Legislature(2021 - 2022)ADAMS 519
04/27/2021 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB69 || HB71 | |
| HB92 | |
| HB55 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 69 | TELECONFERENCED | |
| += | HB 71 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 92 | TELECONFERENCED | |
| += | HB 55 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 27, 2021
9:12 a.m.
9:12:25 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:12 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Brodie Anderson, Staff, Representative Neal Foster; Alexei
Painter, Director, Legislative Finance Division;
Representative Chris Tuck.
PRESENT VIA TELECONFERENCE
Jeff Jones, Self, Ketchikan; Gerard Asselin, Captain,
Anchorage Police Department, Anchorage; Jodie Hettrick,
Fire Chief, Anchorage Fire Department, Anchorage; Angie
Fraize, Officer, Anchorage Police Department Employees
Association, Anchorage; Justin Mack, Alaska Professional
Firefighters Association, Anchorage; Nick Davis, Senior
Captain, Anchorage Fire Department, Anchorage; Jacob
Wilson, Business Agent, Alaska Correction Officers
Association, Anchorage; Nick Clark, Paramedic and Fire
Fighter, Fairbanks Fire Department, Fairbanks; Jim Puckett,
Deputy Director, Division of Retirement and Benefits,
Department of Administration.
SUMMARY
HB 55 PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS
HB 55 was HEARD and HELD in committee for further
consideration.
HB 69 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 69 was HEARD and HELD in committee for further
consideration.
HB 71 APPROP: MENTAL HEALTH BUDGET
HB 71 was HEARD and HELD in committee for further
consideration.
HB 92 ANTICIPATION OF REVENUE; BORROWING;CREDIT
CSHB 92(FIN) was REPORTED out of committee with a
"do pass" recommendation and with one new
indeterminate fiscal note from the Department of
Revenue.
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 69
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; making
supplemental appropriations; making appropriations
under art. IX, sec. 17(c), Constitution of the State
of Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
HOUSE BILL NO. 71
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making
supplemental appropriations; and providing for an
effective date."
9:13:15 AM
Co-Chair Foster relayed that the committee would hear the
latest changes on the operating budget. He referenced a
request from the previous day to take more time reviewing
proposed changes in the committee substitute (CS) [adopted
on May 23, 2021]. He discussed that the first CS the
committee had considered was the governor's budget that had
been rolled out on March 9. He shared that the meeting
would focus on the operating budget. He indicated the goal
was adjournment on May 19 and he was hoping to get the
budget over to the Senate. The meeting would focus on the
high points of the changes from the governor's budget to
the current CS.
Co-Chair Foster detailed that the CS rolled in supplemental
and capital items from the governor's operating and capital
budgets. He planned to speak about the CS and have
committee discussion on the details of traditional budget
items. Additionally, he would have his staff to speak about
supplemental and supplemental capital additions included
for FY 21. He planned to address how the American Rescue
Plan Act (ARPA) funds had been included. He referred
members to a table titled "FY22 House Committee Substitute
(CS1) Summary" (copy on file).
9:17:10 AM
Co-Chair Foster explained the first part of the document
included traditional operating budget items and the last
part of the document focused on ARPA funding. He detailed
that the operating budget summary was broken down by
department and included the major changes in the CS
compared to the governor's budget.
Co-Chair Foster began with the Department of Administration
(DOA) and highlighted that the House Finance subcommittee
had accepted the governor's proposal to consolidate human
resources procurement. The CS added $3.3 million in
undesignated general funds (UGF) for public broadcasting.
He moved to the Department of Commerce, Community and
Economic Development (DCCED) budget where the subcommittee
had accepted the governor's proposal to move a couple of
economic development positions from DCCED to the Office of
the Governor. The CS included $450,000 for Alaska Legal
Services. He detailed that Alaska Legal Services typically
received funding from two sources. He explained that the
agency received some funding through the language section
via court fees. He highlighted an addition of $450,000 in
the numbers section. He believed the $450,000 had been
included because it had been vetoed by the governor in the
past. He asked his staff if his recollection was accurate.
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER, replied
that Alaska Legal Services funding had been maintained at
that level for a few years. He elaborated that the governor
had attempted to veto the funding several years back;
however, the funds had been replaced by HB 2001 at the
time. He explained that the governor had not vetoed the
funding since that time, but he continually attempted to
remove it from the numbers section of the operating budget
each year.
Co-Chair Foster stated that the governor had not included
the funding for Alaska Legal Services in the budget, but
the CS added the amount to maintain flat funding from the
prior year. Additionally, the CS included $370,000 UGF for
the Kuskokwim Ice Road grant. He detailed the item was new
and was a grant to named recipients for the maintenance of
an ice road from Bethel connecting 10 to 15 communities.
9:20:24 AM
Co-Chair Foster highlighted changes under the Department of
Corrections (DOC). The CS denied $4.3 million UGF to
replace restorative justice lost funds. Additionally, the
CS denied structure change proposal relating to putting
electronic monitoring and community residential centers
(CRC) into population management. He detailed that the bill
included intent language for DOC to renegotiate contracts
with CRCs to flat rate contracts.
Co-Chair Foster moved to the Department of Education and
Early Development (DEED). He reported that the House had
early funded and forward funded education, which was
included in separate legislation. He believed there may be
a misconception that the legislature was double funding
education in the current year and future years by
potentially increasing the budget. He clarified the early
funding for education funded the FY 22 budget and the
forward funding component funded education one year in
advance and used FY 23 revenue. He elucidated that the
action did not increase the budget, it just pertained to
the timing of the budget. The CS added $5 million for Pre-
K. He noted that Pre-K had been funded in the past, but the
governor's budget did not include an increment. He
highlighted that the CS funded $640,000 for the Statewide
Library Electronic Doorway (SLED) program and Alaska
Library Catalog using DGF funds. He asked Mr. Anderson
about the DGF fund source.
9:22:31 AM
Mr. Anderson replied that the DGF fund source was the
Higher Education Fund.
Co-Chair Foster continued to review changes to the DEED
budget. The CS denied the governor's proposed deletion of a
State System of Support position. The CS retained the
$109,000 using DGF.
9:23:10 AM
Co-Chair Foster moved to the Department of Environmental
Conservation (DEC). The subcommittee would continue to use
the Commercial Passenger Vessel (CPV) fund to pay for
shellfish testing. He reported that no significant changes
had been made to the Department of Fish and Game budget.
Co-Chair Foster advanced to the budget for the Office of
the Governor. The CS accepted the transfer of economic
development positions from DCCED to the Office of the
Governor. Additionally, the CS accepted the governor's
request for $690,000 UGF for the Division of Elections for
ranked choice voting. He noted ranked choice voting had
passed by ballot initiative and the increment would go
towards notifying the public. The CS included intent
language that the Office of Management and Budget (OMB)
review single audit costs (for amounts billed to the
federal government) and reimbursements.
Co-Chair Foster moved to the Department of Health and
Social Services (DHSS) and addressed the addition of $3.4
million UGF related to a tribal compact. He asked Mr.
Anderson for verification the funds were for child welfare.
Mr. Anderson replied in the affirmative. He elaborated the
tribal compact was between tribal organizations and the
Office of Children's Services. The $3.4 million DGF
increment helped take care of Native adoptions. He
explained the increment was a one-time allocation to
provide the level of funding typically expended in a single
year and encourage the development of a partnership for
other fund sources going forward.
Co-Chair Foster asked if the DGF fund source was
restorative justice funds.
Mr. Anderson replied that the fund source was recidivism
funds.
Co-Chair Foster continued to discuss the changes made to
the DHSS budget. The CS used $16 million in mental health
funds instead of the governor's proposal to use Alaska
Mental Health Trust Authority (AMHTA) reserves.
Additionally, the administration proposed using $35 million
in lapsing Medicaid carryforward, which had been denied by
the subcommittee. The CS would reappropriate lapsing funds
to the language section for school bond debt reimbursement
[and Regional Educational Attendance Area (REAA)].
9:26:36 AM
Co-Chair Foster moved to Judiciary and stated that the CS
accepted the governor's $480,000 increment for therapeutic
courts. There were no significant recommendations for the
Department of Labor and Workforce Development. Under the
Department of Law, the budget eliminated $267,000 UGF for
the chief of staff position. Additionally, in FY 21, the
governor had vetoed a new $20,000 line item for Janus v
ASCME. The CS reinstated the structure and $20,000 in FY
22. He reported that $1 million UGF was added for the
Division of Legislative Audit. He highlighted interagency
charging for time and work related to audits. He detailed
that the funds were not always paid back to the Division of
Legislative Audit. The increment would go directly to
legislative audit for compensation instead of sending the
money through a department first. He believed there had
always been a question about who owes what and the goal was
to cut out the middle person. He asked his staff to
elaborate.
Mr. Anderson confirmed the statements. The $1 million was a
one-time increment while OMB and the Division of
Legislative Audit worked out the details for billing
through the RSA [reimbursable services agreement] or
interagency receipts. He highlighted intent language in the
Office of the Governor for OMB to work with some
cooperation. He stated that while the entities figured out
the rates for different things, it would also be a time to
determine how Legislative Audit would be able to bill
departments for work, primarily the Comprehensive Annual
Financial Report (CAFR), which was constitutionally
required. He explained that Legislative Audit audited each
department; therefore, some sort of cooperation for
providing funds to the division was necessary. Until the
parties determined how to get the rate established, the $1
million increment would enable the production of what was
formerly known as the CAFR to be produced for the coming
year.
9:29:44 AM
Co-Chair Foster moved to the Department of Military and
Veterans Affairs. The department identified various savings
(i.e., eliminated vacant positions) all of which the
subcommittee accepted. He advanced to the Department of
Natural Resources. The subcommittee had recommended filling
six Alaska Conservation Corps positions, but only if enough
fees were collected and no UGF funds were required.
Co-Chair Foster briefly moved to the Department of Public
Safety. The subcommittee had denied a $1.4 million UGF
capital outlay request for troopers in addition to $1.4
million UGF for the full funding of vacant trooper
positions. He highlighted the Department of Revenue (DOR)
and relayed that $210,000 DGF was added for two tax
auditors. He explained that the cost of the two positions
would be outweighed by the potential revenue. He asked Mr.
Anderson to elaborate on the associated DGF fund source.
Mr. Anderson believed the document contained an error. He
corrected that under the Department of Revenue the tax
auditor positions at a cost of $210,000 should be UGF not
DGF. He elaborated the first attempt had been to pay for
the positions with DGF program receipt authority pushed to
DOR to help offset the cost of the two new positions;
however, the effort had not been successful.
Co-Chair Foster continued discussing DOR. He highlighted
the incentive compensation for the Alaska Permanent Fund
Corporation (APFC). He moved to Department of
Transportation and Public Facilities (DOT) and referenced
the Coronavirus Response and Relief Supplemental
Appropriations Act (CRRSAA) funding of slightly over $50
million. He detailed that the funds in addition to language
from the language section of the bill would go towards
providing for 18 months of forward funding for the Alaska
Marine Highway System (AMHS). He would elaborate on the
funding later in the meeting.
Co-Chair Foster turned to the University budget. The
subcommittee accepted the governor's $20 million decrement,
which was the third year of the three-year compact between
the administration and the University Board of Regents.
Additionally, the subcommittee added $15.7 million for lost
revenue relief at a net decrease to the University budget
of $4.3 million.
Co-Chair Foster moved to the language section of the CS. He
detailed that the Permanent Fund Dividend (PFD) would be
addressed in a separate bill that should be heard on the
coming Thursday or thorough the budget amendment process.
He discussed that the governor had originally put out a
supplemental to pay the balance of the 2020 PFD in addition
to a separate bill that would pay a full PFD in the current
year. He shared that "we have been looking at rolling out
our own version" of a PFD. He added that the issue may come
up in the form of an amendment from any committee member
regardless of the introduction of a separate bill.
9:34:43 AM
Co-Chair Foster continued to review changes in the language
section of the bill. He moved to 18-month forward funding
of AMHS via CRRSA FTA [Federal Transit Administration] and
FHWA [Federal Highway Administration] funds. He asked for
verification the amount was around $110 million.
Mr. Anderson answered that the total funding for the 18-
month forward funding of AMHS was $193 million, including
$53 million UGF.
Representative LeBon asked about oil tax credits. He stated
his understanding that the original $60 million to pay oil
tax credits with Alaska Industrial Development and Export
Authority (AIDEA) reserves had been amended to $114
million. He asked if the funds were all UGF or if the
funding source was split.
Co-Chair Foster answered that the governor's original
budget allocated $60 million in AIDEA reserves to pay for
oil tax credits, which had been the full statutory amount
based on oil prices at the time. The governor had later
submitted an amendment to change the fund source to UGF and
increase it to the current statutory amount of $114
million.
Co-Chair Foster continued addressing the language section
of the budget. He highlighted an increment of $950,000 to
cover the costs to elections for implementing the new
redistricting plan and a separate increment of $1 million
for the redistricting board. He shared that had chaired the
Legislature subcommittee and the $1 million had been added
at the request of the redistricting board. He elaborated
that the legislature had appropriated $2.5 million for the
redistricting board in FY 21/FY 22. The board had since
come back to the legislature requesting the additional $1
million, bringing the amount to $3.5 million. He explained
the board was anticipating legal challenges, as was the
case 10 years back. He believed the board's budget had been
$7 million at the time.
Mr. Anderson confirmed that the board's budget [10 years
back] had started off at $7 million and ended at $10
million.
Co-Chair Foster asked Mr. Anderson to touch on the $950,000
increment to cover the cost of implementing the new
redistricting plan.
Mr. Anderson replied that the $950,000 increment would go
to the Division of Elections for implementing the
redistricting plan after the board had rolled out its
plans. He elaborated it would be up to the division to
produce the new maps and distribute new voting cards to
citizens. The $950,000 was to cover new costs required due
to some of the problems related to implementation.
Co-Chair Foster asked for verification it was part of the
governor's proposal.
Mr. Anderson agreed.
9:38:56 AM
Co-Chair Foster addressed school bond debt, which was fully
funded at $83.5 million. The funds were made up of $30.8
million from the School Trust Fund and $52.7 million from
Medicaid lapsing funds. He noted that the governor had
proposed carrying forward Medicaid lapsing funds within
DHSS, but the CS would reappropriate the lapsing funds for
school bond debt. He reported that the REAA Fund was fully
capitalized at $34.2 million with Medicaid lapsing funds.
He explained that school bond debt and REAA were typically
tied together, meaning if one was fully funded the other
typically received full funding as well. He noted that the
CS contained backstop language specifying the increments
would be funded with UGF in the event lapsing funds were
not available.
Co-Chair Foster highlighted the large difference in
community assistance funds between the governor's proposal
and the CS. He detailed that community assistance was fully
capitalized at $90 million. He explained that the
legislature had added $21.3 million in FY 21 and $17
million in FY 22 to bring the fund back to its fully
capitalized level of $90 million. He added that the fund
had to be replenished annually.
9:41:46 AM
Co-Chair Foster addressed ARPA funding. The legislature
anticipated the state would receive about $1.9 billion in
federal funding. He explained that a significant portion
was restricted for specific purposes. He highlighted the
spending flexibility related to $1 billion of the funds
commonly referred to as the Coronavirus State and Local
Fiscal Recovery Funds (CSLFRF). He noted that in some ways
the allocation approach in the CS was similar to the
governor's and in some ways it diverged. One of the large
differences was in the amount spread out over the years. He
explained that the governor had appropriated the full $1.1
billion under HB 181 using a multiyear appropriation from
FY 21 through FY 24. The CS would spend 70 percent in FY 21
and FY 22 and 30 percent in FY 23. The strategy centered
around the belief that most of the impacts to the cruise
ship industry and other related areas had occurred in 2020
and in the coming summer. He expected the hit to be less in
the following year; therefore, more of the funds had been
weighted towards the present than later on.
Co-Chair Foster looked at the last page of the document and
noted that $30 million had been allocated to nonprofits
compared to a $50 million allocation the previous year. He
pointed out that things had been done differently under the
Coronavirus Aid, Relief, and Economic Security (CARES) Act
when compared to ARPA. The $30 million increment for
nonprofits reflected flexible money. He explained that when
accounting for the non-flexible funding that automatically
went to nonprofits, the number could be larger than $30
million. Additionally, he reminded members the CS did not
appropriate the full $1 billion like the governor had
proposed; the CS would appropriate 70 percent of the total
for the current budget cycle. He explained that between the
two sources nonprofits may receive between $60 million or
$70 million.
Co-Chair Foster addressed public testimony the committee
had received about the unexpected loss of Victim of Crimes
Act (VOCA) federal funds. The CS included $6 million to
backfill lost federal funds in addition to any reductions
seen on the state side. He asked Mr. Anderson to expound on
the topic.
Mr. Anderson elaborated that the committee had heard about
a $6 million reduction in federal VOCA funding during
public testimony. The CS included funding to restore the
reduction. He stated there had been some confusion about
the reduction during public testimony. He clarified there
had been some incremental reductions to domestic violence
shelters at the state level beginning in FY 18. The CS
restored the federal loss but did not address increasing
the Council on Domestic Violence and Sexual Assault (CDVSA)
funding levels back to FY 18 or FY 19. He stated that while
the CS restored the federal loss, the funding remained
lower than in previous years.
9:47:52 AM
Co-Chair Merrick had been under the impression the loss of
the federal funds had been $1.3 million and the $6 million
included previous state cuts.
Mr. Anderson clarified that the $6 million covered the
federal loss for the next three years.
Representative Rasmussen asked if there had been any
conversation with advocates in the VOCA sector about a one-
time $6 million payment. Alternatively, she asked if the
funds would be broken up over three fiscal years.
Mr. Anderson answered that the CS included $6 million over
three years. He explained there would have to be an
amendment or adjustment to the CS to inject all $6 million
in one year.
Representative LeBon asked about $80 million in grants to
local governments for community relief [listed on the last
page of the document under ARPA funds]. He interpreted the
language to mean the funds were targeted to organized
cities, municipalities, and boroughs. He asked if the
distribution formula was population driven.
9:50:03 AM
Co-Chair Foster recalled that the Alaska Municipal League
(AML) had testified to the House Finance Committee that it
anticipated receiving about $185 million in ARPA funds.
Mr. Anderson agreed.
Co-Chair Foster explained that even after receiving the
federal funds, AML had been expecting to come up short by
about $133 million. He stated the idea was to get as close
as possible in terms of providing some community relief.
The ARPA community relief funds added up to almost $125
million. He used the cruise ship head tax as an example and
stated that the amount of the shortfalls was clear. The
community relief funds included $42 million for FY 21 and
FY 22 to address the cruise ship head tax losses.
Additionally, the funds included $2 million for fish
landing tax shared between state and local communities. The
$80 million was a broad amount to get close to the $133
million shortfall. He noted that the federal guidelines
were anticipated to come out on May 11. He relayed that in
conversations with the Senate there had been a decision to
move the budget process along instead of waiting for the
federal guidance. There was an understanding that some of
the numbers in the CS were broad and once guidelines came
out, the House would work with the Senate to refine the
numbers.
9:52:40 AM
Representative LeBon understood there was still limited
information. He wanted to ensure there was transparency in
the process and fairness for all communities.
Co-Chair Foster referenced Representative LeBon's question
about whether the community relief distribution formula was
population based. He asked if Mr. Anderson had a comment.
Mr. Anderson followed up on Representative LeBon's
questions. He informed the committee that the $80 million
in grants to local governments included an FY 21 capital
supplemental item to account for the current absence of
clarity on all of the incoming funding. He explained that
by including the item as a capital supplemental item, the
legislature would have the ability to go back with better
clarification on the program DCCED would be required to use
for the grant distribution process. He explained that
before a community applied for grants from the $80 million,
a community's shared taxes and other ARPA or state funding
would be factored into a community's eligibility
percentage. He explained that communities that may have
been hit harder per capita would be able to get a piece of
the pie comparable to some of the "leviathan" lost revenue
sections.
9:54:46 AM
Representative LeBon stated his understanding that lost
revenue was a primary factor for determining who received
the grant funding. He asked if his community would be
disadvantaged in the formula if it did not have tourism,
loss of cruise ship revenue, and other associated items.
Mr. Anderson responded that the issue would have to be
addressed when there was more communication between OMB,
the Senate, and the department to ensure the distribution
was equitable to all communities.
Representative LeBon remarked that some communities relied
heavily on property taxes. He noted that rates had remained
static, and the collection of property taxes had not
materially changed over the past year or two. He stated
that if a community did not have a sales tax or other
revenue process, they relied on property taxes. He
commented there was a mechanism to treat communities with
equality or equity if they did not have a sales tax
program.
Vice-Chair Ortiz addressed the federal community relief
funding. He stated that the $80 million in grants to local
governments to offset lost revenue was intended to bring
relief to communities that had lost significant sales tax
revenue due to a loss of the tourism season. He highlighted
that in prior federal relief packages, resources had not
been available for lost revenue. He stated his
understanding that it was possible to use some ARPA
resources to backfill lost revenue including lost sales
taxes. He thought the intent was to assist communities hit
hard by sales tax revenue losses in relationship to COVID
and loss of tourism.
9:57:31 AM
Representative Wool stated his understanding that the $80
million could be used to fill gaps left due to various
shortfalls in other funding formulas. He knew there had
been various formulas from the federal government and the
state had distributed funding through an RPL [Revised
Program Legislative] process, which used a formula based on
lost revenue instead of per capita. He knew there had been
some discussion that some communities without a sales tax
(e.g., Fairbanks) did not fair as well even though they may
have been impacted. He stated the other ARPA funds for
communities were strictly per capita; therefore, Fairbanks,
Anchorage, and some large communities faired alright. He
furthered that communities like the Denali Borough with a
low population did not have fish landing tax or cruise ship
head tax and fell in a hole of not receiving sufficient
funding; however, those communities faired alright under
the distribution of CARES funding.
Representative Wool wondered if the ARPA grant program
would consider all of the funding previously received by
communities to determine where it could assist. He thought
the funds should be able to fill gaps. He remarked that
none of the funding mechanisms that had come around were
perfect - some helped based on population, some helped
based on lost cruise ship tax, and some helped based on
lost sales tax and other. He hoped the $80 million could be
used in a more customized way to help communities for a
particular need based on past funding they had received.
Mr. Anderson stated it was the hope and it would take
cooperation between both legislative bodies, OMB, and the
department to work out the specifics related to equity.
Co-Chair Foster shared his intent and hope to avoid using
the one-time $1 billion in ARPA funds to create new
programs that would result in recurring future obligations.
He looked at UGF replacement funding of $410 million at the
bottom of page 4 of the document. He detailed that $235
million of the total had been set aside for FY 21 capital
items and $83 million had been used to offset FY 22
operating expenditures.
Mr. Anderson added that he would address the UGF swaps for
the $235 million in the operating supplemental section.
Co-Chair Foster continued speaking about UGF replacement
funds on the last page of the document. He highlighted a
$91.5 million swap with UGF debt service funds for FY 22.
The funds could be used to offset money being paid to
service debt for correctional facilities including the
Goose Creek Correctional Center and a facility in
Anchorage. He briefly addressed community relief funds of
$124.5 million. The total included $42 million for lost
cruise ship head tax in FY 21 and FY 22.
Co-Chair Foster discussed tourism relief funding totaling
$30 million. He detailed that a portion [$20 million] would
go to ARDORs (economic development entities throughout the
state). The remaining $10 million would go to the Alaska
Travel Industry Association (ATIA).
Co-Chair Foster highlighted that $30 million in ARPA funds
would go to small businesses in the form of grants to
offset lost revenue. Additionally, $30 million would go to
nonprofits in the form of grants to offset lost revenue.
There was $310 million allocated for capital including $75
million in ARPA funds and another $235 million already
accounted for as UGF offset. He relayed the governor's
proposal had included $325 million. He noted the difference
between the two totals was not an apples-to-apples
comparison because the CS allocated 70 percent to the
current budget. He highlighted that the full 100 percent
would be a higher number. Additionally, it was necessary to
add in the funding from the inflexible part of the federal
funds.
10:05:03 AM
Co-Chair Foster summarized the expectation of receiving
about $1.9 billion in ARPA funding, of which about $1
billion had flexible spending. He asked Mr. Anderson for
verification that $112 million for broadband was not
included in the $310 million for capital projects.
Mr. Anderson agreed. He elaborated that [the U.S] Treasury
had indicated that $112 million set aside in the
Congressional bill for infrastructure related to remote
education, work, and other. He detailed that Treasury had
ruled the $112 million was specifically for broadband
expansion. He explained the capital budget would need to
reflect $112 million for broadband only.
Co-Chair Foster explained that while the document showed
$310 million set aside for capital, the actual amount was
higher because the $310 million only reflected the flexible
portion or 78 percent of the $1 billion.
Representative LeBon highlighted the slippery slope of
using the words "lost revenue." He stated that communities
had suffered economic setbacks from the COVID crisis
including employment losses and the closure of businesses.
He referenced many communities relying on property taxes as
a primary revenue source and explained there would be some
property tax defaults and inability for individuals and
businesses to pay their property taxes. He thought it
should all be part of the lost revenue debate.
Representative Josephson stated his understanding that in
order to use the $1 billion in CSLFRF funding, it was
necessary to show a shared tax or state tax implication. He
thought the property taxes referenced by Representative
LeBon sounded like a local lost tax rather than a shared or
state tax loss. He asked if he was accurate that it was one
of the difficulties in Representative LeBon's suggestion.
Mr. Anderson answered that OMB was waiting on better
clarification on the term "state lost revenue" included in
the Congressional bill. He explained there had been a
question about the community portion under CSLFRF, which
had yet to be answered.
10:08:26 AM
Representative Josephson looked at the nonprofits line on
page 5 of the document (also located on page 61 of the
bill). He asked whether the grants to nonprofits line also
included funds to assist in additional burden due to surges
in need of service.
Mr. Anderson replied that the grants to nonprofits was very
similar to the FY 21 capital supplemental item, which would
be worked out in more detail as the process progressed. The
issue would take collaboration between the two legislative
bodies, OMB, and the department. The factors should be
taken into consideration for the management of the program.
Representative Josephson asked whether the governor
intended to ask for assistance for public defenders to
provide parity with money the legislature provided to the
district attorney.
Mr. Anderson replied that he had not heard anything about
the possibility. He deferred to the Legislative Finance
Division (LFD) for further detail if desired.
Co-Chair Foster remarked that he did not recall seeing any
governor's amendments adding more funding for public
defenders. He noted that LFD staff were nodding in
agreement.
Representative Josephson referenced domestic violence
relief funding. He believed the CS did a good job restoring
lost federal funding. He discussed that the state had begun
cutting grants to domestic violence shelters in FY 18,
which he characterized as an unfortunate policy call. He
asked for verification that the CS did not remedy the lost
state funds.
Mr. Anderson answered that it was his current
understanding.
10:10:53 AM
Representative Wool referred to the $75 million in ARPA
funds allocated to capital projects [at the bottom of page
5]. He asked if the funding was for things like water,
sewer, and broadband. He asked if there were rules attached
to the funding.
Mr. Anderson answered that the $75 million in CSLFRF funds
for the capital budget were reserved for sewer, water,
and/or broadband.
Co-Chair Foster added that how the money would be spent
would be determined in the capital budget process.
Representative Carpenter referenced the $1.4 million UGF
capital outlay for troopers under the Department of Public
Safety [that had been denied by the subcommittee]. He
highlighted the $410 million [in UGF replacement] coming
from the federal government. He asked if there was room
withing the federal funds to find $1.4 million for public
safety.
Co-Chair Foster answered that the committee could certainly
discuss the issue currently or it could be addressed in the
amendment process. He believed Representative Carpenter
made a good point about the ARPA funding coming in. He
explained that during the budget subcommittee process there
had been a lot less clarity in terms of the incoming
federal funds and how much the state could use to offset.
He thought that the committee could be more open to the
issues as more information was received. He opened the
question up to the DPS subcommittee chair, Co-Chair
Merrick.
Co-Chair Merrick replied that the $1.4 million capital
outlay was for tasers and different equipment for troopers
that were not hired.
10:13:15 AM
Co-Chair Foster relayed that he was hoping to allow the
public to get a better understanding of the changes in the
CS compared to the governor's budget. He highlighted some
of the changes in the bill. The CS added $3.3 million for
public broadcasting, $450,000 for Alaska Legal Services to
maintain flat funding, and $370,000 for the Kuskokwim ice
road starting in Bethel. The CS did not contain any
education formula funding as early and forward funding had
been included in a separate bill. The bill added $5 million
for Pre-K. Under DHSS, $3.4 million for a tribal compact
regarding child welfare using recidivism funds. The bill
reversed the governor's proposal to use $16 million in
AMHTA funds and used UGF instead. Under DOL, the chief of
staff position was removed and the Janus funds of $20,000
were restored. He added that the CS reinstated the
structure and funds that had been vetoed in FY 21. Under
DPS, the CS denied $1.4 million in capital outlay for
troopers and $1.4 million for funding vacant trooper
positions. The CS added $210,000 UGF for two tax auditor
positions under DOR. Under DOT, the AMHS was forward funded
for 18 months primarily with CRRSA funds and some UGF. The
CS accepted the governor's $20 million decrement to the
University budget and backfilled $15.7 million for lost
revenue relief at a net decrease to the University of $4.3
million.
Co-Chair Foster noted the bill did not contain a PFD; the
governor had a separate bill, and the committee may hear a
bill on the topic later in the week. He imagined the PFD
would be taken up during the amendment process in committee
and on the House floor.
10:16:07 AM
Co-Chair Foster continued to highlight the major changes in
the CS. School bond debt and REAA were funded at 100
percent. The CS fully funded community assistance using
$21.3 million in FY 21 and $17 million in FY 22 to bring
the fund back to its fully capitalized level of $90
million. The CS accepted the governor's proposal to use $60
million in AIDEA reserves. He noted it had been determined
later that the number needed to be $114 million. He stated
the issue would be taken up during the amendment process.
The CS added $1 million for the redistricting board.
Co-Chair Foster moved to ARPA funding highlights. The CS
included $6 million for VOCA. He detailed that the CS used
70 percent of the ARPA funds for the current budget and 30
percent for the following year. The CS allocated $125
million to community relief, $30 million to small
businesses, $30 million to small businesses, $30 million to
nonprofits, and a minimum of $310 million in capital funds
(the inclusion of broadband funding increased the capital
number to $420 million). He asked if there were any
questions prior to moving to the capital and operating
items in the supplemental budget.
Representative Carpenter asked about the assessment of
where the budget put the state in regard to the deficit.
Co-Chair Foster replied that the budget was below the
adjusted base of the previous year by $197 million. He
believed the budget was a good deal below the budget passed
the previous year. The budget could be compared to the
enacted budget from the previous year, the management plan,
and the adjusted base. He explained the adjusted base was
the hardest to get under. He reiterated that the budget was
below the adjusted base by $197 million. He noted that the
governor's budget used $60 million in AIDEA reserves and if
the legislature swapped that fund source with UGF, it would
mean the budget was $137 million below the adjusted base.
Additionally, the same applied for school bond debt if the
legislature did not use Medicaid lapsing funds it would
also impact the numbers. He asked his staff for any
additional comment.
10:19:39 AM
Mr. Anderson confirmed that the current CS for FY 22 was
$197.5 million under the FY 21 adjusted base. He elaborated
that the way the governor had funded his budget would have
required a small draw. The CS was $233.7 million under the
governor's budget. There was a small surplus in the current
CS prior to consideration of the PFD. He stated it could
also be compared in the spring forecast and any increased
revenues.
Representative Carpenter stated his understanding that the
CS was roughly $200 million [below the adjusted base]. He
noted the legislature had not yet had conversations about
new revenue measures. He referenced the deficit of around
$1 billion. He asked if the goal was to roughly fix the
deficit by approximately $200 million with $1 billion in
federal funds coming in. He surmised that the CS would only
dedicate about $200 million in debt reduction.
Co-Chair Foster answered that it was in comparison to the
prior year's numbers. He asked Mr. Anderson to elaborate on
the surplus.
Mr. Anderson replied that he did not have the surplus total
on hand. He agreed that Representative Carpenter was
correct that the CS only designated $410 million UGF swap
to create room [inaudible]; for FY 22 the number was $175
million. He stated it was a decision for the legislature to
determine how and where to use the funds and how to balance
what the legislature had chosen for UGF swaps to take care
of the necessary items versus money going directly to take
care of communities and nonprofits that could not be used
toward a surplus or paying down the deficit.
10:22:56 AM
Co-Chair Foster asked to hear from LFD. He knew LFD had
been working to identify the surplus, which had been a bit
of a moving target because it depended what ARPA funds were
used to offset [other funds]. Initially the issue was that
revenue had been a moving target. He noted that the spring
revenue forecast had provided a better idea. They were
working to pin down the revenue number in order to
determine how much could be applied to the PFD for example,
and how much the legislature may want to draw from the
Constitutional Budget Reserve (CBR) or Permanent Fund
Earnings Reserve Account (ERA).
Representative Carpenter looked at the high level picture
and stated the document did not include a line item
specifying how much would be spent on deficit reduction. He
remarked it was not clear to him or the public that the
legislature was dedicating a certain amount of money to
reduce the state's deficit by a given amount. He was
curious what the thinking was when the state was taking in
$1 billion in federal funds and one of spending
requirements was reducing the deficit. He stressed that the
deficit had to be addressed somehow. He stated that the
deficit reduction would either come from revenue from tax
of some sort or in reductions to services the state did not
have enough funding to pay for in the long-term. He
wondered if [federal] funds would help bridge to either of
the solutions. Alternatively, he wondered whether the money
would be spent only on services, which would result in
kicking the can down the road until the federal funding was
gone.
10:25:25 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
provided remarks on the conversation topic. He explained
that between the CS and the education funding bill, not
including the capital budget or PFD, there was a surplus of
about $640 million. The governor's capital budget was about
$62 million, which included over $100 million of Alaska
Housing Finance Corporation (AHFC) bonding. He noted the
bill had not been heard by the committee. He estimated that
the capital budget could potentially use up to $200 million
of the $640 million surplus. He elaborated that on the
higher end, there would be $440 million of the surplus
remaining for a PFD before draws from another source would
have to be found.
Mr. Painter addressed Representative Carpenter's question
on the amount used for debt reduction in FY 22. He
referenced the $83 million of UGF swap [with ARPA funds] in
FY 22 and $91.9 million UGF debt service swap [with ARPA
funds] for FY 22 [at the bottom of page 4 and top of page 5
of the document]. Combined, the total was about $175
million for deficit reduction in FY 22.
Representative Wool stated that he did not really know what
it meant when people said the state's deficit $1 billion.
He noted that the CS and the governor's budget were within
$200 million of each other. He remarked that the deficit
jumped out when looking at a statutory PFD at a total of $2
billion. He stated that the PFD was not addressed in the
CS, and it included a $600 million surplus, some of which
would go to a capital budget and some would go to a PFD. He
continued that if it was enough of a PFD to satisfy
legislators and the governor, there would be no deficit;
however, if it was not enough, the legislature would have
to find more funds in the CBR; or in the ERA, which he did
not support. He stated that without the PFD as a budget
item, there was no deficit. He remarked that it was even
more difficult to put a number on it because there was
currently no PFD number.
Co-Chair Foster addressed Representative Wool's question
about whether there was a deficit. He stated that even when
backing out the $175 million in federal funds, the CS was
still below the prior year budget by almost $200 million.
He considered the surplus of $640 million and backed out
the federal funds used to offset UGF, the money used for
the AHFC bond proposed by the governor, and the ARPA funds,
which still resulted in a surplus. He noted the scenario
assumed not paying a PFD. He stated that Representative
Wool was saying there was no deficit, it just depended on
the size of the PFD. He played devil's advocate and
considered the perspective of Alaskans who wondered why the
PFD was playing second fiddle to everything else. He
highlighted a belief that the PFD should be paid out at the
start; therefore cuts [to government services] were
necessary. He stated that the issue all depended on how a
person saw the deficit being calculated.
10:30:30 AM
Representative Rasmussen asked how much the state had
received in royalties for FY 21 and the anticipated amount
in FY 22.
Mr. Painter answered that he did not have the numbers on
hand.
Co-Chair Foster moved to the supplemental budget items. He
shared that many of the supplementals had been submitted in
the governor's budget. Additionally, there were some ARPA
supplementals. He asked Mr. Anderson to provide detail.
Mr. Anderson referenced two documents titled "Capital
Supplementals" and "Operating Budget FY21 Supplementals"
dated 4/27/21, distributed by Co-Chair Foster's office
(copy on file). He relayed that the documents had
previously been one document the committee had received the
previous week.
Representative Carpenter asked for clarification on the
documents Mr. Anderson was speaking about. He noted he had
three documents, two with the same name.
Mr. Anderson clarified that the correct "Operating Budget
FY21 Supplementals" document included columns labeled
"item" and "request." The addition of the columns allowed
him to quickly reference the items. He explained that the
"request" column [in the Operating Budget FY21
Supplementals document] and the "requested" column [in the
"Capital Supplementals" document] referred to where each
item came up in the conversation about being added to HB
69. Identifiers included: governor's request, ARPA (with
limited flexibility, original governor's supplemental
items, and House Finance Committee changes (labeled "(H)FIN
ARP." [note: there was a last identifier "(H)FIN" discussed
by Mr. Anderson at approximately 10:35 a.m.]
Mr. Anderson pointed to the document titled "Operating
Budget FY21 Supplementals" and addressed item 5 for the
Department of Corrections institution management under the
director's office. He detailed there was a fund source swap
of $5 million UGF with $5 million in federal funds. He
explained that the references added up to the $235 million
UGF swapped with CSLFRF funds [previously discussed in the
document titled "FY22 House Committee Substitute (CS1)
Summary"]. He highlighted that the document showed where
the CS replaced funds. He explained that the method had
been used because the governor's HB 81 had included an
unallocated fund source swap, specifying the legislature
would give OMB the authority to determine the funds at a
later time. He elaborated that Legislative Legal Services
had advised that the method was not sound practice and
could open the legislature to the risk of a lawsuit.
Legislative Legal had recommended a line item swap to show
OMB and the governor's office where the legislature wanted
to swap fund sources. He explained that the fund source
swap items in the CS were large pots of money in an effort
to avoid a "nickel and dime" approach.
Mr. Anderson moved to item 30 on page 2 related to the
Alaska Psychiatric Institute with the identifier "(H)FIN."
He explained the identifier meant the change was a House
Finance decision. He detailed that the governor had
requested a supplemental item using $6 million of AMHTA
reserve funds to fund the Alaska Psychiatric Institute
(API). He elaborated that the CS swapped all AMHTA reserve
funds used in the governor's proposed budget with UGF.
10:36:04 AM
Mr. Anderson relayed he would not go through each of the
line items unless requested by the committee. He moved to
the FY 21 "Capital Supplementals" document. He remarked it
was untraditional to include capital supplemental items in
the operating budget, albeit it was becoming less and less
untraditional. He explained that there were certain things
that worked better to roll into one supplemental with
operating and capital items because of the relationship FY
21 had with the FY 22 budget due to COVID funding including
CARES, CRRSA, ARPA, and the Elementary and Secondary School
Emergency Relief Fund (ESSER). He added that some of the
capital items had not been funded the prior year. He
explained it had been easier to include all capital budget
items (that were easily taken care of) in one location.
Mr. Anderson referenced the "Capital Supplementals"
document and explained the identifiers under the
"requested" column. The identifiers were the same as the
ones used in the operating supplemental document, with the
addition of one new identifier shown on lines 13 and 14 on
page 2 labeled "Gov/(H)CS Mod." He explained the governor
had designated a different fund source for the two
Department of Environmental Conservation capital
supplemental items. The CS swapped the funds with the
traditional AHFC dividend funding source per direction by
the co-chairs. The remainder of the capital items included
were mostly governor items that had been easy to accept
with no major questions.
Representative Josephson asked about the $4 million the
Department of Law sought for the recruitment and housing of
prosecutors. He stated that the governor had wanted to use
Higher Education Fund money. He wondered where the request
ended up and thought it would have been included in the
supplemental.
Mr. Anderson answered that the item was not currently
included in the budget. He noted that the item was still
out there for consideration. He relayed there had been
numerous questions about whether DOL should be in the
housing industry. He detailed that as the budget increment
had been written, DOL would own and operate the housing.
Co-Chair Merrick interjected that the item was being
considered for the FY 22 capital budget.
10:40:06 AM
Representative LeBon looked at lines 25 and 26.
Vice-Chair Ortiz asked if Representative LeBon was
referencing the "Capital Supplementals" document.
Representative LeBon pointed to lines 25 and 26 of the
"Capital Supplementals" document related to the AHFC HOME
Investment Partnership Act in the amount of $5 million
[line 25]. He asked if the funding source was prior COVID
funding receipts or ARPA. He asked how AHFC utilized home
ownership assistance. He asked if it was supplementing
mortgage or rent payments.
Mr. Anderson deferred the question to LFD.
Mr. Painter answered that the funding was an ARPA
appropriation. He relayed there had been a previous RPL for
similar funds from CRRSAA; the bill included a carryforward
of the funds. He clarified the increments referenced by
Representative LeBon were associated with new funds in
CRRSA the governor submitted as a separate amendment. He
explained the funds were not included in the governor's
ARPA bill because he had already submitted it as an
amendment; therefore, the committee added the governor's
amendment to the bill. He did not know how AHFC planned to
administer the program. He remarked that nationally there
had been discussion in many states about how the program
would work because it was a new funding source. He believed
someone from AHFC could answer the question.
Representative LeBon stated that the devil was in the
details. He looked at the home ownership assistance
increment [on line 26]. He asked if the state would be
helping people to purchase a home and stay in a home.
Additionally, he wondered if the state would look to see if
there was a claim made on the money by a homeowner. He
stated it could be statewide and was not targeted for one
community. He highlighted that AFHC was responsible for
underwriting mortgages statewide. He asked if a homeowner
was required to be in default in order to receive
assistance. He wondered whether a homeowner was ineligible
for assistance if they had been able to maintain their
current payment to protect their credit rating but had
struggled in other ways. He noted he was not looking for an
answer at present, but the increment brought forward the
questions.
10:43:19 AM
Representative Carpenter looked at line 77 under the
"Operating Budget FY 21 Supplementals" document showing a
reduction of $21 million of other funds. The increment was
classified as "(H)FIN ARP." He observed that the increment
related to Commercial Passenger Vessel (CPV) tax. He asked
for an explanation related to the fund source.
Mr. Painter clarified that item 77 should be labeled as
governor [instead of (H)FIN ARP]. The item was part of the
governor's budget, correcting an error in the FY 21
appropriation bill. He explained that the FY 21 operating
budget inadvertently funded the incorrect year for the
shared taxes for the CPV tax. He detailed that instead of
funding the calendar year 2020, the budget inadvertently
funded calendar year 2019 for the second consecutive year.
Item 77 corrected the error. He furthered that in calendar
year 2020 there were no cruise ship sailings, resulting in
a reduction of $21.2 million. The House Finance bill used
ARPA funding to backfill lost revenue, whereas the
governor's bill had only included the reduction due to
correction of the error from the previous year.
Representative Wool referenced lost revenue from cruise
ship gambling receipts. He asked where the money was
normally used. He wondered whether it was being made up
with federal funds.
Mr. Painter answered that it was a UGF fund source that was
allocated various places determined by the legislature. He
detailed that the funding was deposited into the General
Fund in FY 20 and in some years, there had been proposals
to use the funds in the Capital Income Fund or another
source. He explained it was included in the broader
calculation of lost revenue as it was a UGF source.
Co-Chair Foster shared that he wanted to give members time
to look over the documents. He relayed members could ask
additional questions during the afternoon meeting. He
proposed pushing the amendment deadline to the following
day at noon with the intent to take up amendments on
Thursday.
10:47:57 AM
Representative Thompson appreciated the additional
information provided during the meeting and believed it was
helpful for the public process.
Co-Chair Foster thanked Representative Thompson for making
the request [to hear additional information]. He believed
it was important for the public to understand the work
being done by the legislature.
Representative Wool asked what CSLFRF stood for.
Mr. Anderson replied that CSLFRF stood for [Coronavirus]
State and Local Fiscal Relief [Recovery] Funds.
Mr. Anderson responded to a question [that was inaudible]
by confirming CSLFRF was one fund source from the federal
legislation that had passed.
Representative Edgmon asked for verification CSLFRF was the
$1 billion [in federal funding coming to Alaska].
Mr. Anderson confirmed that the funding was $1 billion in
what some people termed to be discretionary funding.
Representative Wool understood the guidance was coming out
from the federal government on May 10 [11]. He interpreted
that the words state and local [in the acronym CSLFRF]
implied it was possible the funds could be used to offset
local lost revenue in addition to state lost revenue. He
referenced the $80 million [in grants to local governments]
for community relief. He thought it sounded like the
distribution rules may allow funding to offset a local
revenue loss.
Mr. Anderson answered that everyone was awaiting
clarification on the issue. He noted there was a bit of
concern about how much to trust the current information on
the topic. He shared that he had spoken with OMB the
previous day and highlighted an example related to bed tax.
He detailed that communities had lost bed taxes due to lost
tourism. He noted there was not a statewide bed tax. He
explained that rating the risk of allowing bed tax to be
used as lost revenue, there was a chance Treasury may
determine bed tax was not an allowable use of the funds,
which would mean communities would be responsible for
paying the money back. He explained there was currently
some caution on the parameters and OMB was trying to get
clarification and was working with LFD. He highlighted the
importance of collaboration between the legislature and
administration in terms of the sideboards the legislature
would implement for the grant programs.
HB 69 was HEARD and HELD in committee for further
consideration.
HB 71 was HEARD and HELD in committee for further
consideration.
10:52:13 AM
AT EASE
11:14:46 AM
RECONVENED
Co-Chair Foster announced that LFD was available to help
committee members with the amendment writing process. He
noted there were no bills on the afternoon meeting. He
intended to answer any additional questions on the
operating budget that afternoon. He handed the gavel to Co-
Chair Merrick.
11:15:55 AM
AT EASE
11:15:59 AM
RECONVENED
HOUSE BILL NO. 92
"An Act relating to borrowing in anticipation of
revenues; relating to revenue anticipation notes;
relating to line of credit agreements; and providing
for an effective date."
11:16:15 AM
Representative LeBon MOVED to ADOPT Amendment 2, 32-
GH1707\A.3 (Wallace, 4/23/21) (copy on file):
Page 3, following line 5:
Insert a new bill section to read:
"*Sec. 7. AS 43.08.050 is amended by adding a new
subsection to read:
(b) Within 30 days after an agreement to borrow money
is executed under this chapter, the commissioner shall
notify the Legislative Budget and Audit Committee that
an agreement has been entered into and include
(1) the financial terms of the agreement; and
(2) an explanation for the determination that the
agreement was in the best financial interests of
the state."
Renumber the following bill sections accordingly.
Representative Rasmussen OBJECTED for discussion.
Representative LeBon explained the amendment would require
the Department of Revenue (DOR) report to the Legislative
Budget and Audit Committee on the details of any agreements
entered into related to current asset financing, a line of
credit, working capital loans or whatever process may
follow. He explained that the notification would occur
within 30 days of the execution of an agreement. He
detailed that the report should include a summary of the
financial terms of the agreement and an explanation for the
determination the agreement was in the best financial
interest of the state.
11:17:32 AM
Co-Chair Merrick clarified the amendment number was 32-
GH1707\A.3.
Representative Rasmussen WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment 2 was ADOPTED.
11:18:07 AM
Representative LeBon MOVED to ADOPT Amendment 1,
32-GH1707\A.2 (Wallace, 4/22/21) (copy on file):
Page 1, line 2:
Delete "line of credit agreements"
Insert "short-term borrowing"
Page 1, line 12:
Delete "line of credit agreements"
Insert "other forms of short-term borrowing"
Representative Rasmussen OBJECTED for discussion.
Representative LeBon explained that the amendment cleaned
up bill language. He detailed that page 1, line 2 of the
amendment would delete the phrase "line of credit
agreements" and insert the phrase "short-term borrowing."
Additionally, page 1, line 12 would delete the phrase "line
of credit agreements" and insert the phrase "other forms of
short-term borrowing." He stated the reason for the clean
up was the legislature did not know precisely what pathway
the DOR would follow to secure short-term financing options
such as lines of credit or other short-term borrowing
agreements.
Co-Chair Merrick clarified the amendment number was 32-
GH1707\A.2.
Representative Rasmussen asked for verification that the
other forms of short-term borrowing would encompass the
line of credit agreements.
Representative LeBon replied in the affirmative. He
explained that the amendment broadened the options. He
detailed there were a variety of municipal market and bank
options for short-term borrowing with a variety of
flexibility, interest rates, and the ease in which
temporary financing was secured for the state's working
capital needs. The language change was to give DOR as much
flexibility as possible to achieve its goal.
Representative Rasmussen asked for verification that line
of credit agreements would be included under one of the
other forms of short-term borrowing.
Representative LeBon replied affirmatively. He interpreted
the phrase short-term borrowing to be broad enough to
include a line of credit agreement.
Representative Rasmussen WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment 1 was ADOPTED.
11:20:50 AM
Representative Rasmussen appreciated the amendments to make
the legislation a bit stronger. She thought the bill was an
important tool to give DOR to enable it to manage the
financial interests of the state in the best way possible.
Co-Chair Foster MOVED to REPORT CSHB 92(FIN) out of
committee with individual recommendations and the
accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
CSHB 92(FIN) was REPORTED out of committee with a "do pass"
recommendation and with one new indeterminate fiscal note
from the Department of Revenue.
11:21:36 AM
AT EASE
11:24:47 AM
RECONVENED
HOUSE BILL NO. 55
"An Act relating to participation of certain peace
officers and firefighters in the defined benefit and
defined contribution plans of the Public Employees'
Retirement System of Alaska; relating to eligibility
of peace officers and firefighters for medical,
disability, and death benefits; relating to liability
of the Public Employees' Retirement System of Alaska;
and providing for an effective date."
11:24:53 AM
Co-Chair Merrick OPENED public testimony.
11:25:19 AM
JEFF JONES, SELF, KETCHIKAN (via teleconference), testified
in support of the legislation. He shared that he was a fire
medic and had been with the Ketchikan Fire Department since
2007. He stated a return to a DB [defined benefit] plan
could help the state and municipalities mitigate the cost
the associated with training and turnover with existing DB
plans. He provided information about the various positions
he had held with the [fire] department. He stated he was
not irreplaceable; however, it would be a long time before
someone new could receive the numerous certifications he
had obtained. He did not want to relocate his family to
another state with a DB program. He remarked it was well
known that firefighters working after the age of 55 put
them in greater risk of dying. He wanted to be able to hold
his grandchildren and enjoy his retirement. He started his
career when he was 28 years old and at 58, he would have 30
years with the department, but not enough to retire. He
emphasized that responding to a fire at that age put the
employee, coworkers, and the public at greater risk. He
believed the relatively small increase for the DB program
would be money well spent when considering the value of
retaining employees throughout their career. He encouraged
the committee to pass the bill.
11:27:24 AM
GERARD ASSELIN, CAPTAIN, ANCHORAGE POLICE DEPARTMENT,
ANCHORAGE (via teleconference), shared that he is a
lifelong Alaska resident. He supported the legislation. He
had been honored to serve his friends and neighbors for the
past 23 years with the department. He provided information
about his job duties. He worked with over 200 officers
providing critical service around the clock. Additionally,
he oversaw the field training program. He saw the direct
impacts of the recruitment and retention challenges that
existed within the profession in Alaska. He highlighted
that the department was fundamentally and increasingly in
search of qualified, educated professionals to work in the
career. He stressed that demands on the policing profession
had increased, making it more difficult to recruit people
into the profession and causing officers to reevaluate
their desire to stay. He detailed that after officers
received training, they became a valuable commodity.
Mr. Asselin shared that recruitment had become more
competitive and challenging than ever before. The
department saw officers leave on a monthly basis for
departments in other states. He spoke to the loss of
productivity that occurred with academy and field training
and the proficiency that came with experience. He witnessed
the loss of productivity daily with the department's
training programs. He reported that over the past month he
had interviewed 20 patrol sergeants and almost all had
vocalized the number one problem was young officers and
recruitment and retention. The situation led to
inexperience and a loss of productivity. He appreciated any
tools that could be given to improve recruitment and
retention for the department. He stated that the bill
provided an opportunity to put Alaska in a competitive
position to maintain the best public safety professionals.
He urged support of the bill.
11:31:14 AM
JODIE HETTRICK, FIRE CHIEF, ANCHORAGE FIRE DEPARTMENT,
ANCHORAGE (via teleconference), spoke in support of the
bill. She detailed that the Anchorage Fire Department was
the largest in the state with about 400 employees. She
shared that one of the department's biggest stumbling
blocks for recruitment and retention of members was the
retirement system. The situation was compounded by members'
ineligibility for social security. She explained that the
department was trying to get people to spend 20 to 25 years
serving the community and when they left, they only had a
401k. She explained it had significantly contributed to a
reduction in recruitment opportunities. She reported that
the department's application numbers were approximately 25
percent of what they had been pre-Tier IV. Additionally,
employees were leaving typically within their first five to
seven years. She shared that an employee had reached his
benchmark for his 401k under the Tier IV system, so he
retired at the age of 34 after working with the department
just under 10 years. She explained it was an investment of
close to $2 million the municipality had put into the
individual for training and other and it had gone right out
the door. She detailed that the department was not only
losing employees to other states, but to retirement because
they were comfortable living at a fairly low wage without
having to deal with the negative effects of a career in
emergency services.
Ms. Hettrick stated that without an adequate retirement
system in place, it would be even more difficult to recruit
and retain valuable employees to serve the community. She
believed the bill went in the right direction and she
strongly urged support for its passage.
Representative LeBon referenced the retirement of the young
individual in Ms. Hettrick's example. He asked if the
individual had left the profession to seek other
employment. He remarked that retiring and drawing on a 401k
at the age of 34 would be very unusual. He wondered if the
individual had moved to another employer within the
profession or left the profession completely.
Ms. Hettrick answered that the specific individual had left
the profession entirely. The person had moved to a
community in the Lower 48 where he could live for much less
stable income. The individual had another career field in
woodworking and photography and would supplement his income
with retirement income. The department had never
experienced someone leaving that early for an official
retirement.
11:36:10 AM
ANGIE FRAIZE, OFFICER, COMMUNICATIONS OFFICER, ANCHORAGE
POLICE DEPARTMENT EMPLOYEES' ASSOCIATION, ANCHORAGE (via
teleconference), spoke in favor of the legislation. She
shared that the organization represented over 570 police
employees. She stated that the committee's support of the
legislation would directly and indirectly impact the
department's employees and the greater Anchorage area. She
shared it was her 20th year and she was eligible to retire
with a pension. Additionally, she loved the department and
was born and raised in Alaska. She emphasized that the
department was seeing its employees leave in droves after
their first five years. She relayed that the department
recruited a high number of military employees leaving the
military. She noted that the individuals were not from
Alaska and did not have extended family in the state, but
they were starting their families with the department. She
detailed that after about five years the officers started
having young children and were pulled away by family in the
Lower 48 and by lucrative offers from lateral departments
out-of-state offering more money and pensions. She
emphasized that the department was spending a substantial
amount on the employees. She added that the loss of
employees had resulted in a very young department. She
explained that it would have a huge impact on the
community. Additionally, due to the national narrative that
police were facing, professional, experienced, and educated
officers were needed.
She shared that there were only two officers left in the
department from her 2007 academy. She emphasized that the
department was hurting for experienced and professional
police officers. She hoped the committee considered
supporting the legislation.
Representative Rasmussen asked Ms. Fraize to speak to the
benefit a more experienced officer could bring in
situational awareness.
Ms. Fraize replied that there were many studies showing the
more education experience, the less force an officer used.
She noted it was a topic nationwide and fortunately the
department had not experienced the situation. She shared
that the department had a very junior patrol division and
over 80 percent had been there for three to five years. She
shared that when she had worked as an officer downtown, it
had taken her about five years to feel completely confident
in her handling of all situations. She explained that the
junior officers did not have the experience, through no
fault of their own. She stressed the need to continue a
highly educated and experienced department in order to
avoid seeing the community suffer like Ferguson and
Minneapolis.
Representative Rasmussen stated she found it astounding
there was only 20 percent of the department that had over
five years of experience. She observed that incoming
officers likely were not receiving the training they could
if there were more experienced officers serving as mentors.
11:41:18 AM
JUSTIN MACK, ALASKA PROFESSIONAL FIREFIGHTERS' ASSOCIATION,
ANCHORAGE (via teleconference), supported the legislation.
He shared that he had worked for the Anchorage Fire
Department for 10 years and currently served as a captain
for Fire Station 3. He relayed there was widespread support
for the bill within the organization of over 500
professional fire fighters and EMS personnel throughout the
state. The association had been advocating for a shared
risk solution where employees, employers, and the State of
Alaska shared a responsibility in addressing recruiting and
retention. He detailed that since the change to Tier IV,
there had been many unintended consequences. He stated that
perhaps the clearest consequence was the competitive
disadvantage Alaska faced in recruitment and retention. He
reported that the problem was widespread throughout the
state's fire departments. He pointed out that Alaska was
one of the only states to offer a mandatory defined
contribution (DC) for public safety employees.
Mr. Mack relayed other states had switched back from a DC
plan to a DB plan specifically to address the problems
currently happening in Alaska. The bill aimed to make
Alaska competitive in the hiring and retaining of public
safety employees. He stated it was a conservative plan
built by incorporating best practices of some of the most
successful plans in the country, including establishing a
minimum retirement age, removing DB medical, and using a
five-year average rather than a three-year average. He
remarked that the changes drastically reduced the state's
liability. He detailed that the plan also offered
mechanisms to address any adverse experience the plan may
have, including increasing employee and employer
contributions and withholding inflation proofing.
Mr. Mack stressed there was a significant cost of doing
nothing. He highlighted that too many public safety
employees had left the state who cited lack of retirement
as a primary cause. He stated that departments across the
state were hiring police, fire, and corrections officers
who would receive excellent training, yet had no long-term
plans to remain in Alaska. He informed the committee it was
becoming well known that Alaska employees were ripe for the
picking; the department received emails and flyers from
other states attempting to recruit its employees. Employers
were having to reinvest recruitment and retention dollars
several times over, which was wreaking havoc on public
safety budgets. He pointed out that the most talented
public safety officers were leaving the state. The
organization strongly supported the bill.
11:44:35 AM
NICK DAVIS, SENIOR CAPTAIN, ANCHORAGE FIRE DEPARTMENT,
ANCHORAGE (via teleconference), shared that he had about 17
years with the Anchorage Fire Department and was one of the
lead recruiters and testers for the department. He added
that he was in the Tier III retirement system. He detailed
that he had left for commercial fishing but had returned
for the Tier III defined benefits. He relayed it was one of
the only reasons he was in Alaska. He stated that his
retirement benefits kept him with the department. He
stressed it was very challenging to work in a fire station
where half the employees had retirement and half did not.
He underscored that the job was dangerous. He supported the
bill and plead with the committee to pass the legislation.
11:46:47 AM
JACOB WILSON, BUSINESS AGENT, ALASKA CORRECTION OFFICERS
ASSOCIATION, ANCHORAGE (via teleconference), spoke in
support of the legislation. He detailed that the
organization represented over 900 correctional officers
across the state. He shared that throughout his 10 years in
the job he had spoken with thousands of correctional
officers concerning their retirement and the reason they
came and left the profession. He emphasized that
correctional officers put their lives on the line every
day. He stressed that there was currently a recruitment and
retention crisis. He shared that one of the root causes was
the state's DC retirement system, which was not competitive
with other law enforcement retirement systems around the
country. He detailed that between January 2015 and January
2021, 650 correctional officers or just under 70 percent of
the total workforce had left the bargaining unit.
Mr. Wilson emphasized the high turnover had serious and
negative safety, security, and financial impacts on the
state. Every time an experienced officer left, the position
was backfilled with an inexperienced new officer. He
stressed there was significant cost to the state for
recruitment and training. He emphasized that hiring over
100 new recruits per year compromised safety and security
in the institutions. The DOC was not currently able to keep
up with demand for new officers. He reported that a study
published five years earlier found the institutions were
currently operating with insufficient staffing levels to
meet basic security operational requirements. The
legislation would help with recruitment and retention
problems. He stated the bill was a step in the right
direction. He reported that the Tier IV retirement system
did not offer enough incentive for officers to stay past
their five year mark. The association fully supported the
legislation.
11:49:36 AM
Co-Chair Merrick asked how the problems with recruitment
and retention lead to overtime.
Mr. Wilson replied there had been a substantial uptick in
overtime over the past five or so years. He explained that
the amount of mandatory overtime could result in 16 hour
days. He detailed officers serving 12 hour shifts could be
instructed to stay for four additional hours. Additionally,
officers being ordered to come in for work on their off
week had significantly increased over the last year. He
highlighted that COVID-19 illustrated the department's
understaffing.
Co-Chair Merrick asked Mr. Wilson to share the [written]
data with the committee.
11:50:48 AM
NICK CLARK, PARAMEDIC AND FIRE FIGHTER, FAIRBANKS FIRE
DEPARTMENT, FAIRBANKS (via teleconference), shared that he
is a Tier IV member and had been with the Fairbanks Fire
Department for almost 10 years. He reported that currently
34 out of 45 of the department's members were Tier IV. He
detailed that within nine years, the last seven Tier IV
members would be eligible to retire with their 25 years. He
elaborated that five of the Tier IV members were currently
in or moving into officer positions. He pointed out that
the top leadership of the department was about to be under
Tier IV. He shared that the academy had six new recruits
the past year, which was the largest group since the 1990s.
He shared that the department had hired four new members
and was on track to hire a total of eight in the current
year. He reported the department was running at least two
academies per year. Prior to Tier IV, the department ran
one academy every two years. He stated that Tier IV
employees who had left the department had lasted an average
of 2.3 years. The current Tier IV employees averaged 2.8
years with the department. He stressed the situation left a
large knowledge gap in the department. Additionally, it
cost the department approximately $120,000 in the first
year of bringing on a new recruit.
Mr. Clark explained that seeing so many people leave was a
morale killer. He reported that the candidate pool was
shrinking as people left the state. He relayed there was no
security with the Tier IV retirement, with no social
security, supplemental benefits system, and no chance of
successful retirement income. He shared that he had worked
with the department for nearly 10 years because he loved
Fairbanks and Alaska. Additionally, he was confident there
would be a return to a modified DB system. He wanted to
move away from Tier IV and improve things for future
generations. He urged the committee to pass the bill.
11:55:26 AM
Representative LeBon thanked Mr. Clark for calling in. He
referenced Mr. Clark's testimony that 38 members of the
Fairbanks Fire Department were in Tier IV. He asked if the
members were waiting for the legislation to pass to commit
to working for the department long-term. He asked if there
was a sense of what the response would be if the bill
passed.
Mr. Clark answered that the department had several
employees currently testing for jobs out-of-state. He
reported that many members were asking whether the bill
would pass and wanted to stay but were thinking about their
future. He believed the bill would help retain members. He
was confident the passage of the bill would give him more
security and help him feel more comfortable staying. He
stressed the turnover was hard on morale. He believed
members would stay.
Representative Thompson thanked Mr. Clark for calling in.
He asked how the large turnover within the department
impacted having experienced people move up the ranks in the
department. He asked if the department had enough
experienced members to move up to leadership positions.
Mr. Clark replied that there would be a big impact. He
reported there was currently one Tier IV employee in a
captain position and likely there would be a couple more in
the coming months. He explained that about half the captain
positions would be held by Tier IV members in the current
year. He noted that those four members had been with the
department the longest. He explained that beyond those
members, the experience gap dropped off substantially. The
knowledge the department was losing due to retirement and
the departure of employees was substantial. He stated the
situation would continue if turnover persisted.
Co-Chair Merrick CLOSED public testimony. She thanked the
testifiers for their service and testimony.
12:00:08 PM
Co-Chair Merrick asked to hear the Division of Retirement
and Benefits' perspective on the bill.
JIM PUCKETT, DEPUTY DIRECTOR, DIVISION OF RETIREMENT AND
BENEFITS, DEPARTMENT OF ADMINISTRATION (via
teleconference), shared that he did not have any prepared
remarks. He was available for questions.
Representative LeBon stated that the shared upside risk in
a DB program was capped at 10 percent for participants. He
noted the initial employee contribution rate was at 8
percent. He asked what the financial impact would be if the
ceiling was raised to 12 percent.
Mr. Puckett replied that the question should go to the
division's chief financial officer. He would follow up with
the answer.
Representative Josephson remarked that Buck, the state's
actuary, had stated the plan was around 99.3 percent
solvent in the past year. He asked if there was anything
that would change the number.
Mr. Puckett was not aware of anything that would change the
number. The division would hear an updated analysis the
following day and he would provide the information to the
committee.
HB 55 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster announced that the Legislative Finance
Division could help members with amendments.
Co-Chair Merrick reviewed the schedule for the following
meeting.
ADJOURNMENT
12:03:42 PM
The meeting was adjourned at 12:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 92 Amendments 1-2 LeBon 042221.pdf |
HFIN 4/27/2021 9:00:00 AM |
HB 92 |
| HB 69 FY21 Supp Transactions by Agency Cap 042721.pdf |
HFIN 4/27/2021 9:00:00 AM |
HB 69 |
| HB 69 21-04-26 House CS1 Summary.pdf |
HFIN 4/27/2021 9:00:00 AM |
HB 69 |
| HB 69 FY21 Supp Transactions by Agency Op 042721.pdf |
HFIN 4/27/2021 9:00:00 AM |
HB 69 |
| HB 55 Public Testimony 042721.pdf |
HFIN 4/27/2021 9:00:00 AM |
HB 55 |