Legislature(2021 - 2022)ADAMS 519
03/21/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB281 || HB282 | |
| Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 281 | TELECONFERENCED | |
| += | HB 282 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 21, 2022
2:08 p.m.
2:08:55 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 2:08 p.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; Cori
Mills, Deputy Attorney General, Office of the Attorney
General, Department of Law; Neil Steininger, Director,
Office of Management and Budget, Office of the Governor.
SUMMARY
HB 281 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 281 was HEARD and HELD in committee for
further consideration.
HB 282 APPROP: MENTAL HEALTH BUDGET
HB 282 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the agenda for the meeting. He
discussed the amendment process. The committee would
consider the language, supplemental, supplemental capital,
and capital amendments.
HOUSE BILL NO. 281
"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. 282
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making capital
appropriations and supplemental appropriations; and
providing for an effective date."
2:10:40 PM
^AMENDMENTS
2:10:45 PM
Co-Chair Foster MOVED to ADOPT Amendment L1, 32-GH2686\R.33
(Marx, 3/19/22) (copy on file) [Note: due to the length of
the amendment it is not included here. See copy on file for
details].
Co-Chair Merrick OBJECTED for discussion.
Co-Chair Foster asked his staff to explain the somewhat
technical amendment.
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
explained that the technical amendment including the
governor's supplemental operating language items intended
to be included in HB 281 version R, referred to as "House
Committee Substitute 2 (HCS2)." He explained the items had
been inadvertently excluded from the bill. He highlighted
that Section 15 pertaining to the Department of
Administration (DOA) extended authority for labor
negotiations and arbitration support through FY 25. Section
17(a) pertaining to the Department of Health and Social
Services (DHSS) provided FY 22 authority for $7.4 million
of the remaining Coronavirus Aid, Relief, and Economic
Security (CARES) Act relief funding. Section 17(b) added
$20 million more in Coronavirus State and Local Fiscal
Recovery Funds (CSLFRF) funding to the $20 million
appropriation made the previous year. He relayed that
beginning in FY 23 the authority needed to be transferred
to DHSS. Section 18 pertained to the Department of Law
(DOL) and funded judgements and settlements, excluding the
Alaska Psychiatric Institute (API) settlement Blanford v
Dunleavy. He noted an amendment associated with the
settlement was included later in the amendment packet.
Mr. Anderson continued to review Amendment L1. Section 20
pertained to the Office of the Governor and added $4.3
million to the Division of Elections and included a scope
change for elections worker wages. The amendment included
$50 million for the Disaster Relief Fund comprised of $34
million requested by the governor and an additional $16
million for funding of unanticipated costs associated with
recent disasters. Additionally, the amendment extended
spending authority for $7 million provided to Alaska
Seafood Marketing Institute (ASMI) the previous year
through FY 24. The remainder of the amendment was
conforming language.
Co-Chair Foster noted the items had been included in the
reports given to committee members but had not been in the
HCS2.
Mr. Anderson agreed.
2:15:09 PM
Representative Josephson observed that the $40 million on
page 1 of the amendment was identical to an increment shown
on page 6. He asked for verification the funds were being
rerouted to a new department.
Mr. Anderson replied affirmatively. He clarified that DHSS
had been divided into two departments [in 2022]. He
explained that for FY 22 budget items the department was
still DHSS, but in FY 23 it became the Department of
Health.
Representative Josephson referenced the [API] settlement
dollars previously mentioned by Mr. Anderson. He asked if
the committee substitutes did not list the settlements.
Mr. Anderson answered that it was a supplemental language
section that did not get included [in the committee
substitute], but it was included in the reports.
2:15:57 PM
Representative Carpenter asked about $792,000 provided in
Section 15 to be spent through June 30, 2025. He asked if
there was a history of forward or advance funding.
Mr. Anderson deferred the question to the Legislative
Finance Division (LFD).
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
relayed that the item originally been an FY 15 multiyear
appropriation extending through FY 22. He explained that
the department [DOA] had not yet concluded the work. The
governor's budget had extended the funding authority
through FY 23. He clarified that the item had been extended
a little farther [in HCS2] to avoid the need to extend it
again the following year if the funds were not all
expended.
Representative Carpenter referenced federal Coronavirus
relief spending in Section 17. He thought the funds had to
be spent by FY 24. He observed that the section extended
the funds through June 30, 2025. He asked if that meant it
still applied to FY 24 and was expendable.
Mr. Painter answered that the funds had to be spent by
December 31, 2024 (halfway through FY 25). He explained
that by providing the extension through FY 25, the
department would be able to spend the funds through half of
the fiscal year. He explained that to enable spending in FY
25, the entire year had to be included in the budget. He
noted the language could specify the funds were to be
expended by December 31, 2024.
Representative Carpenter looked at an increment on page 2,
line 24, appropriating $50 million to the Disaster Relief
Fund. He asked fund balance had been prior to the COVID-19
pandemic.
Mr. Painter replied that he did not have the number on
hand. He noted that the Disaster Relief Fund had not been
used for the COVID-19 crisis. He clarified the current
disaster funded with the appropriation was primarily the
2018 Anchorage earthquake in the amount of $26 million in
addition to other receipts. He explained that while the
Disaster Relief Fund had been used for some COVID-19
related things, the majority of the funding for COVID-19
had been federal. The negative fund balance was due to the
Anchorage earthquake.
Representative Carpenter asked about the fund's average
historic balance.
Mr. Painter answered a common amount was a deposit of $5
million per year in addition to whatever was needed to
catch up on past disasters. He explained that occasionally
when there had been a lapsing fund balance, there had been
a decision to deposit extra money in the account to ensure
enough funding for any disasters.
2:20:14 PM
Co-Chair Foster recognized Representative Rasmussen had
joined the meeting.
Representative Thompson asked about the [Disaster Relief]
fund balance. He asked if there was action taken annually.
Mr. Painter replied that generally the legislature included
an annual deposit of around $5 million in operating budget.
The legislature included funding in the supplemental when
funds were needed to catch up due to disasters. He stated
that generally it was necessary to appropriate money to the
fund annually.
Representative Thompson asked if there were personnel with
the job of tracking the funds. He did not understand why
the balance was not known.
Mr. Painter answered that the current balance needed $26
million for the Anchorage earthquake to avoid being in the
negative. He clarified that the current balance was
negative, awaiting the supplemental funds. The extra
deposit was to provide space for disaster expenses that had
not yet been spent.
2:21:49 PM
Representative LeBon asked if the $50 million was a deposit
into the state treasury. He asked if it went to a
designated account and if it was sweepable.
Mr. Painter replied that he did not know off the top of his
head whether the funds went into the General Fund. He
clarified that the funding was not sweepable because it
could be spent without further appropriation by the
Department of Military and Veterans Affairs. He noted the
funding was a mix of federal and general funds.
Co-Chair Merrick WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment L1 was ADOPTED.
2:22:41 PM
Representative Johnson MOVED to ADOPT Amendment L2, 32-
GH2686\R.24 (Marx, 3/19/22) (copy on file) [Note: due to
the length of the amendment it is not included here. See
copy on file for details].
Co-Chair Foster OBJECTED for discussion.
Representative Johnson explained the amendment would put
$495,000 back in the budget for the Blanford and Bellville
v Dunleavy settlement made by the state related to two API
doctors. She explained there could be a lasting
repercussion if the state did not pay its settlement fee.
She detailed there was a common misconception that the case
had only been against the governor and his former chief of
staff. She clarified the case had been brought against the
state and the damages were owed by the state. She
elaborated there was another misconception that if the
state did not pay the damages owed, the governor and chief
of staff would have to pay for the expenses personally. She
clarified that it was not true. She relayed an issue of
qualified immunity had been appealed and was dropped as
part of the settlement. She stated there was no assurance
the 9th circuit court would have followed the trial court;
it was not a decided issue. She remarked that being sued
was part of the price of doing business and being an
elected official of the state. She continued that the
$495,000 should be restored to ensure the state could
handle the litigation. She stated that anyone could be
named in a suit.
Co-Chair Foster stated that the individuals who would come
up short were the doctors, which he did not want to happen.
He highlighted his understanding that the ACLU supported
paying the funds. He noted there had been questions posed
about whether the funding could be paid in the operating
budget the following year. He did not know enough about it,
but it would give more time for the discussion to occur. He
asked whether the department wanted to comment.
2:26:12 PM
CORI MILLS, DEPUTY ATTORNEY GENERAL, OFFICE OF THE ATTORNEY
GENERAL, DEPARTMENT OF LAW, shared her concern with waiting
a year would be ending up with the same issue for the
state. She believed the ACLU would object to waiting as the
plaintiffs would not be assured to receive their payment
because the next legislature could make the same exact
decision. The department's concern was whether plaintiffs
would be willing to sit down with DOL to try to settle a
case where the state was the defendant if plaintiffs had no
surety the settlement would be paid.
Representative Josephson was not certain how he would vote
on the issue. He highlighted that a federal judge appointed
by former President George [H.W.] Bush found the governor
and his chief of staff as personally liable. He detailed
that the House Judiciary Committee chair had relayed in
subcommittee that he could not find another example in
history of a governor being held personally liable in the
same way. Additionally, the state could argue there was
joint and several liability and the other defendants should
participate in that. He referenced a statement made by the
amendment sponsor that paying the settlement was the price
of doing business. He clarified that the judge had made the
opposite finding that it was an egregious effort to get
sworn allegiance from people who did not have an executive
branch policy making obligation (i.e., a psychiatrist).
Representative Josephson thought Legislative Legal Services
left the issue up to the legislature as a policy call. He
noted that in the settlement document, although the state
and other plaintiffs did not admit wrongdoing, there was
language specifying that the state and executive officers
should not have done what they did. He stated there were
arguments for voting in favor and against the amendment.
Co-Chair Foster MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Johnson, LeBon, Rasmussen, Thompson, Wool,
Josephson, Ortiz, Merrick, Foster
OPPOSED: Edgmon
The MOTION PASSED (10/1). There being NO further OBJECTION,
Amendment L2 was ADOPTED.
2:31:18 PM
Representative Carpenter MOVED to ADOPT Amendment L3, 32-
GH2686\R.16 (Wallace/Marx, 3/17/22) (copy on file) (Marx,
3/19/22) (copy on file) [Note: due to the length of the
amendment it is not included here. See copy on file for
details].
Representative Josephson OBJECTED.
Representative Carpenter explained the amendment pertained
to Section 18, page 72, line 24 of the bill and related to
the supplemental fund transfers to the designated general
fund (DGF) accounts and the Higher Education Investment
Fund that were swept in the last budget cycle. He did not
believe it was an appropriate use of the state's funds at
present. The amendment would remove the funding from the
budget to fund the accounts. There were still questions
about whether the funds would be swept into the
Constitutional Budget Reserve (CBR). He was not certain the
legislature should put money into the accounts that may be
swept into the CBR when there were other things that could
be funded with the money. He stated his understanding that
programs funded from the accounts were fully funded and
there was not a need to put funding into the accounts at
present.
Representative Rasmussen believed that as long as the
Alaska Performance Scholarship was in place, the money
needed to be in the Higher Education Investment Fund. She
highlighted the legislature had heard about existing
workforce shortages from most departments and industries.
She believed predictability and stability in the funding
was necessary. She found it encouraging that the state was
looking to expand the Washington, Wyoming, Alaska, Montana,
and Idaho (WWAMI) program. She believed legislative support
and funding for the programs was needed. She was opposed to
the amendment.
Representative Wool agreed that the Higher Education
Investment Fund needed to be funded and to maintain a
balance. He remarked that his colleague to the left
[Representative Josephson] had introduced a bill to ensure
the fund was not swept in the future. He hoped the bill
moved forward. He stated the remaining funds were
repopulated by fees charged during the year. He was
apprehensive because there were numerous funds, and he did
not know the mechanics of them all. He wanted to maintain
the Higher Education Investment Fund balance. He stated
that some of the other funds like the Tobacco Cessation
Fund were repopulated with fees annually.
2:35:26 PM
Representative Josephson aligned himself with the two
previous speakers. He stated there was another bill on
vessel replacement that would put the fund out of the realm
of sweepability. He highlighted that a Hickel v Cowper
decision specifying contributions made from individual
people should not be sweepable. He provided an example
about a person who smoked marijuana who understood that
some of the cost would go towards marijuana cessation
programs. He explained that if the funding was swept, it
did not meet the citizens' expectation. He believed if the
topic was litigated, Hickel v Cowper would say there were
issues with taking money from people, telling them how it
was going to be spent, and then not spending it for the
specified purpose. He was against the amendment.
Co-Chair Foster apologized to Representative Johnson for
not giving her a chance to provide closing remarks on the
previous amendment.
Representative Carpenter provided wrap up on the amendment.
He highlighted that the bill protecting the Higher
Education Investment Fund had not passed yet and it was
necessary to operate off of current statute. He stated
there was no current protection for the Higher Education
Investment Fund. He stated it was likely that the funding
in the budget would be swept if the aforementioned
legislation did not pass. He referenced Representative
Rasmussen's concerns voiced about surety of legislative
support moving forward. He saw the issue as valuable as
educators wanted to know from year-to-year about program
funding. He saw it as a direct conflict with the state's
constitutional requirement related to the dedication of
funds. He pointed out that the state was unable to provide
complete funding surety to any organization from year-to-
year because the legislature had to make budget decisions
from year-to-year, with the exception of forward funding.
He was concerned the committee was trying to say one thing
and the constitution was prohibiting the action.
Representative Carpenter continued to provide wrap up on
Amendment L3. He shared that he had supported the WWAMI
program and associated funding. He clarified that the WWAMI
program had been funded in another way and had been funded
in the past budget cycle as were any of the other programs
paid for out of the accounts the bill section would
specifically fund. He remarked that the same programs would
be funded in the current bill by receipts coming into
accounts. He remarked it was the administration's decision
to fully fund the programs regardless of a sweep. He stated
they did not need a fund continuing to build a balance, the
bills would be paid from the fund with incoming receipts.
He asked why the legislature would want to put money into
an account merely to grow money if the funds could be paid
with receipts.
Representative Carpenter stated that an account with a
large balance became a target down the road by various
spending opportunities. He reasoned that an account funded
by receipts paid for programs in the current year, it was
doing what it was intended to do. He stated there was no
need to put additional money in the account.
2:42:00 PM
Representative Josephson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Johnson, Carpenter
OPPOSED: Josephson, LeBon, Ortiz, Rasmussen, Thompson,
Wool, Merrick, Foster
The MOTION to adopt Amendment L3 FAILED (9/2).
2:43:28 PM
Representative Carpenter WITHDREW Amendment L4, 32-
GH2686\R.14 (Marx, 3/17/22) (copy on file). [Note: it was
clarified at 2:44 p.m. that the amendment would possibly be
offered at a later time.]
2:43:48 PM
AT EASE
2:44:00 PM
RECONVENED
Co-Chair Foster asked for clarity on the amendment
sponsor's intent.
Representative Carpenter set aside the amendment to
possibly offer it at a later time.
2:44:29 PM
Representative Carpenter MOVED to ADOPT Amendment L5, 32-
GH2686\R.8 (Marx, 3/17/22) (copy on file) [Note: due to the
length of the amendment it is not included here. See copy
on file for details].
Vice-Chair Ortiz OBJECTED for discussion.
Representative Carpenter explained the amendment would
insert a new section (Section 20) into the bill and would
appropriate $250 million in supplemental income from the
previous fiscal year into the CBR to set some of the extra
earnings from oil into the savings account.
Co-Chair Foster stated his understanding of the amendment.
He stated that currently the bill set aside all excess
money to be put into the Statutory Budget Reserve (SBR). He
clarified that the SBR required a majority vote whereas the
CBR required a three-quarter vote. He informed the
committee that the current bill put $2.3 billion into
savings in the SBR (prior to the adoption of any
amendments).
Representative LeBon clarified that taking money out of the
CBR would require support from 30 House members, while the
SBR would require support from 21 members.
Co-Chair Foster agreed. He stated that Representative
Carpenter's amendment would put $250 million into the CBR,
which would require a three-quarter vote to access.
Representative Rasmussen was inclined to support the
amendment. She stated that bringing along broader group of
legislators on spending was likely to the benefit of the
state as it represented the voices of more constituents.
She stated the fact that the return on the CBR and SBR was
lower compared to the Permanent Fund and Higher Education
Investment Fund gave her pause. She was not certain it was
the best use of state dollars. She thought it would be
beneficial to discuss putting the funds into a higher
interest investment account. She wondered about putting the
topic on the ballot. She pointed out that the
constitutional question was on the ballot in the coming
fall. She had not heard from her constituents concerned
with putting money directly into the CBR. She had heard
from quite a few who would like to see some of the money
saved. She believed there were many paths forward. She was
undecided on the amendment and would listen to the debate.
2:48:19 PM
Co-Chair Merrick appreciated the comments about the higher
threshold to access the CBR as a method to protect the
funding. She asked Mr. Painter how much money had
previously been in the CBR and how much had been spent
down.
Mr. Painter answered that the state currently owed about
$12 billion to $13 billion to the CBR as a result of
borrowing, which was the amount that had been spent via the
three-quarter vote.
Representative Edgmon asked what happened if projected oil
prices did not materialize. He asked if the amendment
included a provision that would allow for money not to be
deposited into the CBR and used for other purposes that may
be a higher use.
Mr. Painter replied in the negative. He noted the item was
supplemental. He pointed out that state was three-quarters
of the way through the [fiscal] year and oil prices would
have to be near zero to not be able to pay the $250 million
unless there were additional significant appropriations in
FY 22 that would reduce the surplus size. The amendment did
not include any prioritization of appropriations in FY 22.
2:50:35 PM
Representative Edgmon appreciated the intent behind the
amendment to put money into savings. He was concerned about
the opportunity cost of not being able to use the funds for
something like K-12 forward funding. He noted that the
public education fund earned more and did not require a
three-quarter vote. He stated that it would be a huge
political fight to access the money if it was needed in the
future. He was a strong supporter of putting money into
savings, but he liked putting the money into the K-12
account to earn more money and be available for education.
He thought it could take pressure off of the FY 24
operating budget.
Representative Josephson asked about the value of the word
"supplemental" in the amendment.
Mr. Painter answered that it made the appropriation
effective in the current fiscal year. He relayed that based
on HCS2 and the spring revenue forecast, there was a post-
transfer surplus of approximately $1.5 billion in FY 22 and
~$800 million in FY 23. He explained that making the item a
supplemental gave more breathing room in FY 22,
particularly because the fiscal year was close to over and
the associated revenue forecast was a bit more certain.
Representative Josephson considered a scenario where the
amount owed to the CBR was $13 billion. He stated his
understanding that if the legislature put the proposed
funding into the CBR and wanted to spend $100,000 out of
it, the amount would be owed back to the CBR the moment it
was withdrawn.
Mr. Painter agreed.
Representative Josephson pointed out that the state owed
the funds back immediately after taking funds from the CBR.
Mr. Painter agreed. He clarified that any appropriations
out of the CBR generated a repayment responsibility.
Representative Josephson asked for verification there was
no interest accruing to anyone and no penalty for not
putting $12 billion or $13 billion back.
Mr. Painter agreed. He stated there was no interest between
the General Fund and CBR.
2:54:09 PM
Representative Wool asked how much had been swept from the
Higher Education Investment Fund to the CBR the previous
year.
Mr. Painter replied that $395 million had been swept from
the Higher Education Investment Fund. The total value of
the sweep was $437 million.
Representative Wool stated that because of the failure [to
achieve a three-quarter vote], $437 million swept into the
CBR. He stated that the previous amendment that had failed
would have deleted the populating of the Higher Education
Investment Fund. He surmised that if the Higher Education
Investment Fund was funded, the reverse sweep failed, and
Representative Josephson's bill to protect the fund did not
pass, close to $400 million would be swept into the CBR
"whether we like it or not."
Mr. Painter agreed.
Representative Wool did not support the amendment.
Representative Carpenter provided closing remarks. He
thought Representative Wool's comments indicated the Higher
Education Investment Fund could be swept and yet the
committee had just avoided the opportunity to make sure it
would not be swept. He stated that in essence, the
committee was saying it wanted to have the money in the
Higher Education Investment Fund go into the CBR and it
valued having savings in the CBR. He was not certain he
understood the logic. He stated that Amendment L5 was a
supplemental pertaining to the current year's budget [FY
22]. He referenced Mr. Painter's testimony about a $1.5
billion realized surplus for FY 22 and an $800 million
projected surplus for FY 23. He stated the amendment was a
policy call to set a priority to save a portion of the
surplus. He did not know what kind of a surplus there would
be in the current year. He remarked that the current bill
would put savings into the SBR; however, based on the
amendments, he was uncertain about what kind of surplus
there would be. He thought there was a high level of
support for increased spending. He stated that when he was
asked about priorities for surplus revenue, he immediately
thought about what debts could be paid and how much could
be saved. He emphasized the amendment proposed saving $250
million out of $1.5 billion, which he believed was a
reasonable portion.
Representative Carpenter stated the amendment would set
funding aside for the future. He stated that counting on
$2.3 billion was an unrealized number. He stressed that the
legislature did not know whether it would be the amount
available at the end of FY 23. He indicated putting the
funds in savings was a responsibility. He noted that Co-
Chair Merrick highlighted that the state had spent from the
CBR; it was possible to do. He underscored the requirement
to pay back the funding to the CBR was constitutional in
order to force the legislature to save money.
Vice-Chair Ortiz MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Ortiz, Rasmussen, Thompson, Carpenter, Johnson,
Merrick
OPPOSED: Josephson, LeBon, Wool, Edgmon, Foster
The MOTION PASSED (6/5). There being NO further OBJECTION,
Amendment L5 was ADOPTED.
[Note: action on Amendment L5 was rescinded on 3/24/22 at
approximately 1:53 p.m. Another vote was taken, and the
amendment did not pass. See separate minutes dated 3/24/22
1:30 p.m.]
3:00:24 PM
Co-Chair Foster MOVED to ADOPT Amendment L6, 32-GH2686\R.20
(Marx, 3/18/22) (copy on file):
Page 78, lines 1-4:
Delete all material and insert:
"(d) The amount authorized under AS 37.13.145(b) for
transfer by the Alaska Permanent Fund Corporation on
June 30, 2022, estimated to be $2,764,400,000, is
appropriated from the general fund to the dividend
fund (AS 43.23.045(a)) for the payment of permanent
fund dividends and for administrative and associated
costs for the fiscal year ending June 30, 2023."
Representative Rasmussen OBJECTED for discussion.
Co-Chair Foster explained the amendment would pay a full
PFD. He elaborated that statute designated that a Permanent
Fund Dividend (PFD) shall be paid. He detailed that
according to the statutory formula the current payout would
be about $4,200 per Alaskan. He stated that until the
formula was changed, he proposed paying the full amount. He
shared there were numerous lower income residents in his
district who were impacted unequally and
disproportionately. He explained that many individuals had
vocalized reducing the PFD was a regressive tax. He
highlighted inflation taking place (including high cost of
energy, food, and supplies) and believed if there was any
time to stick with the full statutory PFD it was the
present time.
Representative Josephson asked about the funding source
from the General Fund. He asked if the funds would come
from the SBR under the current HCS2.
Co-Chair Foster agreed. He stated it was generally the case
for anything that would be added to the budget in the
amendment process unless it was specified as DGF. He
clarified the UGF would come from the SBR.
Representative Rasmussen directed a question to Mr.
Painter. She asked if the ~$2.8 billion included the money
already transferred for dividend payments. She believed it
had been stated there was a surplus of roughly $1.5 billion
surplus for FY 22. She asked how much would have to be
drawn from the Permanent Fund Earnings Reserve Account
(ERA).
3:03:28 PM
Mr. Painter responded that the amendment replaced the FY 23
PFD currently in the bill estimated at $1,250 for a total
of $840 million from the General Fund. The amendment would
replace the amount with an amount estimated to be $2.76
billion from the General Fund to pay a statutory dividend.
Representative Rasmussen noted the committee had just
passed an amendment to put $250 million into the CBR. She
asked about the combined actions of the two amendments. She
asked where the funding would come from.
Mr. Painter answered that Amendment L6 would increase
expenditures from the General Fund in FY 23 by just under
$2 billion. There was currently an estimated $800 million
surplus in FY 23. He explained that HCS2 included language
that would reduce forward funding of K-12 dollar-for-dollar
if there was a deficit. He elaborated that the first thing
to happen when paying the extra $2 billion would be a
reduction to K-12 forward funding. When combining the two
[amendments mentioned by Representative Rasmussen] the
impact would be to take away forward funding and the
projected surplus in FY 23, but it would not create a
deficit.
Representative Josephson asked for verification that the
amendment would leave the energy relief payment in the
bill.
Mr. Painter agreed.
Representative Rasmussen asked for the amount of the energy
rebate.
Mr. Painter responded that the energy rebate totaled ~$840
million and would pay $1,300 per person.
Representative Wool highlighted the $2.8 billion in
Amendment L6 and $800 million in the supplemental energy
check, which totaled $3.5 billion. He pointed out the cost
was almost as much or more than the percent of market value
(POMV) draw in the past few years. He stated the POMV draw
had previously supplied about 60 to 70 percent of Alaska's
state revenue. He recognized the state was having a "bumper
crop of a year" with the high oil prices; however, the
stock market, responsible for growing the Permanent Fund,
was not having a great year. He did not believe spending
$3.5 billion in individual checks to Alaskans was the best
path forward, especially because the future was unknown. He
reasoned that $800 million for the PFD checks and $800
million for energy checks at $1.6 billion was more than any
other department received. He noted that forward funding of
education was about $1.2 billion. He supported the $1.6
billion and stated the amount was generous. He did not
support the amendment.
3:07:12 PM
Representative Thompson asked if the POMV could pay the
dividends if there was a surplus.
Mr. Painter replied affirmatively. He highlighted that
under Amendment L6, the POMV would go into the General Fund
and the PFD would be paid from the General Fund.
Representative LeBon was concerned about the overreach of
paying out money the state may not have. He wanted to be
cautious about spending, including the PFD amount. He
thought the PFD in the current HCS2 of approximately $2,500
was affordable (combining the PFD and energy rebate). He
pointed out it had not been long ago where there had been
suggestions it was acceptable to overdraw the ERA because
that state had been having such a good year. He hoped the
investment earnings of the Permanent Fund had a great year,
but it was not currently looking that way. He wondered why
it would be a good idea to pay out a larger PFD when
investment earnings were not as robust. He underscored that
about a year earlier the legislature had been looking at
the price of oil and balancing the budget and the potential
need to draw more aggressively from the ERA than SB 26
[POMV draw legislation passed in 2018]. He was opposed to
the amendment and cautioned against being overly aggressive
with PFD payments when there was still much unknown in the
economy and financial markets.
Vice-Chair Ortiz associated himself with the comments made
by the prior speaker.
3:09:55 PM
Representative Rasmussen moved to ADOPT conceptual
Amendment 1 to Amendment L6 to insert contingency language
that would eliminate the energy rebate if Amendment L6
passed.
Co-Chair Foster did not object to the proposed conceptual
amendment.
Representative Josephson OBJECTED.
Representative Wool stated the energy rebate was a check
equal to about 25 percent of the POMV draw. The money would
be given to individual Alaskans to offset their increased
expenses due to the increase in oil prices. He supported
paying the amount out for the stated purpose. He stated
that if they removed the label and called it a full PFD
with no energy rebate, it changed the intent of the energy
rebate. He stated the current budget included 25 percent
for energy and 25 percent for the PFD, which was equivalent
to a 50/50 amount for the PFD. He elaborated that it had
been stated as a one-time payment due to high oil prices
and extra revenue resulting from high oil prices. He
supported the original language and did not want to
eliminate the energy check. He objected to the conceptual
amendment.
3:12:30 PM
Representative Carpenter remarked that the current CS
included a PFD and energy relief payment both in the
amounts of $800 million to be paid out of the dividend
fund. He reasoned the legislature could call the payments
whatever it wanted, but the payments were being paid out of
the dividend fund. He thought the more important question
was a point brought up by Representative LeBon about why
the committee would choose to adopt the amendment, which
was $1.2 billion more than in the current CS.
Representative Carpenter highlighted a couple of reasons
why the committee may consider doing so. He referenced the
importance of having money in the fund available for WWAMI
program decision making. He pointed out that recovery from
the pandemic had not yet occurred. He highlighted
unprecedented inflation in certain sectors. He thought
about the economy and people working in the economy that
did not contribute much to the state budget. He pointed out
that those individuals may need some assistance, just as
much as the government needed assistance. He stated that
combatting inflation and helping with economic recovery
were valuable things to people in his district and
throughout the state. He stressed it was just as valuable
as ensuring there were government programs. He was
frustrated to be talking about the difference between
$2,500 PFDs or $4,400 PFDs, which were annual payments. He
thought they should really be talking about how to get
$2,500 or $4,500 paychecks. He wanted a stimulated economy.
He remarked that the more spent on state services put a
burden on bill payers (i.e., the PFD and oil tax economy).
He found it logical to see a large chunk of change go to
the private sector during the current trying times. He
stated that families needed support just as much as the
government.
3:15:43 PM
Representative Josephson MAINTAINED his OBJECTION.
Co-Chair Foster clarified that the conceptual amendment
would add contingency language to Amendment L6 that would
eliminate the energy relief payment.
3:16:23 PM
AT EASE
3:18:04 PM
RECONVENED
Co-Chair Foster asked Mr. Painter to provide clarification
on the amendment.
Mr. Painter stated the conceptual amendment would add the
language "remove Section 47 of the bill" to bottom of
Amendment L6. He clarified that Section 47 was the energy
relief payment in HCS2.
Co-Chair Foster asked Representative Rasmussen if it
captured the spirit of her amendment.
Representative Rasmussen agreed. She stated the conceptual
amendment would ensure the budget did not severely overdraw
the POMV should Amendment L6 pass. She remarked that the
prior debate veered from the intent of the conceptual
amendment.
Co-Chair Foster noted the objection had been maintained by
Representative Josephson.
A roll call vote was taken on the motion to adopt
conceptual Amendment 1 to Amendment L6.
IN FAVOR: Rasmussen, Thompson, Carpenter, Johnson, LeBon,
Merrick
OPPOSED: Ortiz, Wool, Edgmon, Josephson, Foster
The MOTION PASSED (6/5). There being NO further OBJECTION,
conceptual Amendment 1 to Amendment L6 was ADOPTED.
3:19:57 PM
Representative Wool stated his understanding that Amendment
L6 as amended eliminated the fuel energy supplement in the
budget intended to help people during a time of high energy
prices and high oil revenue and would replace it with a
full statutory PFD of $2.8 billion. He stated the current
budget included $1.6 billion for the PFD and energy
payments compared to the amendment that would cost $2.8
billion. He highlighted it was $1.2 billion higher than the
original budget. He did not support adding $1.2 billion to
the budget. He noted it was the same amount included in the
budget for forward funding of education. He supported the
forward funding. He did not support going up to $2.8
billion.
Representative Rasmussen requested to hear from Mr.
Painter.
Co-Chair Foster restated Representative Wool's totals. He
clarified that the amendment included $2.8 billion minus
the energy rebate of $800 million. He calculated that the
amendment would be higher than the current budget by $400
million.
Representative Wool stated that if the amendment passed
there would be a PFD check of $2.8 billion with no energy
rebate. He clarified that a total of $2.8 billion would go
out in checks. He stated that the current budget included
$1.6 billion and was lower by $1.2 billion. He stressed the
amendment would add $1.2 billion to the budget. He stated
the $1.2 billion was currently the amount in the budget
funding education. He did not support adding $1.2 billion.
He thought $1.6 billion for PFDs was more than the state
had paid in a long time and he could live with it.
Co-Chair Foster believed the math was correct. He asked for
clarification from Mr. Painter.
3:23:40 PM
Mr. Painter answered that the statutory PFD was estimated
to be $2.76 billion. The combined PFD and energy relief was
currently $1.68 billion. The difference was about $1.1
billion.
Representative Rasmussen asked if the state had enough
revenue to fully fund the amendment and education.
Mr. Painter answered there was a projected $832 million
surplus after forward funding. The amendment would decrease
forward funding by about $250 million based on the spring
forecast.
Representative LeBon offered that the committee may need to
retreat on the CBR deposit previously adopted in order to
balance the books.
Representative Edgmon shared that there were a couple of
school board members in the room from his district. He
discussed the current budget structure in HCS2 and
acknowledged a prior amendment that directed $250 million
to the CBR. He explained the budget had been structured to
provide a balance between essential services, put money
into a K-12 account to forward fund education the following
year, and include a PFD with a relief component of $2,500
(compared to $1,114 the previous year). He supported some
small schools, as did the co-chair, and some medium sized
schools. He viewed a budget as being a document of
compromise and balance by definition. He was concerned that
Amendment L6 took the whole balance aspect away. He
underscored they were dealing with projected revenues.
Representative Edgmon shared an explanation he used when
talking to constituents about the budget that it was not
prudent to buy a new pickup just based on a positive
projected fish season. He was concerned the amendment
action could be hazardous to basic state services. He
understood that the PFD was critical to many Alaskans. He
pointed out that what oil prices would be in the future was
not known and they could be half of what they were at
present. He supported a balanced budget approach. He
reiterated that the current budget doubled the PFD from the
last calendar year with the inclusion of the energy relief
component, which he believed was a good approach. He did
not support the amendment.
3:27:57 PM
Vice-Chair Ortiz associated himself with the comments of
the previous speaker. He stated that the amendment did not
reflect prudent fiscal planning. He emphasized the
amendment was based on revenue projections instead of
actual revenue. He remarked that the state was
constitutionally obligated to take care of providing for an
adequate education for all Alaskans. He stated it was nice
if the other things could be funded, but the legislature
did not know whether it could do so. He did not support
passing the amendment.
3:29:17 PM
Representative Josephson remarked that the amendment
complied with statute, which the supreme court had
specified the legislature could disregard as the
appropriating body. He believed it was illustrative of the
problem with funding a full dividend that it took "us back
to the last seven years." He was worried about unlearning
some things. He highlighted that the committee had learned
from its fiscal analyst the previous week that the FY 23
projections were more dubious than the FY 22 projections
because they were farther out in the future. He opposed the
amendment.
Representative Rasmussen referenced Mr. Painter's earlier
testimony that the budget's forward funding language
included a provision to decrease the funding if it was not
available. She asked if the CBR transfer of $250 million
[adopted in an earlier amendment] took precedence over the
forward funding.
Mr. Painter answered that the CBR transfer was effective in
FY 22 and would not enter the calculation for FY 23.
Representative Rasmussen highlighted that it would
ultimately fall on Alaskans when there were shortages. She
understood how education provided for the good of everyone
in the state, but she also understood there were some areas
in government that did not need all of the funding they
received. She stressed that individual Alaskans did not
have that luxury. She underscored that single mothers did
not have someone guaranteeing their paycheck for the next
year. She pointed to high grocery costs. She thought the
statute should be changed and the legislature should follow
the statute. She understood the current statute was not
sustainable. She hoped the legislature would continue its
efforts to find a balance to a more sustainable dividend.
She supported the amendment.
3:32:47 PM
Representative Carpenter supported comments made earlier by
Vice-Chair Ortiz and believed they were illustrative of the
challenge at hand. He restated Vice-Chair Ortiz's remarks
that the revenue was projected and not known. He stated
that some legislators had been wanting to have a
conversation about fixing the structural imbalance in order
to always deal with known revenue as opposed to projected
revenue. He highlighted that the more the state relied on
oil revenue and Permanent Fund earnings revenue it was
putting all its eggs in the projected revenue basket. He
stated the crux of the problem went to the structural
imbalance that included a statute on the books. He stressed
that the people back home did not care what the justices
ruled. He stated that the people expected the legislature
to follow the law. He clarified that the current
conversation was not about shorting education. He pointed
out there may not be enough money to forward fund
education, but education would not be short funded. There
was a structural imbalance that the legislature continually
did not want to address year after year. He wanted to
continue having a long-term conversation about how to
address the structural imbalance, including how to follow
the law and meet obligations. He stated that if the
amendment was not passed, they were shorting Alaskans.
3:35:42 PM
Co-Chair Merrick stated that the amendment called for a
statutory PFD. She remarked that the administration had
previously supported a statutory PFD and had shifted
support to a 50/50 PFD. She asked why there had been a
shift away from the statutory PFD.
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, answered that the governor had put
forward constitutional amendments to address the PFD and
remove it from the annual discussion of budget priorities.
He stated that when looking at the governor's ten-year plan
and projection of the state's fiscal reality, the
administration believed a 50/50 PFD was fair. He stated it
was a fair split of the POMV draw and was affordable in the
long-term under the state's fiscal reality. He stated the
fairness was essential to any dividend plan going forward.
He believed the people would accept the idea if put forward
on the ballot in the form of a constitutional amendment.
Representative Thompson asked what happened if the
legislature changed the PFD formula prior to adjournment.
3:37:57 PM
Representative Edgmon thought the response was pretty
straight forward based on the Wielechowski decision the
legislature's power to appropriate rose above whatever may
exist in statute. He elaborated that the governor would
have to sign the bill. Additionally, there would be an
effective date attached. He reasoned if the effective date
was 90 days, the operating budget may go into effect before
the bill. He stated they really did not know. He looked to
Mr. Painter for verification that the legislature's power
to appropriate rose above any bill that would be passed.
Mr. Painter added that the appropriation as written (in
Amendment L6) specified the amount authorized under AS
37.13.145(b). He explained that if the statute was modified
it could change the amount paid under the appropriation;
however, he would recommend a fiscal note to be attached to
the other piece of legislation for clarity specifying it
would replace the appropriation.
3:39:31 PM
Representative Thompson provided a hypothetical scenario
where the legislature passed separate legislation with a
75/25 PFD [split between government services and the PFD
respectively]. He highlighted the action would have a
substantial impact on the current discussion about a 50/50
split.
Mr. Painter replied affirmatively. He detailed that if the
legislature passed a bill specifying the amount authorized
under AS 37.13.145(b) was one-quarter of the POMV draw,
$840 million would go out [for distribution] instead of
$2.76 billion.
Representative LeBon referenced the original statutory
formula passed in the 1980s. The formula contained a
lookback feature and took the earnings of the Permanent
Fund and allowed for a percentage to be deposited into the
PFD account. He stated the funds were shared between PFD
payments and potentially government services. He stated
that the intent of the statute was to share roughly 50/50
between PFD payouts and state services (e.g., education,
public safety, health). He explained that over the years
the PFD portion had been deposited into the PFD account
(with some inflation proofing), but the government draw had
been nonexistent. He expounded that legislatures over the
years had appropriated extra money into the Permanent Fund
that did not have to be appropriated. He stressed it was
not an accident that the Permanent Fund was currently worth
$80 billion. He underscored there had been an intention on
the part of past legislatures to build the fund up over 40
years and to sacrifice spending decisions in order to do
so.
Representative LeBon continued that in the past, the state
had been enjoying pipeline throughput of up to 2 million
barrels per day, but it had presently been on decline for
30 years. He highlighted that at present, less than 25
percent of the pipeline was filled. He stated that
sometimes price volatility played in the state's favor, but
it could not be counted on all of the time. He pointed out
that one year earlier there had been near panic about
paying for state services and hoping to get a $1,200 PFD.
He stated, "wow, do things change quickly." He underscored
that Amendment L6 was a bad amendment that should go down.
He suggested the committee members should be the adults in
the room and make certain that PFD and energy rebate checks
balanced with essential state services that constituents
wanted. He stressed that constituents wanted public safety,
education, and health and social services. He emphasized
committee members should be making amendments to cut state
spending if they believed otherwise. He did not see serious
cuts being proposed by the committee.
3:43:34 PM
Representative Wool supported Representative LeBon's
statements. He referenced Representative LeBon's statement
that the Permanent Fund was worth $80 billion He pointed
out that it had been worth $83 billion in the recent past.
He underscored the volatility of world markets and oil. He
did not support passing the amendment. He stressed that
that Permanent Fund was in the state constitution, but the
PFD was not. He stressed that education is in the
constitution. He noted there were educators in the building
the current week and districts were hurting. He remarked
that energy prices had a major impact on school districts.
He stated the districts would not receive an energy check.
He supported education as a priority. He cited the
Wielechowski decision and stated the legislature legally
had the discretion to appropriate what it saw fit.
Representative Rasmussen asked Mr. Painter if the amendment
forced the legislature to overdraw the POMV under SB 26.
Mr. Painter replied, "No, it does not."
Representative Rasmussen stated that if the amendment
passed, the budget still funded two years of education and
met the constitutional requirement. She believed the way
the amendment was written gave the legislature time to
change the formula if it chose to do so. She reasoned that
the amount could be $2.8 billion or $1.35 billion or $1.4
billion if the legislature changed to a 50/50 split. She
did not see the amendment hurting the $80 billion
investment. She pointed out that the amendment did not
overdraw the POMV, education was funded for two full years,
and it met the legislature's statutory obligation that had
not been met in recent years. She supported the amendment.
Representative Edgmon stated there were a lot of
predications built into the statement made by the previous
speaker. He noted that one of the predications was that oil
prices remained at a high. He explained that if oil prices
plummeted after PFD checks were distributed there would be
unknowable downstream impacts. He saw a strong risk
associated with putting all of the money out and taking a
chance there may not be sufficient funds to pay for
essential services. He could not support the amendment.
3:48:21 PM
Representative Wool remarked that Representative Rasmussen
had stated the budget could still forward fund education at
$1.2 billion if the amendment passed and paid a full PFD.
He stated it was his understanding that was not the case.
He would not support the amendment either way.
Mr. Painter estimated the budget could pay about three-
quarters of the forward funding. He noted it assumed the
governor's capital budget level in FY 23.
Representative Wool pointed out that the oil forecast the
committee was using had been made with a five-day window of
oil prices for the futures market. He noted the prices used
were higher than they had been in quite some time. He was a
no vote on the amendment.
Representative Josephson referred to Mr. Painter's previous
statement that with the amendment, the legislature would be
looking more at the governor's $150 million capital budget,
and less at the $300 million or $400 million that had been
discussed by the two legislative chambers.
Mr. Painter replied affirmatively. He explained that his
prior statement that the budget could include roughly
three-quarters for the forward funding [of education]
assumed the governor's capital budget level. He stated that
if the capital budget in FY 23 were higher, it would eat
into the forward funding. He suggested the legislature
could also make capital projects effective in FY 22, but it
was outside the scope of what had been discussed.
3:50:39 PM
Co-Chair Foster provided wrap up on the amendment. He
appreciated all of the comments made by committee members
and believed they were all fair and good. He recognized
some of the comments that there were numerous assumptions
built into the amendment including that oil prices were
having a banner year and may not remain that way forever.
He referenced comments about what would happen if there was
a large crash in the state's revenue and whether a full PFD
could still be paid. He highlighted a comment asking where
the proposed cuts to the budget were. Additionally, there
had been questions about whether the amendment would
potentially reduce funding for education, which was a
constitutional obligation. He highlighted that the PFD
statute was on the books and if the legislature did not
deal with it in the current year, it would continue to be
an amendment in the following years. He thought the
legislature needed to focus on rewriting the formula if
legislators wanted to pay a smaller PFD.
Representative Josephson MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Rasmussen, Carpenter, Johnson, Foster
OPPOSED: LeBon, Ortiz, Thompson, Wool, Edgmon, Josephson,
Merrick
The MOTION to adopt Amendment L6 FAILED (4/7).
Co-Chair Foster relayed that the committee would meet again
the following morning to continue amendments.
HB 281 was HEARD and HELD in committee for further
consideration.
HB 282 was HEARD and HELD in committee for further
consideration.
Representative Thompson asked about the schedule for the
week.
Co-Chair Foster answered that he hoped to be finished with
amendments on Wednesday.
ADJOURNMENT
3:54:00 PM
The meeting was adjourned at 3:54 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 281 & HB 282 Op Budget Amendments Supp Cap 032022-4.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 HB 282 |
| HB 281 & HB 282 Op Budget Cap Amendments 032022-6.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 |
| HB 281 & HB 282 Op Budget Language Amendments 032022.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 HB 282 |
| HB 281 & HB 282 Op Budget Numbers Amendments 032022-2.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 HB 282 |
| HB 281 & HB 282 Op Budget Supp Op Amendments 032022-3.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 HB 282 |
| HB 281 & HB 282 Op Budget Amendments Today's ACTIONS 032022.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 HB 282 |
| HB 281 & HB 282 Op Budget Additional Amendments 032022-3.pdf |
HFIN 3/21/2022 1:30:00 PM |
HB 281 HB 282 |