Legislature(2019 - 2020)Anch LIO Lg Conf Rm
04/24/2020 10:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Coronavirus Aid, Relief, and Economic Security Act | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
ANCHORAGE LIO
April 24, 2020
10:00 a.m.
10:00:39 AM
[Note: meeting took place in the Anchorage LIO and was
recorded from Juneau.]
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 10:00 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Jennifer Johnston, Co-Chair
Representative Dan Ortiz, Vice-Chair (via teleconference)
Representative Ben Carpenter (via teleconference)
Representative Andy Josephson (via teleconference)
Representative Gary Knopp (via teleconference)
Representative Bart LeBon (via teleconference)
Representative Kelly Merrick (via teleconference)
Representative Colleen Sullivan-Leonard(via teleconference)
Representative Cathy Tilton (via teleconference)
Representative Adam Wool (via teleconference)
MEMBERS ABSENT
None
PRESENT VIA TELECONFERENCE
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor; Alesia Kruckenberg, Director of
Planning and Budget, Office of Strategy, Planning, and
Budget, University of Alaska; Representative Bryce Edgmon;
Senator Donny Olson; Representative Sharon Jackson.
SUMMARY
PRESENTATION: CORONAVIRUS AID, RELIEF, and ECONOMIC
SECURITY ACT
Co-Chair Foster reviewed the meeting agenda. He recognized
Senator Donny Olson in the audience. He asked members to
hold their questions until the presentation concluded.
^PRESENTATION: CORONAVIRUS AID, RELIEF, and ECONOMIC
SECURITY ACT
10:03:05 AM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR (via teleconference), shared his
intention to review the governor's plan as laid out in the
Revised Program Legislative [RPL] package the Office of
Management and Budget (OMB) had submitted earlier in the
week.
Co-Chair Foster asked Mr. Steininger where the document was
located online.
Mr. Steininger replied that the PowerPoint presentation
should be available on the legislature's website. The
package was also available on the governor's website, which
listed all of the revised programs sent forward to the
Legislative Budget and Audit (LB&A) Committee earlier in
the week.
Co-Chair Johnston added that the PowerPoint was located on
the legislature's website under the House Finance Committee
agenda for the day.
10:04:23 AM
Mr. Steininger began on slide 2 of the PowerPoint
presentation titled "Office of Management and Budget: House
Finance Committee: Coronavirus Aid, Relief, and Economic
Security Act," dated April 24, 2020 (copy on file). He
relayed that there was a variety of federal legislation
related to the COVID-19 response mitigation. The
presentation focused primarily on items under the
Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Additionally, there were two other pieces of legislation
that provided other areas of support that did not
necessarily run through the state's budget, but provided
support out to communities and individuals to address more
healthcare and medical related response mitigation. The
presentation would focus on relief of some of the second
order effects and impacts of the COVID-19 outbreak.
Mr. Steininger moved to slide 3 to provide a high level
summary of the CARES Act funding. The largest portion of
funding coming to the state from the CARES Act was coming
via the COVID-19 Relief Fund (CRF) in the amount of $1.25
billion. He noted the $1.25 billion was the minimum
allocation going out to states. The federal Treasury had
issued additional guidance on April 22 regarding how the
funds could be spent. He detailed that the guidance listed
six broad categories of expenditures designed to address
costs occurring between March 1, 2020 and December 30,
2020. He explained the funds pertained to expenditures that
were already being incurred and would continue to be
incurred through the duration of the crisis by
municipalities, businesses, and the state government.
Mr. Steininger reviewed the six categories included in the
federal Treasury guidance. The first was medical costs,
which included costs related to the provision of medical
services, expenses at public hospitals, testing, and other.
The second category was public health including the expense
of quarantining individuals, making public areas safe for
people, and other. The third category was payroll expenses
for some individuals performing the work needed to mitigate
and respond to the public health emergency. The fourth
category related to compliance with health measures. He
detailed that many of the public health measures released
by the governor in recent weeks carried a cost for
compliance. The CARES Act funding provided the ability to
cover costs that were incurred as a result of the mandates.
Mr. Steininger detailed that the fifth category was
economic support to cover economic impacts of the mandates
on small businesses. The sixth category pertained to
expenditures necessary for the function of government
related to COVID-19. He reiterated that the funding covered
March 1, 2020 to December 30, 2020. The CARES Act included
other non-CRS funding of approximately $281 million. The
funding had gone to direct allocations to very specific
impacts. For example, it included money coming to
educational institutions and airport and transportation
infrastructure. The CRS covered areas that were not
specifically enumerated elsewhere in the bill and gave
broad ability and discretion for states and municipal
governments to work through the impacts of the COVID-19
crisis.
10:09:53 AM
Mr. Steininger turned to a table showing CARES Act federal
funding by agency. The table showed where CRF allocations
and CARES Act direct grants fell in the state's budget. The
table included an RPL column to show which portions of the
CARES Act they were associated with. He explained that the
rows without RPL numbers reflected areas with adequate
authority in the state budget to accept the incoming
federal revenues. He elaborated that some of the bills
passed during session had given authority to the Department
of Health and Social Services (DHSS) to receive and
distribute money related to impacts of the CARES Act.
Additionally, there was also authority within the
Department of Commerce, Community and Economic Development
(DCCED) related to community development block grants. He
would address the items individually in later slides.
10:11:34 AM
Mr. Steininger moved to slide 5 showing an RPL related to
direct municipal relief. He explained that the CARES Act
allocated 45 percent of a state's CRF money directly to
municipalities exceeding 500,000 residents. The allocation
did not apply to Alaska because it did not have a city
exceeding 500,000 residents; however, the administration
was using the guidance to distribute 45 percent into
municipalities because municipalities and the smaller
political subdivisions were closer to the response
activities. He elaborated that the municipalities were able
to understand where the money needed to be allocated to
ensure the maximum benefit, mitigation, and response.
Mr. Steininger shared that the administration believed it
was important to ensure the money was going to
organizations best fit to respond to the crisis. When the
administration had looked at how to allocate the money
fairly and provide adequate resources to communities, it
had considered numerous points of data to help guide its
allocation decisions. The administration had looked through
different data sets and things the state had in order to
develop a calculation that quantified the economic activity
and size and scope of government in communities. They had
considered areas like retail, hospitality, tourism,
regional commercial fishing, and other measures of commerce
activity in order to distribute the money. The calculation
was also based on population. He detailed that the existing
Community Assistance Program was successful in distributing
money based on population. The administration had applied
approximately half of the distribution through the
Community Assistance Program. Additionally, the
administration had used metrics within DCCED regarding
retail, hospitality, commercial fishing, and other economic
activity and had applied a 75 percent factor.
Mr. Steininger reported that the administration had elected
to do three quarterly payments instead of one lump sum
payment. The first payment was targeted for May 1. The
payment would be the population based metric combined with
one-third of the economic activity metric. The second and
third payments would each be one-third of the economic
activity metric. He highlighted the calculation shown on
slide 5. He added that the by-community distribution was
available within the RPL package.
10:15:42 AM
Mr. Steininger communicated that the administration wanted
municipalities to report back monthly on how they were
spending the money. He explained that the federal guidance
applied to communities receiving the money - all recipients
had to ensure their expenditures fit within the federal
guidance. The administration wanted communities to have the
discretion to spend the money as they saw fit, but within
the guidance from the federal government. He elaborated
that the reports would go to OMB and could be made
available to the legislature and interested parties.
Representative Sullivan-Leonard considered the three
quarterly payments of the economic stimulus grants. She
asked if there had been discussion about asking for
quarterly reports instead of monthly reports in order to
ascertain how communities were using the funds.
Mr. Steininger replied that they had chosen to do monthly
reporting to get a quicker idea of how the funds were being
spent by municipalities and gauge the effectiveness of the
response activity. He explained that the administration was
still working to determine the best reporting mechanism. He
detailed that every municipality had a slightly different
accounting system and way of recording expenditures;
therefore, the administration needed to ensure the reports
could be provided by all municipalities.
10:18:39 AM
Representative Sullivan-Leonard asked about the parameters
on how municipalities could spend the money.
Mr. Steininger answered that municipalities should consult
the federal guidance. He detailed that the administration
was also looking at the federal guidance and was working
with its federal partners to better understand it as there
were questions about whether specific costs fit. He shared
that municipalities all had questions and the
administration was answering as best it could as quickly as
possible. The administration was available as a resource to
municipalities as they tried to determine which category
expenditures fit under. He noted it was a team effort
requiring everyone involved to answer questions as they
arose. He stated the administration was hoping to help the
municipalities with questions in order to ensure their
spending met federal guidance.
Co-Chair Foster recognized Representative Sharon Jackson in
the audience.
Vice-Chair Ortiz looked at the "Payment 1" calculation on
slide 5: .25 x Economic Activity Metrics + Community
Assistance. He asked for detail on what economic activity
metrics meant or the inputs used to determine what the
metrics were all about.
Mr. Steininger responded that OMB had looked through its
data that quantified the amount of economic activity in any
given municipality as well as the government's involvement
in the activity (the scope and scale of a local municipal
government). He relayed that DCCED had substantial data
activity in retail, hospitality, tourism, and commercial
fishing. He explained there were metrics that quantified
all of the activities; therefore, OMB had applied a 75
percent factor to the metrics. He detailed that the .25
represented one-third of the 75 percent. He clarified he
was talking about one-third of 75 percent of the total,
which resulted in .25 instead of .33. The number had been
applied to the metrics DCCED collected on an annual basis.
10:22:13 AM
Vice-Chair Ortiz asked if the department had economic
activity data from all of the different communities that
would be receiving the money.
Mr. Steininger answered that when looking at the list of
communities it was possible to see that some had values
within the three other economic activity metrics columns.
He stated they were somewhat variable; however, it was
representative of every community collecting and providing
data to DCCED that also used the economic activities as a
means to support their local municipal government. There
was an element of size of government within the community
that was inherent in the data used by OMB. He elaborated
that some municipalities may have a lower level involvement
in the community and the government involvement may come
from a different political subdivision that may sit above
the community. He explained that they wanted to ensure the
distribution went to the political subdivision most
involved in the activity within a community.
Vice-Chair Ortiz was concerned about having the accurate
information to make the distribution calculation. He wanted
the distribution to be as fair as possible. He shared that
he may have a follow up question about the slide later on.
10:24:50 AM
Co-Chair Johnston thanked Mr. Steininger for the
presentation, which she found very helpful. She considered
the three [quarterly payment] tranches. She appreciated
that OMB was asking for monthly reports because she had
been reviewing the federal guidelines and found them to be
unclear at times. She remarked on the importance of taking
caution because misappropriated funds would have to be paid
back. She asked if OMB would review the monthly reports and
only release the second tranche after 80 percent of the
funds from the first tranche were spent. She wondered if
there was a formula in terms of releasing the second and
third fund tranches.
Mr. Steininger answered that the plan was to send tranches
out regardless of the expenditures made from the prior
tranche. He explained that the reporting requirement was to
help the administration know how the funds were being
spent. He informed the committee that the April 22 federal
guidance made it clear that unspent monies would be
returned to the Treasury. The administration intended to
distribute the three tranches of money on a quarterly
basis. The administration anticipated that COVID-19 impacts
were significant; therefore, it was not concerned about a
lack of spending by communities. The concern was more about
ensuring that funding reached communities in an expeditious
and reliable way in order to allow communities to plan
ahead and not make expenditures without any certainty of
being reimbursed.
10:27:29 AM
Representative LeBon believed the economic activity
variable in the formula seemed to be very subjective. He
pointed out that the Fairbanks North Star Borough had been
allocated $450 per person and was located at the bottom of
the list of the bigger communities, while Kenai was
allocated $1,150 per person and Mat-Su was allocated over
$600 per person. He pointed out that the economic impact of
the crisis was occurring statewide and found it difficult
to believe that Fairbanks was not worthy of receiving more
support than $450 per person. He had a problem with the
subjectivity of the economic activity variable. He
suggested that a separate presentation may be needed to go
into depth on the economic activity formula. He did not
know how it worked and wanted to understand it better. He
was unhappy about a $450 per person allocation for the
Fairbanks area.
Mr. Steininger responded that the cost of providing
government services throughout the state was highly
variable on a per capita basis. For example, some rural
areas were more expensive to provide services to than
others. The data used by the administration accounted for
geographic variability and included the political
subdivision involvement in activity within communities. He
explained it was the reason for some of the disparity [in
funds] between communities. He explained that the
administration had tried to use a calculation that was as
objective as possible with the data available to the state.
There was some limitation around the data available to the
state. The goal was to make a distribution in order for
communities to have some certainty as soon as possible in
the amount of relief coming their way in order to allow
them to plan mitigation efforts. The factors included the
data available to the state and adjusting for factors
surrounding economic activity and the size of government in
each community.
10:31:36 AM
Representative LeBon stated that the answer did not address
his concerns. He believed the most impactful part of the
allocation formula should be population. He speculated that
if all of the communities in the state were asked to
address their economic impact, there would be no question
that all communities were severely economically impacted.
He stated that splitting hairs on the economic impact
portion of the formula was a disservice. He wanted the
formula to be readdressed with population used as the
dominant factor. He expressed disbelief that Fairbanks
would be so far down on the list if a true economic impact
analysis were conducted.
Representative Wool remarked that it sounded like half of
the money allocated to municipalities would be determined
by the community assistance formula and the other half
would be determined by the economic metric. He explained
that the community assistance formula gave different flat
amounts to boroughs, cities, unorganized boroughs, and
outside unorganized boroughs. He was assuming the
administration's calculation followed the existing
community assistance formulas. He stated that the remainder
with the community assistance was divvied up per capita
throughout the whole state. Under the scenario, the larger
areas received more money because they had more people, and
the smaller areas may receive more based on their
organizing entity. He assumed the administration's formula
was similar. He stated his understanding that the other
half of the money would be divided into three payments of
25 percent each. He wondered about the remaining 25
percent.
Representative Wool asked if there was a formula for the
economic metrics like there was for community assistance.
If so, he asked if the administration could provide the
formula. He asked if unorganized areas also received
economic metrics.
Mr. Steininger confirmed that the existing community
assistance program formula had been used in the
administration's formula. He noted that the only difference
was that the funding level was much higher than was
typically distributed by the community assistance program.
The portion beyond the community assistance base amount was
primarily based on population. He explained that roughly
half of the CRF distribution was based on population. He
shared that OMB could individually walk people through the
DCCED economic activity data to help committee members
understand it better. He furthered that it was objective
data collected from any political subdivision providing it
to DCCED. He elaborated that any place where economic
activity metrics impact a municipality's ability to provide
government services to its population was collected by
DCCED. The data touched on most but not all of the state's
communities, which was the reason the population
distribution for the other half [of the funding] was so
important.
Mr. Steininger addressed Representative Wool's question
about the three payments of .25 not adding up to 100
percent. He explained that OMB tried to divide the
allocation of funds in half by population and economic
activity. He elaborated that 75 percent of the absolute
value of the metrics equaled about half of the CRF. He
detailed that it resulted in a fairly even split and
weighting between population and economic activity (based
on some level of political subdivision size).
10:37:36 AM
Representative Wool estimated that if .25 of economic
activity equaled roughly half of the $560 million grant,
approximately $280 million would go out under the community
assistance formula. He asked if all of the political
organized entities would receive an amount equal to their
per capita. For example, he believed areas inside an
unorganized borough received 1/19th of the amount received
by a full borough and areas outside an unorganized borough
received 1/12th of the amount. He believed Mr. Steininger
had stated that a community would not get the economic
activity portion if they did not submit economic activity
information. He asked if the communities would receive a
per capita portion, similar to the community assistance
formula.
Mr. Steininger answered in the affirmative. He detailed
that any political subdivision that was part of the most
recent community assistance program distribution was also
part of the distribution [shown on slide 5]. He clarified
that the 75 percent was roughly half of the distribution.
He explained that $305 million of the $562.5 million would
go out based on the economic activity metrics and the
remaining $257.5 million would go out based on the
community assistance formula. He reiterated his earlier
explanation that 75 percent of the absolute value of the
metrics equaled roughly half or $305 million.
Representative Wool would be interested in seeing the
economic formula calculations used by the administration.
10:40:07 AM
Vice-Chair Ortiz asked why Juneau would qualify for 10
times more than Fairbanks under the inputs and formula used
by OMB. He asked why North Slope would receive nothing. He
asked if the methodology used to create the formula could
be shared with committee members.
Mr. Steininger answered that the administration was working
on a distribution that would be as objective as possible.
He noted that with the information available to the state,
nothing would be perfect. He stated that the amount of
effort it would take to get a perfect distribution would be
arduous and would slow the down the state's ability to
respond and ability to get money into the communities. He
agreed that the economic metrics were not equal for every
community, which made it important to layer in the
population metric. He explained that much of the
variability was based on data the state had and the ability
to have an objective metric and not picking and choosing
subjectively. He offered to walk committee members through
the calculation for their communities individually.
10:42:22 AM
Representative Knopp looked at slide 4 and remarked it was
evident there were concerns about the allocation
methodology. He appreciated the information provided. He
was happy to see the administration would issue the
payments in quarterly distributions and require monthly
reporting by communities. He had heard from some municipal
managers that the federal guidance limiting how the funds
could be used meant there was no way most municipalities
would be able to expend the funds and the money would end
up going back to the federal government. He asked if, as
information came in along the way showing which communities
were able to spend the funds, the funding allocation
formula could be adjusted based on need. He stated it was a
strictly COVID related issue and every community responded
differently. For example, if Fairbanks spent more of the
funding than Kenai, he wondered whether funds could be
reallocated in the second and third payments.
Representative Knopp asked if all of the funds could not be
spent on COVID related costs whether funding could be
reallocated to the Small Business Relief Fund because the
state had fallen short in support of small businesses. He
elaborated that the payroll protection plan had done a lot
to support employees and keep them on the payroll; however,
it had done little for business owners who had used savings
or loans to keep employees on the payroll. He highlighted
that the plan had not accounted for any lost revenues for
small businesses. Likewise, the COVID relief funding did
not account for lost revenue in municipalities.
Representative Knopp believed the legislature needed to
advocate for on behalf of businesses. He stated that Kenai
was heavily dependent on tourism and he believed the
community would take a severe hit in lost revenue in the
next one to two years. He observed that revenue makeup was
prohibited in the guidance issued from the Treasury. He
noted that the crisis had shut the state down on March 1
and support funding had not come until mid-April; however,
none of the funding was retroactive. He stressed that all
of the businesses that had kept employees on and had lost
revenue had not been helped. He asked if funds could be
used where they were needed instead of returning unused
funding to the federal government.
10:46:04 AM
Mr. Steininger confirmed that making up lost revenue was
explicitly prohibited in the Treasury guidance. He
clarified that the CARES Act specified that the money was
meant to reimburse expenditures from March 1 going forward.
He explained that businesses would have the ability to put
CARES funding towards expenses incurred beginning March 1.
He relayed that the way the RPLs had been laid out would
not allow redistribution of funds; however, the
administration believed the money allocated to small
business relief was a good amount based on the total
resources available and the other programs that existed to
help small businesses.
Mr. Steininger addressed Representative Knopp's idea of
reallocating within the municipal relief program. He stated
that everything was a moving target going forward. The
administration had provided the RPL project on the 21st [of
April] and it had received additional guidance from the
federal government on how the funds could be spent on the
22nd [of April]. He relayed there would be more guidance
coming at later dates as the Treasury responded to
questions. He noted that the Treasury may make changes to
how the money could be used and there may be subsequent
legislation from the federal government. He highlighted
that the quarterly payments gave the administration the
ability be responsive if the federal government provided
new information that changed the nature of the money or
response. He stated that the administration's response
needed to be flexible because there would be new federal
guidance and changes in the way money came to the state.
10:48:48 AM
Mr. Steininger turned to slide 6 related to the Small
Business Relief plan. The administration had allocated $300
million out of the CRF funding to small business relief. He
reiterated his earlier statement that OMB had released the
package on April 21 and additional federal guidance had
come out on the 22, which had slightly changed the way the
administration had envisioned spending the money. He
explained that the RPL addressed the concept of loan relief
for some of the small businesses; however, the federal
guidance was much more tailored towards grants to small
businesses. The administration was looking at working with
the various state agencies like the Alaska Housing Finance
Corporation (AHFC), the DCCED Investments Section, the
Alaska Industrial Development and Export Authority (AIDEA),
and other various agencies with access to different
industries within the state. The idea was to look at the
business community and distribute funds to businesses that
did not have the option or were not good fits for the other
existing programs like the Small Business Administration
Loans or the Payroll Protection Act.
Mr. Steininger explained that the state had to work the
Small Business Relief program within the federal guidance.
He detailed that the program was a bit more flexible - the
administration needed to respond to the guidance and ensure
the money was allocated to the right sectors and businesses
most in need of relief. The $300 million was set aside to
provide relief to businesses, but without a specific
allocation. The plan was more open ended and would require
the state to work with the business community and different
partners to ensure the funds reached the right businesses
in the right way.
10:51:23 AM
Co-Chair Johnston asked if the RPL was still a work in
progress.
Mr. Steininger answered in the affirmative. He explained
there was room for flexibility as to how the money was
spent, but the administration knew a significant amount of
money was needed for small business relief.
Co-Chair Johnston understood the problems with the
[federal] guidance and how it came out April 22 [after the
RPL was submitted]. She stated that currently the
administration had the funds going through the DCCED
investment section. She did not recall DCCED receiving pass
through funds to AIDEA and AHFC in the past. She believed
the entities tended to receive their own appropriations.
She looked forward to more information about how the
administration developed the RPL going forward.
Representative LeBon noted that the presentation identified
AHFC, AIDEA, and the DCCED Investments Section as the
recipients of the funding (on slide 6). He asked if there
would be a program to allow the banking community to have a
say in how the monies were allocated to businesses.
Mr. Steininger answered that it was a great suggestion. He
explained that the [small business relief] plan was more
fluid than the specific allocation and municipal relief
portion. The federal guidance received on [April] 22 did
not allow loans, but it did not preclude the administration
from working with the banking community to understand
impacts to businesses throughout the state.
Representative LeBon suggested addressing the size of the
various banks if OMB intended to work with the banking
community. He advised against a first come, first served
basis. He recommended a pro rata approach to prevent small
banks from being squeezed out by larger ones.
Representative Wool wondered how businesses would know
which state entity (i.e. AHFC, AIDEA, DCCED) to approach
for funding. He asked if each of the entities would receive
$100 million of the $300 million total. He remarked that
businesses often went to a bank they currently did business
with. He commented that Mr. Steininger had stated that the
funds would be grants, not loans. He asked if businesses
would apply for grants with all of the entities.
10:55:23 AM
Mr. Steininger answered the administration would need to do
more outreach prior to distribution of the money to ensure
that all impacted businesses knew where to go to gain
access to relief if they were not eligible for things like
the Small Business Administration loans and other federal
CARES Act funding. He reiterated that outreach would need
to take place prior to distribution of the funds.
Representative Josephson asked if the administration would
be using its economic stabilization team that included
former Governor Sean Parnell and former Senator Mark Begich
on the small business relief component of the package.
Mr. Steininger replied that the administration was using
every resource available in the state to guide each aspect.
He elaborated that there was no reason not to tap into any
resource with expertise in each area of the response.
Vice-Chair Ortiz asked if Mr. Steininger was saying the
economic team had given input or whether the administration
was not opposed to seeking the input in the future.
Mr. Steininger answered that the guidance that came out
after the RPL was put forward changed how the state would
go forward with the small business relief. He explained
that the administration needed to make adjustments to fit
with the revised federal guidance. The administration would
work with any available resources, which could include the
economic stabilization team.
Vice-Chair Ortiz asked for verification that the economic
stabilization team had not yet provided input on the small
business relief portion of the plan.
Mr. Steininger replied that the business relief portion of
the plan had shifted since its release because of the
change in federal guidance. Beyond the goal of ensuring the
grants reached businesses most in need, the administration
did not yet have a specific plan that would have had input.
The administration was currently working to respond to the
change in federal guidance.
10:59:08 AM
Co-Chair Foster recognized that Representative Carpenter
had joined the meeting.
Representative Wool considered that the funding under
discussion [shown on slide 6] was for small business
relief. He surmised the funding was for existing entities
needing relief. He assumed the grant funding would not be
available for a future business proposal to make masks. He
asked if the [economic development] team headed by Bob
Penney under DCCED was involved in the plan development.
Mr. Steininger confirmed that the funds were not for new
businesses. He stated that the funds were to mitigate
impacts to existing businesses suffering due to COVID-19.
He elaborated that if someone were looking to start a mask
making business, it would not necessarily qualify for the
small business relief funding; however, there was other
money in the CARES Act funding for the purchase of masks.
He considered that there may be opportunities for an
enterprising individual to start a business producing and
selling masks; however, the small business funding would
not be direct support for the business. He explained that
the funding was intended for existing businesses that had
been required to shut down due to health mandates, such as
restaurants and hairdressers.
Mr. Steininger answered an earlier question about where the
incoming funding went within DCCED. He explained that the
funding had been centralized within DCCED because there
were multiple entities throughout the state government
(i.e. AIDEA, AHFC, the DCCED Investments Section) that had
relationships with the business community. The idea was to
centralize the funds within DCCED for distribution to the
different agencies as the need arose.
11:02:06 AM
Mr. Steininger turned to slide 7 related to economic
stimulus for Alaska fisheries. He detailed that the funding
was not a portion of the CRF; it was a direct grant within
the CARES Act related to fisheries relief for subsistence,
charter fisheries, and commercial fisheries participants.
The administration estimated Alaska would receive about
$100 million of the $300 million national total. He
explained that the estimate was based on Alaska fisheries
accounting for about two-thirds of the tonnage value and
one-third of the value of fish catchment in the country.
The administration was looking to have the state involved
in the distribution of the funding to ensure it went into
the correct fisheries. The total the administration
expected to receive was about one-third of the $300 million
national distribution.
Co-Chair Johnston asked for verification that the [economic
stimulus for Alaska fisheries] funding was still in
negotiation with the National Marine Fisheries Service.
Mr. Steininger answered in the affirmative.
Co-Chair Johnston asked if the CARES Act clarified the
funds were supposed to go to the discretion of states.
Alternatively, she asked if the amount people would receive
was still under negotiation with the National Marine
Fisheries Service.
Mr. Steininger agreed that the administration was still
working through who was responsible. He relayed that
fisheries managers had reached out and were interested in
seeing the money routed through the state for distribution
to ensure the funds would go to the fisheries most
impacted. He explained that whether the money would be
routed to the state was still under discussion at the
federal level. The RPL would ensure the state had the
ability to collect and distribute the funds if the funds
were routed through the state.
Representative Josephson asked if the monies could be used
for a community like King Salmon or Naknek to set up a
temporary hospital or to contract with ANPs or PAs for
screening incoming fisheries workers. He used a scenario
where screening was done well, the quarantine worked, and
the state supported a regular fishery. He noted that a
further assumption was the presence of someone on the other
side of the Pacific Ocean who was prepared to buy Alaska's
product. He considered the possibility of a full season
that would result in a productive financial season. He
asked if the economic stimulus funds for Alaska fisheries
could be used on costs associated with screening and
treatment.
11:06:05 AM
Mr. Steininger answered that public health expenses such as
setting up quarantine and testing sites fit more within
municipal distributions out of the CRF. He explained that
the fisheries money appeared to be intended as direct
relief to individual fishermen. He elaborated that the
expenses highlighted by Representative Josephson would
better fit under the activity directed through public
health or municipal relief funds.
Representative Josephson remarked that it was difficult to
separate the things at some point. He stressed that workers
could not work if they were not safe. He understood that
the administration did not write the rules.
11:07:36 AM
Vice-Chair Ortiz referenced the $100 million Mr. Steininger
had described that would be going to various entities most
impacted. He asked if the statement referred to economic
impacts of the virus in terms of market for the product. He
asked for more detail on how the funds could be used based
on the impacts of COVID.
Mr. Steininger replied that he did not want to speculate
about exactly what type of impact to an individual fishery
would be covered by the funds. He explained his
understanding that the funds were designed to be released
directly to individual fishermen involved in a subsistence
charter or commercial fishery. He furthered that the types
of things mentioned by Representative Josephson in his
previous question would not be 100 percent successful in
ensuring every fishery could occur and that every fishery
had a market. He believed there would be many impacted
fisheries and the money was intended to help those
individuals.
Representative LeBon asked if the intent of the funding
(highlighted on slide 7) was to benefit Alaska fisheries as
opposed to fishery operations from out of state (e.g.
Seattle, WA) working in Alaska waters.
Mr. Steininger answered that the intent was to work with
Alaska fisheries comprised of Alaskan men and women making
a livelihood through commercial, charter, and subsistence
fishing.
Representative LeBon replied that he was glad to hear it.
11:10:47 AM
Mr. Steininger moved to slide 8 and detailed that the
funding was a distribution from the $1.25 billion CRF in
the amount of $337.5 million. He detailed that a portion of
the funding was intended for health related costs in the
Department of Health and Social Services (DHSS) and a
portion would be contingency funding because there were
myriad unknowns about where the virus would progress into
the future. The contingency funding would be available for
future health costs and costs incurred by DHSS while
responding to the virus. The funding would also be used to
backfill some of the expenditures paid for with general
funds in advance of federal relief packages. He relayed
there was not an RPL required for the funding because there
was existing authority within the DHSS Division of Public
Health to collect any federal receipts related to health
response from the federal government.
Representative Josephson stated that at the end of March
the legislature had appropriated $87.7 million toward COVID
relief. He noted that a portion had been vetoed and the
actual appropriation was $75 million. He wondered if the
department would use the federal funding or state
appropriation first. He asked if the state funding would
lapse if it was not needed after federal funds were used.
Mr. Steininger answered that federal funds would be
utilized before state funds where possible. The preferred
option was to use federal revenues where available. He
elaborated that the [state] general funds would enable the
state to meet the needs for items that did not fit under
the federal funding guidance. He confirmed that unspent
state funds would lapse back into the General Fund when the
appropriation expired.
Mr. Steininger turned to slide 9 showing a $50 million
allocation to human services nonprofits including soup
kitchens, food banks, homeless shelters, and groups
providing clothing to individuals who were displaced and
impacted due to COVID. The funding was allocated to DHSS
and utilized the existing federal receipt authority within
the Division of Public Health. The intent was to run the
funding through the existing community initiative and human
services matching grant program. He remarked on the
numerous organizations providing support for homeless
populations displaced due to COVID and individuals who may
have lost their jobs. The funding was intended to ensure
the nonprofit community had access to resources to continue
providing support.
11:15:03 AM
Representative LeBon asked for verification that city and
borough governments would have a role in determining how
the funds were distributed.
Mr. Steininger answered that the intent was for the funds
to go directly to nonprofits from DHSS. The federal funds
would bolster the existing program to provide grants to all
of the [human services] nonprofits. The funds would not run
through municipalities.
Representative LeBon asked if the state would decide how
the distributions would be made.
Mr. Steininger answered in the affirmative.
Representative Wool asked if nonprofits receiving funds
would be subject to any reporting requirements like
municipalities were.
Mr. Steininger answered that he was not familiar with the
reporting requirements under the existing state program. He
relayed that like municipalities, the nonprofits would need
to spend the money on eligible expenditures under the
federal guidance. The idea was to target funding to
existing nonprofits that were doing work related to COVID.
He elaborated that all homeless shelters and soup kitchens
throughout the state had to respond dramatically to ensure
health mandates were followed (e.g. social distancing
rules), which had resulted in a substantial cost. The
administration did not believe there would be trouble tying
costs within the organizations to COVID. He believed there
would be much of an issue tying the costs to the federal
guidance because it was clearly laid out that the expenses
were allowable.
11:17:25 AM
Mr. Steininger highlighted a $5 million CARES Act grant for
child nutrition within the Department of Education and
Early Development (DEED) on slide 10. He explained that the
funding was intended for meals to students.
Vice-Chair Ortiz asked how the $5 million amount had been
determined.
Mr. Steininger answered that $5 million represented the
amount allocated to Alaska through the CARES Act as
determined by the federal government.
11:18:41 AM
Mr. Steininger reviewed CARES Act funding for development
block grants at a total of $2.8 million via DCCED. He
elaborated that there was existing federal authority within
prior DCCED appropriations for community development block
grants. The excess federal authority would be utilized to
collect the funds for distribution to communities.
Representative Wool asked what portion of the funding for
block grants had been vetoed.
Mr. Steininger replied that he did not have the number off
the top of his head.
Representative Wool wondered if the CARES Act funding
reflected a backfill of the vetoed funds.
Mr. Steininger answered that the $2.8 million represented a
direct allocation to Alaska from the federal government via
the CARES Act.
Mr. Steininger addressed $48 million for emergency
education relief funds allocated to DEED. The funding
represented the amount directly allocated to Alaska in the
CARES Act. He elaborated that $38.4 million of the funding
was for education stabilization. He explained that the
grants were distributed to local education agencies or
school districts through the Title I formula. Additionally,
there was $6.5 million in the governor's Emergency
Education Relief Fund. He expounded that the fund had been
established in the CARES Act to allow states discretion in
providing grants to school districts and other education
agencies on needs and impacts of COVID. There was an
opportunity for Alaska to receive slightly more than the
known allocation; therefore the $48 million requested in
the RPL had been rounded up slightly.
11:21:23 AM
Vice-Chair Ortiz asked if the entire $48 million would be
distributed through the formula program. Alternatively, he
wondered if the amount to be distributed via the formula
program was limited to the $38.4 million. He asked how the
$6.5 million would be distributed to schools.
Mr. Steininger answered that 90 percent of the $38.4
million was required to be distributed through the Title I
allocation. He noted that DEED could provide a list showing
how much each school district received. He relayed that the
$6.5 million could be distributed at the discretion of the
department to aid the most impacted districts. The
department had identified where approximately half of the
funds would go and the information was included on a list
DEED could provide. The remaining 10 percent of the $38.4
million could be used for other COVID related costs
incurred by the department, such as helping districts with
distance learning. The funding would allow for some
resources to be available at the state level to assist in
some of the programs and with other impacts that may
benefit from state coordination. The remaining half of the
$6.5 million would be held in reserve for districts that
may see larger impacts.
Vice-Chair Ortiz referenced the remaining half of the $6.5
million and asked if it would be up to individual districts
to make the case that they had been the most impacted by
COVID to qualify for the funds.
Mr. Steininger answered that the governor and DEED had the
discretion to determine how the funds would be distributed.
He believed they were working to establish the best way to
distribute the money and determine which districts were
most impacted. He recognized that all districts were being
impacted by COVID. The funds were being held in reserve
because, similar to the reserve held in DHSS, there were
many unknowns about how the impacts would carry forward.
11:24:41 AM
Representative Josephson asked about the $562.5 million for
local governments. He asked if it had been within the
administration's authority to give monies directly to the
54 school districts.
Mr. Steininger answered that the CARES Act guidance
specified that the $562.5 million (42 percent of the CRF)
should be distributed to municipalities/political
subdivisions that the state had distributed to. He
elaborated that if there was a district within a
subdivision that had seen impacts related to COVID that may
not be covered under the $38 million distribution, it was
in a municipality's discretion to allocate the funds. He
explained that the method provided municipalities with the
most discretion. For example, if the biggest and most clear
need within a community was helping out a school, the
municipality had the ability to do so. The administration
did not want to tie the hands of the municipalities and
would give them the discretion available within the federal
guidance.
Representative Josephson remarked that he had his own
concerns about adding an additional $2.5 trillion in the
federal deficit for great grandchildren to pay. He
discussed that a number of states were making the argument
that Congress had failed to bail them out and there had
been an "odd" discussion about bankruptcy. For example, New
York had a $15 billion deficit. He noted that Alaska was a
horrible candidate for bankruptcy for obvious reasons. He
asked if the administration planned to join in the outcry
for funds that were not necessarily COVID related. He
pointed out that the oil recession was impacting the
state's bottom line significantly, which was "sort of
directly" related to COVID. He asked if the administration
would be joining governors like [New York] Governor Andrew
Cuomo asking for additional funding in direct aid.
11:28:07 AM
Mr. Steininger could not speculate on future intentions for
joining in any of those sorts of petitions. The more
flexible the funding was, the more it would help Alaska
recover from the first and second order impacts of
COVID-19. The state had to work within the federal
guidelines, which did not allow for the backfill of lost
revenues or things of that nature.
Mr. Steininger highlighted a $5 million allocation to the
Higher Education Emergency Relief Fund on slide 13. The
funding had been set up in the CARES Act to provide relief
to higher education institutions. He elaborated that $7.9
million would go to the University of Alaska system. He
explained that the University system had some existing
federal authority it would use to collect a portion of the
funding. The RPL was only $5 million because it accounted
for the difference of the shortfall in the University's
federal receipt authority. Half of the amount was for
grants directly to students and the other half could be
used at the University's discretion.
Representative Wool asked if the $5 million was a federal
determination or a state request. He referenced Mr.
Steininger's statement that that the University had federal
authority to cover part of the grant. He observed that the
relief fund was $5 million, and the University would
receive $7.9 million in other grant monies. He considered
the grants that would go directly to students. He noted
that students were being sent home. He asked how the
student requirements were determined. He highlighted that
the University had said at one point that impacts from
COVID could cost the system $20 million. He wondered if the
administration was looking to address some of that
information.
11:31:06 AM
Mr. Steininger answered that the $7.9 million allocation to
the University had been determined by the federal
government. The $5 million was the additional amount in
receipt authority needed by the University. He elaborated
that the University already had excess or hollow federal
authority within its budget allowing the institution to
make up about $3 million, which was the reason they only
needed an additional $5 million. He clarified that the
University would receive $7.9 million total from the
federal government to cover some of the impacts related to
COVID. He addressed Representative Wool's question related
to money that would go directly to students. He detailed
that the allocation had been specifically laid out in the
CARES Act and the state did not have discretion over how
the funds were used.
Representative Wool asked if there were any plans for the
administration to [note: a portion of the question is
inaudible due to an interruption in the audio]...directed
to the University due to impacts resulting from COVID,
including declining enrollment. He reasoned that some
students may not want to do distance-only courses. He asked
if the University would receive any additional federal
COVID funding.
Co-Chair Johnston asked members to mute their phones. She
asked if Mr. Steininger had heard the question.
Mr. Steininger restated his understanding of Representative
Wool's question. He understood the question to be whether
there was a plan to address continued future impacts to the
University system as a result of COVID and decisions made
by students to do on-campus versus remote learning in the
future.
Representative Wool agreed. He noted that like the fishing
and hospitality industries, the University was affected. He
highlighted the $7.9 million in federal grants, half of
which would go to students, leaving less than $4 million
for the University. He explained that the University had
put out a publication a month or so ago, specifying it
could be impacted by $20 million. He remarked that what the
number would be was unknown. He wondered if there were
other plans for higher education relief for the University
from the federal government.
11:34:52 AM
Mr. Steininger answered that OMB had been tracking impacts
to all state agencies and the University. He reported that
the University was projecting significant impacts as a
result of COVID and decisions being made by students. He
highlighted a similar situation where the Department of
Fish and Game was impacted by decisions made by people
coming to Alaska for hunts. Currently, nothing in the CARES
Act allowed for the backfill of lost revenues; however, the
administration was tracking the information for an
understanding of what relief may be necessary for state
agencies suffering from decisions other people were making
in response to COVID that impacted their ability to
operate. He explained it would be a challenge going forward
into budget development for the coming year to understand
some of the longer-term impacts. He noted there was the
possibility that further federal legislation would help
with some of the longer-term impacts, but it was not
guaranteed. He spoke to the need to monitor and understand
the impacts as they became more apparent over time.
Representative Josephson relayed that his staff had
attended an Education Committee meeting where University
President Johnson had testified that foregone revenue had
reached $35 million to $45 million due to issues with
investment losses, potential declines in tuition fees and
auxiliary income, and research revenue if research was
delayed.
11:37:18 AM
Representative LeBon asked about grants directly going to
students. He asked if there were limitations on how the
money could be spent by students. He wondered whether the
funds could be used for travel going home.
Mr. Steininger replied that he did not know the answer to
the question. He believed someone may be available from the
University to respond.
ALESIA KRUCKENBERG, DIRECTOR OF PLANNING AND BUDGET, OFFICE
OF STRATEGY, PLANNING, AND BUDGET, UNIVERSITY OF ALASKA
(via teleconference), replied that there were some
limitations. She relayed that funding could be used for
emergency grants to students but not for the institution to
recoup funds. She explained that if the University paid for
students to travel home it could not reimburse itself for
the cost, but she believed it was an allowable expense for
the students. She noted that if she were mistaken, she
would follow up with the accurate information.
Mr. Steininger highlighted a National Endowment of the Arts
grant under the CARES Act in the amount of $400,000 for the
Alaska State Council on the Arts. The funds were intended
to make grants to art organizations and local art agencies
to sustain operations through COVID-19.
Mr. Steininger addressed slide 15 showing $49 million
associated with Federal Aviation Administration (FAA) rural
airport system maintenance. He explained that the
allocation was part of a larger component from the FAA
going to all owner-operators of airports throughout the
country. He detailed that $49 million of the component was
designated for rural airports operated by the Department of
Transportation and Public Facilities (DOT) throughout
Alaska. The money could be used for general operating and
maintenance expenditures in airports and on airstrips
throughout the state. He underscored that the funds were
for non-international, rural airports in Alaska.
11:40:23 AM
Mr. Steininger pointed to a $32.1 million FAA allocation
for international airports (on slide 16). There was no RPL
associated with the allocation because the money could be
deposited into the International Airport Fund and spent by
the international airports on general airport expenditures.
Representative Wool noted that Merrill Field in Anchorage
was not a rural airport. He had read somewhere that the
airport was receiving $13 million. He asked why it was
included.
Mr. Steininger answered that Merrill Field was part of the
wider FAA distribution, but DOT was not the owner-operator
for the field; therefore, the funding would not be included
in any money flowing through DOT.
Representative LeBon remarked that the Merrill Field
allocation appeared to be close to $18 million. He
understood there were two different buckets of money. He
stated that it hardly passed the red-face-test that the
Fairbanks International Airport allocation was $5.7
million, while the Merrill Field allocation was nearly $18
million.
11:42:25 AM
Mr. Steininger replied that the allocations were calculated
by the FAA and not the state. The state only had discretion
over how the money allocated to state-operated rural and
international airports was spent. He explained that once
the state had the money it could allocate to the projects
as it saw fit. He furthered that within the bucket of
funding for rural airports, the state did not have to spend
exactly as allocated by the FAA.
Mr. Steininger turned to slide 17 showing $29 million in
Federal Transit Administration grants. The funds would go
to DOT for eligible operating expenses for Federal Transit
Administration 5311 recipients for (non-urbanized areas)
including Anchorage, Fairbanks, and the Alaska Marine
Highway System (AMHS). The department was looking at
exactly how to distribute the money. He reported that about
$10 million would go to AMHS and the remainder would go to
other surface transportation costs.
Mr. Steininger highlighted a direct CARES Act grant of
$3 million for measurement standards and Whittier Tunnel
support on slide 18. The funding would go toward unbudgeted
and unanticipated expenditures related to ensuring
continuity of operation and program delivery.
11:44:49 AM
Mr. Steininger turned to slide 19 showing $3.6 million for
the Department of Public Safety (DPS) for the U.S.
Department of Justice Byrne-JAG grant. The funding
supported law enforcement, prosecution, defense, courts,
corrections, crime victim and witness initiatives, and
other mental health programs. The grant would go directly
from the federal government to DPS. Slide 20 showed
$3 million for the Division of Elections to be deposited
into the election fund. Currently, there was adequate
authority to deposit federal revenues into the election
fund; however, the election fund was not subject to the RPL
process, meaning the ability to spend the funds could not
be accessed through the RPL process. He noted there was an
existing $3.7 million project out of the election fund that
could be used for election security measures and other
election costs the division would incur due to the COVID
crisis.
Representative Josephson believed the legislature had given
authority in SB 241 [COVID-19 declaration/relief
legislation passed in 2020] for the lieutenant governor to
move to an all-mail ballot, but he was not certain it
covered the November general election. He remarked that
Dr. Anthony Fauci had indicated there would be a second
wave of the virus in the fall. He asked if the monies could
be used for an all-mail ballot in the fall to keep people
safe and participating in the democracy.
Mr. Steininger responded that he did not know the specific
criteria around how the elections fund could be used. He
deferred the question to the Division of Elections.
11:47:23 AM
Mr. Steininger concluded the presentation and was available
for any additional questions.
Representative Josephson prefaced his remarks and noted he
did not mean for his question to be a "gotcha" question. He
was happy with the administration's response to the crisis.
However, the administration had issued $260 million in
vetoes. He understood that facts had changed, which
happened to everyone. He detailed that the administration
had believed most of the vetoes could be supplanted by the
federal dollars. He asked if OMB had an opinion after the
latest [federal] guidance about which items could almost
surely be supplanted and which items could not.
Mr. Steininger answered that at the time of the vetoes the
administration had a different understanding and guidance
on how the CRF funding through the CARES Act could be
spent. The administration was trying to ensure that
communities had as much flexibility as possible within the
guidance to use the funds on anything related to COVID to
make certain normal resources could be used to cover
normal, non-COVID related expenses. There were some areas
where there were not dollar-for-dollar replacements of the
vetoes, but there were resources going to communities to
ensure they could cover COVID related costs within the
federal guidance in order to allow communities to use their
own limited resources to cover costs that may not fit
within the federal expenditure guidelines. It was the
administration's goal to ensure that communities came out
of the crisis whole. He noted there was also the very real
issue of the availability of financial resources at all
levels of government in Alaska. Whether the costs could be
covered at the state level was also in question.
Representative Josephson thought there was almost an
inference that because of the changed circumstances that
some [vetoed] items should be overridden and that the
administration may even see it that way or that there
should be more appropriations. He pointed out that
Mr. Steininger had just stated that local governments
should be made whole. He asked how that would happen unless
the state provided community assistance funding for school
bond debt reimbursement for example.
Mr. Steininger clarified that communities needed to be made
whole for costs related to COVID-19, which the CARES Act
was enabling the state to do - to ensure that any costs
related to COVID were covered and that municipalities were
not harmed by costs they incurred to respond to the crisis.
The administration hoped that by providing municipalities
with maximum flexibility in their use of the CARES Act
funding it would hold communities harmless for expenses
related to COVID to the maximum extent possible. The goal
was to enable communities to preserve other resources to
cover non-COVID related costs of governance.
11:52:05 AM
Representative Tilton asked if there were any guidelines on
the grants going out and on any of the costs associated
with administering the grants.
Mr. Steininger used grantees receiving human services
grants as an example. He relayed his understanding that
using the funds to cover costs associated with
administering grants for expenses related to COVID would be
allowable. He noted there had not been much direct guidance
on the specific question. Based on the guidance released by
the Treasury on April 22, it appeared administrative costs
associated with providing services was allowable.
Representative Tilton wondered when funds would lapse back
to the federal government if they were not spent within a
certain timeframe. She asked if the timeframe was based on
a federal fiscal year or another deadline.
Mr. Steininger answered that the current guidance limited
expenditures through the end of December [2020]. He
elaborated that any unused funds would be returned at that
time. He shared his understanding that a normal accounting
process would be followed where any encumbered funds would
not need to be returned. He relayed that the administration
did not have specific details or a date when a final audit
of expenditures would occur. He noted that the final audit
would be sometime after the December 30 deadline.
11:55:11 AM
Representative Tilton thanked Mr. Steininger for his
answers and presentation. She provided a scenario where a
community had funding that lapsed. She asked if the
responsibility to return the funds to the federal
government would reside with the state or the community.
Mr. Steininger answered that the scenario was part of the
reason the administration would require reporting [from
communities on fund expenditures]. He elaborated that if
the administration started to see the situation develop it
could determine the best logistics. He explained that
because the money was distributed directly to the state
from the Treasury, he believed the federal government would
expect the state to be responsible for returning the
[unused] funds. The state would have to work with
communities to ensure mechanisms were in place and the
monthly reporting would give visibility into areas where
issues may arise.
11:56:19 AM
Representative Wool referenced Mr. Steininger's statement
about aiming to keep communities whole from the effects of
COVID-19 and that the administration had economic metrics
involved in the distribution of funds to municipalities
based on tourism or fishing dollars. He remarked that
Fairbanks would not top the list on tourism or fishing;
however, the University was a big part of Fairbanks'
economic portfolio and the University had stated it may be
impacted by $30 million to $40 million. He elaborated that
the University would receive about half of the $7.9 million
with the other half going to students. Additionally, the
University may receive a small amount of the K-12 funding.
Representative Wool highlighted that it appeared the
University would be severely impacted. He emphasized that
the impact would also affect municipalities where campuses
were located. He thought there seemed to be a disconnect
about helping out municipalities. He elaborated that
Fairbanks had a large entity that would be heavily
affected. He thought it seemed funds going toward higher
education were diminutive compared to funds going to
municipalities or the $100 million for the fishing
industry. He was not trying to take away from other
entities that needed the funds, but he believed there
should be more effort toward the higher education
component. He noted that the University's operating budget
had been vetoed by $10 million. He wondered if there were
further plans to address the situation.
Mr. Steininger replied that the administration needed to
continue to work on budget development with the University
going forward as the impacts of COVID were seen. He did not
believe the University had been part of the economic
activity metrics. He noted that the administration had
worked with the information available at the time. The $7.9
million had been allocated through the CARES Act to higher
education institutions and was limited by decisions at the
federal level. He spoke to the concerns that the state
ensured communities seeing some of the outweighed impacts
were assisted through its distribution of funds and the
need to take second order impacts into consideration. He
noted it could be difficult to ensure that every little
impacted area was being addressed, but the administration
felt confident there was a fairly broad distribution within
the plan to try to hit as many areas as possible.
Representative Wool remarked that considering funding over
the long-term was fine; however, he was confident there
would be immediate affects felt in September. He understood
the state had access to other funds apart from the Higher
Education Emergency Relief Fund, which he hoped would be
considered.
11:59:58 AM
Vice-Chair Ortiz thanked the presenter for his answers
during the meeting. He returned to slide 5 that specified
about $305 million would go directly to municipality
assistance. He asked if the administration believed the RPL
process was the correct process based on the fact there was
no federal funding within the current budget for aid to
municipalities. He asked if the RPL process was the
appropriate method to distribute the federal funds. He
noted the incoming federal funds seemed to be a different
category of funding than what currently existed under the
federal funding category.
Mr. Steininger answered that the administration believed
the RPL process was the correct process to use in the
current situation. He elaborated that the RPL process
through the Legislative Budget and Audit Committee was
designed for situations where there was an increase or new
federal receipts coming into the state after the budget had
passed. He stated it was the situation currently taking
place. The administration was using the existing mechanisms
in order to gain access to the federal relief funds.
Vice-Chair Ortiz asked for verification that the RPL
process was creating a new category of federal funding that
did not currently exist.
Mr. Steininger assumed that Vice-Chair Ortiz's use of the
term "new category" meant that the funding was a new type
of federal grant that the state had not received in the
past. He answered that the RPL process the same way in the
past. For example, DEED had recently received a new grant
for literacy development that had been accessed through the
RPL process. He elaborated that the grant had not been
received in the past. He explained that it was not
necessarily uncommon to use the RPL process to access new
federal grants that had not existed in the past that came
to the state unexpectedly. The CARES Act funds were merely
a much larger dollar value than the state was used to
seeing, but the acceptance of the funds was within the
bounds of how the RPL process had been used before. He
explained that the RPL process was the most expeditious way
to accept federal revenue in the absence of an
appropriation bill and when the legislature was not
actively meeting in session. The administration believed
the RPL process fit the criteria for access to the federal
funds.
12:03:28 PM
Vice-Chair Ortiz noted that his questions were not intended
as a debate and he appreciated Mr. Steininger's answers. He
pointed out that Mr. Steininger had spoken about the time
period when the legislature was not in session. He believed
it was common practice for the RPL process to be used in
the interim period. He highlighted that the legislature was
not currently in the interim period.
Mr. Steininger replied that it was a good point; however,
he clarified that there was no specific prohibition [on the
use of the RPL process during a non-interim period]. The
administration had looked at the processes available to
access federal funds in an expeditious way because the
funds were intended to cover costs incurred on March 1
going forward. He elaborated that the costs had been borne
for two months without the ability to provide relief to
communities to cover the costs being incurred; therefore,
an expeditious method of payment was important. He
explained that the LB&A RPL process was something that was
available and was intended to access new federal revenues
coming into the state. The administration believed the RPL
process was the most appropriate mechanism to gain access
to the funds and make the distribution as quickly as
possible.
Vice-Chair Ortiz asked if the administration had a legal
opinion on the validity of the use of the RPL process under
the current circumstances.
Mr. Steininger answered that he was basing the use of the
RPL process off of prior RPLs the administration had
submitted for new revenues coming in. For example, new
revenues that may never have been appropriated to a
specific item before or new programs that had not been
considered before. He cited an education example he had
used earlier in the meeting. He relayed that the use of the
RPL process was based on past practice. He did not have a
legal opinion in his hand.
12:05:46 PM
Representative Sullivan-Leonard thanked Mr. Steininger for
his diligence in answering the questions. She asked about
AIDEA funding on slide 6. She was concerned that mom and
pop small businesses that may or may not have employees,
had fallen through the cracks with regard to receiving PPP
[Paycheck Protection Program] support or SBA loans. She
asked how some of the AIDEA grants would be used to help
small businesses.
Mr. Steininger replied that the RPL had been structured to
touch on multiple state agencies because there were
different levels of businesses in the state. He detailed
that some of the mom and pop businesses likely did not
interact with AIDEA in the way they may interact with other
areas within DCCED. The administration was aiming to have
the funding be available to businesses lacking the ability
to receive support through PPP or SBA loans. The
administration was very sensitive to the mom and pop
businesses that would need relief almost more than anyone
else.
Representative LeBon shared the concern expressed by
Representative Sullivan-Leonard. He stated that the best
way to take care of the smaller mom and pop businesses was
through their local banks. He pointed out that local banks
knew the businesses and their needs. He elaborated that
AIDEA and AHFC were not directly connected to the smaller
businesses. He urged the administration to work with the
banks as part of the solution and do some sort of
allocation program to ensure small banks were able to
participate.
12:08:30 PM
Co-Chair Johnston thanked Mr. Steininger for his work and
candidness that some of the RPLs were a work in progress.
She shared that she had spent time pouring over the
[federal] guidance, which she described as "clear as mud"
in some places. She noted that she had highlighted a couple
of areas [in the federal guidance] and read from the first
page (copy not on file):
Funds may not be used to fill shortfalls in government
revenue to cover expenditures that would not otherwise
qualify under the statute and although a broad range
of use is allowed, revenue replacement is not a
permissible use of funds.
Co-Chair Johnston thought it was important to keep the
guidance front and center during the process. She cited
examples of ineligible expenditures listed in federal
guidance such as expenses for state share of Medicaid;
damage covered by insurance; payroll or benefits expenses
for employees whose duties were not substantially dedicated
to the response to COVID-19; expenses that had been or
would be reimbursed by other federal programs (e.g.
reimbursements from other parts of the CARES Act);
reimbursements to donors for donated items of service;
overtime; severance pay; and legal settlements. She
believed legal settlements were something the state needed
to be aware of. She spoke to the need for transparency. She
appreciated Mr. Steininger's work towards transparency.
Co-Chair Johnston stated that one of the frequently asked
questions on the Treasury's website was whether a state
receiving a payment could transfer funds to local
government. She reported that the answer was yes and that
such funds would be subject to recoupment by the Treasury
if they were not used in a manner consistent with the CARES
Act. She relayed that the state had liability for funds
allocated to local communities and for funds it would
appropriate. She reiterated the importance of transparency
and spoke to the need for cooperation between the
legislature and the administration. She emphasized the need
to distribute the funds as soon as possible, while keeping
the state's liability and need for transparency in mind.
12:11:54 PM
Co-Chair Foster thanked Mr. Steininger for the abundance of
information.
Mr. Steininger thanked the committee for the opportunity to
present detail on the plan and explain how the
administration intended to provide the relief. He
acknowledged that the guidance could be unclear. He spoke
to the need to ensure the state's plan was tailored to the
federal guidance. He believed the state would be more
successful if it made sure the funds were made available to
those most connected to the response.
ADJOURNMENT
12:13:02 PM
The meeting was adjourned at 12:13 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| COVID-19 HFIN CARES Act Presentation 4.24.2020.pdf |
HFIN 4/24/2020 10:00:00 AM |