
of the consequences of these reductions. A vote to
override the governor's vetoes does not signal
disagreement with the goal to provide an efficient and
cost-effective Medicaid program. On the contrary, a
vote to override the $50 million unallocated Medicaid
cut and elimination of adult preventive dental
services recognizes the rightful role of the
Legislature in the Medicaid program design and
structure, restoring its ability to continue working
toward sustainable and sensible program improvements.
On behalf of ANTHC, I strongly urge you to consider
the negative impact this will have on the health of
Alaskans and the overall economy of the State and
override the governor's Medicaid vetoes.
Mr. Roberts strongly urged members to override the
governor's vetoes regarding Medicaid funding.
2:34:03 PM
KEN HELANDER, ADVOCACY DIRECTOR, AARP, ANCHORAGE (via
teleconference), read from a prepared statement:
Thank you, Co-Chairs Wilson and Foster, and Vice Chair
Johnston, for inviting AARP to testify this afternoon
regarding the governor's vetoes. I am Ken Helander,
Advocacy Director for AARP Alaska, our state's largest
membership organization with 85,000 members over the
age of 50. Although we are concerned with all of the
governor's line item vetoes, I am focusing my remarks
on his zeroing out of funding for the Senior Benefits
Program.
The Senior Benefits Program was created in 2007 as
something of a reiteration of the old Longevity Bonus
Program that was completely phased out under Gov.
Murkowski. The old program paid a monthly cash
benefit to Alaskans 65 and older regardless of their
need for it. Senior Benefits came into being with the
recognition that though not all older Alaskans needed
this money, there are some who do. These are often
single or widowed older women who may have lost their
economic security caring for a dependent spouse or
child. Or it might have been a low wage worker who
never had a chance to save and whose Social Security
amount is very small. It also includes many who lived
and worked by subsistence, not building a retirement
savings or substantial Social Security.
In any case, these are older Alaskans who are
economically poor. How poor? Those who qualify for
the largest Senior Benefit amount ($250/mo) can have
no more (often less) than $949/month income! The
middle benefit amount is $175/mo for persons who have
incomes below the 100 percent Federal Poverty Level
($1265/mo), and for the current lowest benefit
($76/mo) the income limit is 175 percent FPL at no
more than $2214/mo. It is difficult to imagine living
on such an income in Alaska, especially when the
average Senior Beneficiary is 75 years old, likely has
chronic health problems and must regard every expense
as a choice between a necessity and a necessity.
When older Alaskans who qualify lose this income
supplement from the Senior Benefits program, it will
be gone and irreplaceable. They are not going to go
out and get a job or ask for a raise. They are not
going to ask for help from mom and dad. They will
simply have permanently lost a significant amount of
their monthly income, and therefore their financial
security. Unquestionably the loss of this income will
increase the risk of losing their independence and
hasten their move to a much costlier track of
dependent care.
The Senior Benefits Program is not a bricks and mortar
program for the state. In fact, it functions in much
the same way as the Permanent Fund Dividend, though on
a smaller scale. The monthly allowance from the state
goes directly to the senior beneficiary who then
spends it on necessary expenditures in this state.
They certainly are not going to fancy restaurants,
buying a smart TV or taking a trip to Hawaii. It is a
modest financial stimulus to Alaska's economy and can
rightly be regarded as a state investment rather than
an expense.
Being old and poor in Alaska is not a circumstance for
more insecurity. Yet, when Gov. Dunleavy announced
his line item vetoes on Friday, June 28th, he gave
only three days' notice to beneficiaries that they
should not expect any more checks.
This is the current notice on the state's DHSS
website: "July 1, 2019 - Under the FY 2020 budget
signed by Governor Dunleavy, the Alaska Senior
Benefits Payment Program will end July 1 and payments
for FY2020 will not occur. With the state facing the
challenge of aligning current state revenues with
state expenditures, this program is being eliminated
to contain costs and reduce dependence of individuals
on state funds. Repealing the Senior Benefits Payment
program will reduce the administrative and financial
burden on state resources."
Aside from the obvious disregard of proper notice that
some poor elders will immediately and permanently lose
up to 25 percent of their monthly income, this website
notice reiterates the governor's byline that it is to
"reduce dependence of individuals on state funds."
The individuals in question ARE dependent, not because
of state funds, but because age has a tendency to do
this to all who live long enough. Anyone who owns
stock and watches the exchanges or Dow Jones, seeing a
drop of 20-25 percent in the value of their portfolio
would be stunned and reeling, and would quickly set
about figuring out how to make this up. Low income
seniors who are dependent will never be less dependent
than they are today, and certainly not by abruptly
cutting off a crucial source of financial
security?.without notice.
The governor says it will be a wash because they will
get a larger PFD, and so it should not be a problem
for these low income, vulnerable older Alaskans.
However, there are some things to consider:
Being cut off from the monthly benefit as of
July 1, means these seniors must go through July,
August, September, perhaps part of October, before
they ever see any PFD money. While they live month to
month counting every penny, we apparently now expect
them to sustain the impact of losing up to $1000
before ever seeing a PFD.
Many forgo a PFD altogether, knowing it could
render them ineligible for other means-tested supports
they need, like many food assistance or heating
assistance programs.
Having this significant portion of monthly
income taken away can be seen as a penalty or tax
targeted specifically at the poorest and oldest of
Alaskans, a tax that is not levied on other Alaskans.
No one else is being asked or required to give up a
chunk of their income in order to receive a PFD. Why
penalize or tax these, our elders who have the least
to give up?
Repealing the SBP will "reduce administrative
and financial burden on state resources." When people
lose the ability to be independent in their homes and
community, the next step is increasing dependence on
state funds (Medicaid long term care) and/or family.
The dependency will not go away, and thus it will
increase administrative and financial burden, likely
on the state, but also on Alaskan families who will
have to take time off from or quit work, subsidize
finances, and perhaps have their own health and well-
being compromised as well.
The most any SBP beneficiary receives is
$250/month. If that beneficiary should lose their
independence and have to move out of their home and
into assisted living, the cost would be somewhere
between $4000-$9000/month. Skilled nursing care
(nursing home) costs close to $25,000/month in Alaska.
Most often this cost is assumed by the state Medicaid
program. No reduction of administrative and financial
burden here.
In all of this, there is an apparent contempt for the
oldest members of our community. Some call them "the
aged" or "the aging." But Governor Dunleavy is aging;
the OMB director is aging; commissioners are aging;
all the legislators are aging; Republicans and
Democrats and unaffiliated are all aging; liberals and
conservatives are all aging; people of every color and
gender are aging; children are aging; the wealthy and
the needy are aging; workers and business owners are
aging; neighbors and friends are aging; petroleum
workers and farmers are aging; doctors and mechanics
are aging. In fact, nobody is not aging. All of us,
every Alaskan, is aging just as fast as the other.
And someday that senior who could have sustained
themselves independently for a little longer with the
Senior Benefit income help, that person will be you or
me.
We should not turn our heads away from our elders. We
should not treat them as burdensome. We should look
beyond the dependencies and pay very close attention
to them. We should learn everything we possibly can
from them. We should take care of the old person
we're going to become.
Thank you for the opportunity to give comment today on
behalf of older Alaskans.
2:43:56 PM
Representative LeBon asked if AARP had taken a position on
the PFD.
Mr. Helander indicated that, because the PFD was very
Alaska-specific and AARP was a national organization, there
was no policy to address the program. He shared that it was
believed that taxes should be primarily progressive, and
levied equitably.
Representative LeBon asked if the organization had thought
about taking a position.
Mr. Helander responded that he did not think the
organization would take a position because of it being a
national organization. He reported that the organization
supported an income taxes and would likely support an
account such as the Permanent Fund.
Co-Chair Wilson asked if there was data that showed how
many seniors declined the PFD.
Mr. Helander responded that he did not have any numbers.
2:47:37 PM
MELANIE BAHNKE, PRESIDENT AND CEO, KAWERAK INC., NOME (via
teleconference), read from a prepared statement:
For the record, I am Melanie Bahnke, President and CEO
of Kawerak, Inc., the regional non-profit in the
Bering Strait Region.
Co-Chairs Representative Foster and Representative
Wilson, and Members of the House Finance Committee, I
want to express to you my appreciation to you for
allowing me to testify at this historic point in our
state's history. I also want to thank the legislature
for having developed a compromise budget and uniting
for Alaska. Unfortunately, the vetoes have had the
effect of dividing your body yet again. Ironically,
this issue of the vetoes has actually brought Alaskans
from all different kinds of walks of life together, as
we unite in an unprecedented way to call for the
legislature to override the vetoes.
By way of information, Kawerak employs over 200 people
in our region and we are a partner with the State in
providing services. We operate a Head Start program,
which serves over 220 children. The veto to the Head
Start budget will result of a loss of over half a
million dollars in funding for Kawerak. This funding
provides a match for our federal Head Start grant. It
brings in, for every State dollar that we use in our
Head Start program, 4 additional dollars from the
federal government. Our Village Public Safety Officer
Program is currently we have 3 applicants in the
process that we've been told to freeze the process of
hiring them. We do have 5 VPSOs employed, so this
means, in a region with 15 villages, that if we stay
at 5 VPSOs, two-thirds of our villages will have no
public safety. We also, among the other services that
we partner with the State for, we have a Child
Advocacy Center, where we provide services to children
who have been sexually abused, we provide family
services, we provide Adult Basic Education, and we
also put people who are on welfare to work. So we
have a big interest in these vetoes.
Indirect cuts that are not necessarily affecting
Kawerak but will affect our region's community members
are the closure of the Nome Youth Facility, which is a
detention center for youth have been incarcerated.
This facility is slated to close on July 14th if you
do not act to override the vetoes. The adult dental
Medicaid program is impacting people already. I heard
just the other day about a special needs adult who was
going to have his wisdom teeth removed who was told by
his provider that dental Medicaid is no longer an
option for that. The University of Alaska system cuts
we have currently 76 higher education scholarship
recipients in the University of Alaska system
statewide. 25 attend UAF, 20 attend UAA, 14 attend
the Northwest campus, 6 attend the University of
Alaska Southeast, and 11 are attending higher
education in the University of Alaska, Juneau. We are
making progress in terms of people from our region
seeking higher education and obtaining degrees and
becoming employable productive citizens for the state.
Our homeless shelter, the Nome Emergency Shelter Team
I heard, I believe it was a representative from
Anchorage who asked Diane Kaplan, "Will these vetoes
actually cause people to die?", and she wasn't able to
answer that directly. For our region, that's an
answer that I can provide. The answer is yes. We did
have people freezing on our streets, up until we were
able to open an emergency shelter, especially in the
winter time. It averages about 20-30 people, it's
only open during the winter when people are at their
most vulnerable and at risk of freezing to death. And
since the emergency shelter has opened, we have had
zero instances of people freezing to death on the
streets. I'm concerned that if their funding is cut,
we will see people dying, or maybe committing crimes
on purpose so that they can go to jail so that they
have a roof over their heads.
I could go on and on, but you've been presented with
the data. The data is out there. You've also been
presented with useful information. There have been
rallies. I think though, more than anything, what I
offer you is to encourage you to act, to let you know
that Alaskans are paying attention to what is going
on. I'm not sure what motivated each of you
individually to seek political office. I'm grateful
for your service. If it was to leave your mark in
history, that is happening now. This situation has
made national news. This moment, and this legislature
shall be remembered as historic as Alaska faces a fork
in the road. Budgets passed by various legislatures
don't go down in history as memorable. However, human
rights issues are always remembered. This is a human
rights issue. Segregation legislators were historic
too. When Alaska legislators considered the Civil
Rights law, which Elizabeth Peratrovich bravely
testified in favor of, the nay votes, are remembered.
This is a human rights issue and human rights issues
are always remembered. We are at a fork in the road
for our state. We must protect our most vulnerable
people. You need to override the Governor's vetoes.
When the Governor was in Nome, I was very hesitant to
speak up. I thought who am I to stand up to the
Governor? And yet, I did because I care about our
region and our State, and our people. You, of all
people, in this state, can use your voice too, and you
actually wield a much more powerful weapon than just a
voice, you have a vote. You can change the tide, or
you can go down in history as having stood by as
Alaska drowned. Be on the right side of history.
Override the vetoes. Thank you.
2:55:09 PM
NILS ANDREASSEN, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL
LEAGUE, JUNEAU, read from a prepared statement:
The Alaska Municipal League and Alaska Conference of
Mayors (ACoM) have been clear in our communications
throughout the legislative session the budget as
proposed by Governor Dunleavy and expressed most
recently in the form of vetoes is detrimental to
Alaska's local governments, residents and the economy.
In releasing his vetoes, the Governor referred to cuts
as a two-year process. The scale and scope of the
vetoes dismantles the good work that this body
undertook during the legislative session, and there's
more to come. AML participated actively through the
legislative process. It was your care and
consideration that mitigated the negative impacts to
communities, and your action now that is asked for.
We encourage your continued partnership with local
leaders in strengthening Alaska, and working on
solutions, together.
Local Government Activities
As we speak, it is local governments whose budgets
support first responders fighting forest fires on the
Kenai, in the Mat Su, and around Fairbanks. Local
government spending on law enforcement is $75 million
more than the entire budget of the State's Department
of Public Safety. Local governments provide 50 percent
of the State's education funding, as well as own and
maintain the majority of schools in the state. Local
governments maintain and operate Alaska's entire
coastal infrastructure system, ensuring ports and
harbors continue to support an active fishing industry
the largest private employer in the state. Local
governments operate 37 public power utilities, a
handful of hospitals, and 47 public libraries. Local
governments are busy in road construction and
maintenance during these summer months, responsible
for more than 5,500 road miles, about equal to DOT's
responsibilities. Local governments in Alaska provide
these services to an area of 252,000 square miles,
100,000 more than State land ownership.
It is worth understanding the roles and
responsibilities of local governments not just because
they are significant, and in many ways are fulfilling
State obligations, but because reductions in State
support force trade-offs at the local level that
potentially negatively impact each of these services.
When the State cost-shifts to local governments,
decision-making centers on reallocating already scant
resources between competing priorities debt
obligations, especially, compete directly with
education and public safety, or insurance for that
matter.
Municipal budgets were finalized more than a month
ago. Budgets were negotiated at the local level
between taxpayers and their assembly or council. Tax
rates were set based on those discussions, to ensure
revenue commensurate with local needs, taking into
account the assumption that the Legislature's work on
the budget would stand. A pre-veto polling of
municipalities indicated the majority were keeping tax
rates stable, consistent with taxpayer interests.
These factors enter into municipal conversations with
credit rating agencies, as well, which are now
affected by the Governor's vetoes.
For those local governments with property taxes, mill
rates are set annually. The opportunity to change the
mill rate will be next year, at which point residents
could potentially see two years' worth of increases,
if these vetoes stand and the State continues its
divestment of obligations. For those without a
property tax, new or increased taxes could take
anywhere from 3 to 9 months to be proposed and pass
through local processes. And there are some local
governments whose revenue is in place through PILT
agreements with resource development companies, and
these can't just be renegotiated.
The circumstance of every local government is
different. For some, in the short term they can make
do. For all, the long-term consequences of vetoes and
continued budget cuts will negatively impact their
capacity to deliver essential public services,
increase quality of life for residents, and fulfill
their responsibilities as political subdivisions of
the State.
Direct Impacts to Local Governments
The total direct budgetary impact to local governments
is approximately $55,647,565, mainly from School Bond
Debt Reimbursement but also including
OWL Broadband
Municipal Capital Project Reimbursement
Local Emergency Planning Committee
Human Services Community Matching Grants
Additionally, the veto of $30 million in Community
Assistance Fund recapitalization will directly impact
local governments in the years to come.
A 50 percent reduction to school bond debt
reimbursement breaks the State's promise to
communities; roughly speaking it means that local
governments will pick up the majority of school
construction costs in support of the State's
Constitutional obligation. Similarly, vetoing the debt
reimbursement for municipal capital projects that
improved ports and harbors across Alaska will
negatively impact those communities and the fishing
industry. Some local governments will be better able
to manage this than others, but cost-shifting will be
directly felt by local taxpayers.
AML is concerned that the Governor chose to veto
capitalizing the Community Assistance Fund, which
essentially reduces Community Assistance in FY21 by a
third. This, coming off reductions just a few years
back of 50 percent, presents an undue burden on local
governments. The long-term viability of many smaller
local governments will be at risk we know that local
taxes increase when Community Assistance is decreased.
This program has seen not only significant reductions
over the years from $140 million in 1985 to its
current $30 million but also not kept pace with
inflation. Many of those receiving Community
Assistance are truly dependent on this dwindling
revenue to perform the duties required of them by the
State.
Economic Impacts
To make up for the reduction to school bond debt
reimbursement, this will mean as much as 15 percent of
some local governments' annual tax revenue. While you
may have seen media reports of increases in
residential property, commercial property tax
increases threaten a company's bottom line.
This Governor's veto of school bond debt reimbursement
increases Fairbanks property taxes on Alyeska
Pipeline, Fort Knox, Doyon Utilities, ACS, Petro Star,
GCI, and Flint Hills among the top 10 by more than
$900,000.
In Anchorage, the Governor's veto of school bond debt
reimbursement will increase property taxes for the
largest property-owners including GCI, ACS, Alaska
Regional, Providence, Fred Meyer, Enstar, Hickel
Investment, Alaska Airlines, BP, Dimond Center, and JL
Properties by more than $1,000,000.
Businesses depend on a local government's ability to
provide infrastructure maintenance and upgrades, and
stable fees.
Businesses depend on a local government's ability to
support and sustain schools where the families of
employees can learn and grow. Similarly, those
employees evaluate the quality of life in a community
to determine how a locality fits into their long-term
commitment to a company.
Finally, businesses depend on a local government's
fiscal health. In 2017, local government budgets
planned for $2.5 billion in expenditures, which
further enhanced local economic activity.
Impacts to Partners
Vetoes of this scope and scale very definitely have
the potential to disrupt the lives and livelihoods of
community residents, the business decisions of
investors, and the capacity of our local governments
to support those organizational partners who depend on
State funding.
We're struck by the intersection of so many of these
vetoes with Article 7 of the Constitution public
education, the university, public health, and public
welfare. These are Constitutional obligations of the
State that provide the fundamental building blocks of
a resilient society and a successful economy.
The outcry from those impacted is warranted. From the
nonprofit sector, local governments recognize the
importance of community partners, many of whom
collaborate with a borough or city to provide services
that would otherwise be borne by the State or local
government. Again, vetoes were justified with the hope
that the philanthropic and nonprofit sector would
simply "pick up" the State's responsibilities. At the
local level, we know that this sector is one built on
collaboration and partnership, and that the capacity
of these partners depends on the ability to leverage
federal, state and local funds.
While the direct impact to municipalities may be only
$55 million, the indirect impact is much greater.
Local governments and their partners depend on the
State providing many of the services that were just
cut. As political subdivisions, the interconnectedness
and interdependence between state and local governance
is of critical importance. We have heard from members
who are especially concerned about the loss of public
media, housing and public assistance, Medicaid, early
education and VPSO funding.
AML members with University campuses are concerned
about vetoes to that institution. University campuses
across the state are often the center of the
community, and the veto of 40 percent of State aid
threatens quality of life, workforce development, and
the opportunity for residents to pursue career
pathways. Alaska's University system reflects its
communities' interests and priorities, is responsive
to economic development, and is one of the basic
investments necessary in today's globally competitive
environment.
Closing
I don't have time to comment on each of the vetoes,
but I also know how familiar you are with the
priorities you included in the budget. AML was pleased
to be included in your deliberations earlier in the
year, and we hope to continue this partnership by
contributing our understanding of municipal impacts to
your decision-making. The Governor has said that this
is a multi-year process.
AML stands ready to work with the Legislature in the
years to come in support of the State's Constitutional
and statutory obligations, and in the best interests
of Alaska's local governments, residents and
businesses. We stand ready to collaborate on
solutions, including a step-down approach. And we
stand ready to work with you on a fiscal policy that
goes beyond cuts, and focuses on revenues that match
the needs and goals of Alaskans.
Co-Chair Wilson asked if none of the communities had
changed their mil rate in anticipation of the governor's
budget.
Mr. Andreassen responded that some communities had changed
their mil rates.
Co-Chair Wilson indicated that Fairbanks had increased its
mil rate by 1.5 mills.
Representative Josephson commented that he took the co-
chair's point, and he thought it pitted the communities
against each other. He was deeply concerned about it.
3:07:53 PM
DAVE LANDIS, MAYOR, KETCHIKAN GATEWAY BOROUGH, KENAI (via
teleconference), read from a prepared statement:
Good afternoon Mr. Chairman and members of the
committee. My name is David Landis, Mayor of the
Ketchikan Gateway Borough, the largest municipality in
District 36.
As you've heard from others this afternoon, there are
wide-ranging impacts from these vetoes, if they stand,
and they would deeply affect all Alaskans no matter
what their party or political philosophies, and no
matter whether they realize it yet are not. I won't
repeat all of what has been said by those before me as
it applies to our municipality but will note that we
have a large University of Alaska footprint here, we
have an ever-increasing Medicaid eligible population,
and our population receiving senior benefits is also
growing. Like Mr. Andreassen before me, I would
emphasize that in large part these vetoes are simply
cost shifts to municipalities around the state, and
that they also disproportionately impact programs that
bring additional revenue, economic activity and jobs
to the state. Why on earth would programs that bring
in multiple times the amount of funding from non-state
sources be targeted ?
Moving to specific impacts to the Ketchikan Gateway
Borough, the broken promise of state partnership in
school bond debt reimbursement hits us the hardest.
This is close to a $1.2 million hit to the taxpayers
of this community, and again this is NOT A CUT! It's a
cost shift to this community. Fortunately, this year,
the entire program was not eliminated but we expect
that this will happen in future years unless something
is done to protect it. This community has also been
responsible enough where this shift won't break us
this year. But in future years can we count on these
promises being kept? The fact is that education is
squarely named in the constitution as a State
responsibility, and it can't be carried out without
functioning facilities. The Borough has been
responsible in planning on projects such as the needed
replacement of a school roof and another school which
needs mechanical work. These are in the CIP pipeline
now, but now we can't do those projects without
drastic revisions of some type. Please remember that
other communities in Alaska will be hurt far worse
than Ketchikan will be with this particular veto.
The elimination of community assistance, or revenue
sharing, will also be a substantial blow to this
community but make no mistake, in smaller communities
it will be absolutely devastating, and functioning
municipal governments will cease to exist.
I'll be honest - I've had serious discussions with
citizens here who have raised the issue of dissolving
the Borough so that the State can't keep pushing more
responsibilities down to local taxpayers and
residents. I feel that there's a tipping point that
we're rapidly approaching where
Alaska residents will make a calculation whether their
quality of life in terms of health, education,
welfare, the arts, senior benefits, public radio,
management of fish and game, the Marine Highway, and
many other basic services are degraded to the point of
them leaving the state for good. These are the
questions that I'm hearing from our local residents.
Quite frankly, I don't know how to answer them. Do
you? Please override these vetoes in their entirety.
You, the legislature, did the hard work of
appropriating, and your work should stand.
Thank you again to the committee for your time and
attention. If you have any questions, I would be happy
to answer.
Co-Chair Foster asked for more detail about community
assistance. He inquired about community assistance and the
overrides devastating certain smaller communities. He asked
Mr. Landis to comment.
Mr. Landis responded that the smaller communities were
charged with compliance which thy might opt to not comply
in the future.
Co-Chair Foster asked testifiers to support their written
testimonies.
3:14:38 PM
BENJAMIN MALLOTT, VICE PRESIDENT, ALASKA FEDERATION OF
NATIVES, ANCHORAGE (via teleconference), read from a
prepared statement. He stated that his organization was to
enhance the Native community.
Co-Chair Foster thanked all of the testifiers for their
participation. He indicated that the next meeting was t
1:00 PM the following day.
ADJOURNMENT
3:18:21 PM
The meeting was adjourned at 3:18 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2019 07 09 - Impact of UA Budget Vetoes.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Impact of Veto Overrides |
| 7.09.19 Veto Impacts FBX Chamber of Com. Testimony.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| Response HFIN UA Tuition Revenue HFIN Response wAttachments.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| AML N Andreassen Veto Impact Testimony7.9.19.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| ANTHC Veto Impact testimony 7-9-2019.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| ASHBA J Twait Veto Impacts testimony20190707_0001.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| ASHBA letr to Gov20190707_0001.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| ASHNA Testimony - HF July 9.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| Ken Helander Testimony --AARPVeto Impacts.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| Lundgren Veto Impacts Alaska Banker AssociationTestimony July 9 2019.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| Testimony David Landis. Ketchikan Mayor 09JUL2019.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |
| FBX Chamber Veto Impact letter.pdf |
HFIN 7/9/2019 1:00:00 PM |
HFIN Veto Impacts |