Legislature(2021 - 2022)ADAMS 519
03/22/2022 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 22, 2022
1:40 p.m.
1:40:12 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:40 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
Alexei Painter, Director, Legislative Finance Division;
Chad Hutchison, Director, State Relations, University of
Alaska.
PRESENT VIA TELECONFERENCE
Jason Brune, Commissioner, Department of Environmental
Conservation; Cori Mills, Assistant Attorney General,
Office of the Attorney General, Department of Law.
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. The
committee would continue the amendment process on the
operating budget. He relayed the committee would pick up
where it left off earlier in the day.
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."
1:40:49 PM
^AMENDMENTS
1:40:59 PM
Representative Johnson MOVED to ADOPT Amendment L8, 32-
GH2686\R.9 (Marx, 3/17/22) (copy on file):
Page 87, following line 12:
Insert a new bill section to read:
*Sec. 33. DEPARTMENT OF LAW. The sum of $4,000,000 is
appropriated from the general fund to the Department
of Law, civil division, for litigation relating to the
defense of rights to develop and protect the states
natural resources, to access land, to manage its fish
and wildlife resources, and to protect state
sovereignty in the fiscal years ending June 30, 2023,
June 30, 2024, and June 30, 2025.
Renumber the following bill sections accordingly.
Page 104, lines 29-30:
Delete sec. 41(x)
Insert sec. 42(x)
Page 104, line 31:
Delete sec. 41(x)
Insert sec. 42(x)
Page 105, lines 14-15:
Delete 35, 39(b) and (c), 41, 42(a)-(l), 43(a)-(c),
47, and 48(b)
Insert 36, 40(b) and (c), 42, 43(a)-(l), 44(a)-(c),
48, and 49(b)
Page 105, line 30:
Delete 51
Insert 52
Page 106, line 2:
Delete secs. 53-55
Insert secs. 54-56
Representative Wool OBJECTED for discussion.
Representative Johnson explained the amendment. She noted
the Department of Law (DOL) was online to answer any
questions. The amendment was a $4 million multiyear
appropriation for DOL to protect statehood rights. She
detailed that the state historically had to fight for its
th
rights granted in the 10 Amendment of the United States
Constitution. She elaborated that the Alaska National
Interest Lands Conservation Act (ANILCA) and Alaska Native
Claims Settlement Act (ANCSA) both reinforced state
management authority over its lands and right to
sustainably develop its lands and resources for the maximum
benefit of the people. She highlighted that the state had
experienced an unprecedented amount of litigation involving
the states ability to responsibly manage and protect its
fish and game and other natural resources. She continued
that much of the issue was due to federal actions, but a
portion was due to other influences outside of Alaska
wanting to shut down the states economy. She reported
there had been a 30 percent increase in litigation the
previous year. She cautioned that the interest of the state
and its people would go unrepresented in matters directly
impacting resource development and jobs if the state was
not engaged.
Representative Johnson stated the funds were needed to
defend the state's rights to manage fish and game resources
and other. She emphasized the issue was crucial to Alaskas
economy to provide food security to rural communities. She
stated it was about Alaska being able to mind its own
business and do its own business. She pointed out there
were ongoing legal cases and 11 anticipated cases DOL was
expected to file with a cost of $8 million or more. She
highlighted case topics including the Endangered Species
Act, Clean Water Act, contaminated sites, resource
management plans, RS 2477 issues, Tongass issues, and
navigability of waters. She relayed DOL had already
authorized $1.3 million in outside counsel contracts
related to statehood defense. She estimated the amount
would more than double in the next couple of years. The
additional $4 million over three fiscal years would ensure
the increase in litigation was covered. She relayed that
the increment was not frivolous. She pointed out it was not
always possible to know where a lawsuit would come, but it
was necessary to be prepared.
1:44:57 PM
Representative Josephson asked if [Department of
Environmental Conservation] Commissioner Brune was online.
Representative Johnson replied affirmatively.
Representative Josephson remarked that he found that
interesting in itself. He highlighted that the DOL
subcommittee had been told by the department one month
earlier that the department had spent $260,000 of the $4
million appropriated by the legislature for the current
fiscal year. He highlighted that the funding for the
current year was also a multiyear appropriation. He stated
that the department had spent less than 15 percent of the
appropriation. Additionally, the department wanted to
double the money it had not spent and extend the spending
timeframe. He thought the smarter course was for the
department to report back in January about its progress and
need.
Representative LeBon supported the amendment. He stated
that the timing and amount required to litigate was
unpredictable. He highlighted there had been multiyear
legal disputes involving effort and expense when he had
worked in the banking industry. He pointed out it was
necessary to be prepared for the possibility of a lawsuit.
He stressed the need to give DOL the support.
Representative Thompson supported the amendment. He stated
that the money had not been spent from the previous year
because DOL had been using existing funds knowing there
were currently 11 active cases with additional cases to
come. He wanted to make sure the state was prepared to
fight for its rights.
Representative Rasmussen supported the amendment. She
recognized that one of the previous speakers found it
peculiar that the DEC commissioner was online, but she
noted there were several areas where the state was
concerned about federal overreach including the Clean Water
Act. She believed several of the areas fell under
Commissioner Brune's department. She thought it would be
good to hear from the commissioner about what DEC was
anticipating. She noted that the current federal
administration was against responsible resource development
in the state. She remarked the state had a unique
opportunity to reduce reliance on other countries if
projects such as Willow were allowed to move forward and
produce [oil]. She elaborated that Alaska could reduce
reliance on other countries like Russia that did not
develop as responsibly as Alaska and were involved in
activities Alaska did not support. She requested to hear
from Commissioner Brune.
1:48:43 PM
JASON BRUNE, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION (via teleconference), relayed that he was the
current chair of the statehood defense team that met on a
weekly basis. The team included [Department of Fish and
Game] Commissioner Vincent-Lang, [Department of Natural
Resources] Commissioner Feige, Attorney General Taylor, and
additional staff. He relayed that the team discussed the
ways the state was constantly under attack under areas like
the Clean Water Act where the everchanging definition
impacted Alaska more than any other state and in
contaminated sites where the federal government refused to
clean up nearly 1,000 sites on Alaska Native Corporation
and State of Alaska land. He elaborated that the state had
hired outside counsel to assist with the matters. The state
was developing information that could cost over $500,000 to
develop the case and bring litigation. Additionally, the
team constantly talked about the impacts to oil and gas,
state submerged lands, subsistence resources, and statehood
entitlements and access to state lands. He reported that
the weekly meetings lasted longer than an hour and there
was always more to discuss. He stressed that the state was
under attack. He underscored the need for the amendment.
Co-Chair Foster noted DOL was online for questions as well.
1:51:04 PM
Co-Chair Merrick asked if there were any statistics on the
success of previous lawsuits. She was interested in the
bang for the buck the state was getting.
CORI MILLS, ASSISTANT ATTORNEY GENERAL, OFFICE OF THE
ATTORNEY GENERAL, DEPARTMENT OF LAW (via teleconference),
answered there were many different types of cases. She
began with navigability and RS 2477 cases that were some of
the most expensive. She had asked the same question
recently and had been told the state had always gotten the
rights it had sought to get. She noted it had sometimes
taken too long and the department would prefer not to use
the resources. She relayed that no federal administration
ever appeared to have interest in sitting down with the
state to work the things out. Instead, the state had to sue
in order for the federal government to recognize what was
rightfully Alaskas land. She added there had been a bad
faith claim granted in one of the cases by the Alaska
district court because the court found the federal
government was bringing bad faith arguments. There were
currently two ongoing cases and DOL had filed notices of
intent in two other cases, which would be brought later in
the year. Additionally, an RS 2477 case was currently being
developed.
Ms. Mills discussed ANILCA cases. The departments strategy
was to build off of the success of the U.S. Supreme Court
in the [John] Sturgeon case. She detailed that the case had
gone to the U.S. Supreme Court twice and the court had very
good language for Alaskas rights under ANILCA. The case
cost the state $700,000 and she estimated the litigation
cost to Mr. Sturgeon had been closer to $2 million. She
stated that the case had been seminal in terms of looking
at Alaskas management rights. The department was building
off of the case to have the recognition more broadly
acknowledged. She highlighted the costs were reduced in
cases where the state joined with other states that took
the lead. She referenced the oil and gas drilling ban by
executive order under the current federal administration
and reported the state had received a preliminary
injunction to allow Cook Inlet lease sales to move forward.
She noted there were other pending cases. She clarified she
was not claiming the state did not have losses. She
expounded the state had received a dismissal in a public
land order case and the department was evaluating whether
to appeal. She believed the state was heading the right
direction on many of the larger issues.
1:55:29 PM
Co-Chair Merrick asked what happened to the money if the $4
million was not used within three fiscal years.
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
replied that the funding would lapse to the General Fund if
not used.
Representative Carpenter asked how to characterize DOLs
spend plan for the money already appropriated by the
legislature. He asked if the department had anticipated
spending more or less of the multiyear funding to date. He
asked if the legal action the department hoped to
accomplish had been impacted in the past year as a result
of the slowing down of the court system due to the
pandemic. Likewise, he asked if it had impacted DOLs
ability to spend the appropriated funding.
1:57:24 PM
Ms. Mills answered that there were six or seven cases
currently filed using the existing fund source for the
workload including outside counsel in some cases. Based on
prior similar cases, the department estimated the cases
would cost between $3 million to $6 million. She explained
that a case was always cheaper at the beginning. She did
not know that the court system had contributed to a delay
but there had been numerous motions for stay and extension
by the opposing party. Subsequently, there had been
numerous starts and halt action; however, those cases would
eventually get going. She reviewed the departments
spending to date. When the department had reported to the
budget subcommittee, it had spent approximately $266,000.
She added outside counsel contract invoices and estimated
the spending to date at $350,000 internally and $250,000
for outside counsel for January and February. She expected
the costs to continue increasing because the six cases were
likely to accelerate.
Representative Wool asked how many lawyers were in the
Department of Law.
Ms. Mills answered there were currently 126 or 127 filled
attorney positions and 17 vacancies within the Civil
Division. She noted the Criminal Division had similar
numbers.
Representative Wool asked if the department historically
used in-house lawyers in lawsuits against the federal
government and hired outside expertise once in a while.
Alternatively, he wondered if historically the department
had used in-house attorneys only.
Ms. Mills replied that the department had seen different
eras and phases depending on workload, in-house expertise,
and how its recruitment and retention efforts were going.
For example, at one point DOL had brought all of its
Endangered Species Act work in-house because it had built
up the expertise over time where in-house attorneys had
worked alongside outside counsel. There had been about a 30
percent increase in the type of work coming from agency
referrals and DOL was having to rely more heavily on
outside counsel. She noted the department was trying to be
strategic in regard to reliance on outside counsel.
2:01:53 PM
Representative Wool asked if there was an effort to reduce
outside counsel. He estimated the department had currently
spent about $600,000 out of the $4 million appropriation it
received the previous year. He asked if another $4 million
appropriation would lead the department to be less thrifty
on outside counsel instead of focusing on using the funds
in-house.
Ms. Mills answered that the multiyear appropriations had
been used for the department in the past for cases like BP
corrosion and Flint Hills. She understood the tension
around wanting to use the money; however, DOL really wanted
to build up its expertise in-house and partnering with
outside counsel meant DOL got the biggest bang for its buck
because after four years, the department hoped its workload
would be reduced to a manageable level and that it would
have rebuilt in-house resources due to recruitment and
retention efforts. The department was utilizing its in-
house counsel for issues it deemed to be the best use of
their resources and it used outside counsel to augment. She
clarified that use of outside counsel had not been the
first place the department had gone.
Representative Wool used the Alaska Permanent Fund
Corporation (APFC) as an example and explained that APFC
was trying to hire additional in-house investors to save
money on expensive external managers. He stated it would be
nice to see the department try to fill positions with
specialty expertise.
2:04:43 PM
AT EASE
2:12:42 PM
RECONVENED
Co-Chair Merrick MOVED to ADOPT conceptual Amendment 1 to
Amendment L8 to reduce the sum from $4 million to $2
million.
Representative Johnson OBJECTED. She stated the
appropriation had been $4 million the previous year and the
remaining funds were $3.2 million. She noted costs were
accelerating and $250,000 had been used in the last couple
of months on outside counsel. She believed there were 11
anticipated matters coming up and 8 in the process that DOL
had not yet gone public with. She stated there was little
funding left in the reserve from the appropriation the
previous year. She estimated the amount at around $600,000.
She stated the action would leave $2.6 million through FY
25. She pointed out that legal costs did not typically go
down and additional resources were often required. She
reasoned that the initial costs were not always indicative
of the final costs. She highlighted that the funds would
lapse into the General Fund if they went unused. She wanted
to start strong, not slow. She opposed the conceptual
amendment.
Representative Josephson asked what years the $4 million
appropriated by the legislature in June covered.
Ms. Mills believed the funds went through FY 25.
Representative Josephson stated his understanding that the
department had received a multiyear appropriation nine
months ago and it wanted to double the amount that would
extend through FY 25.
Ms. Mills agreed.
2:17:11 PM
Representative Rasmussen asked how many cases the staff
attorneys within DOL typically had at any given time.
Ms. Mills answered that she did not have the details on
hand. She relayed that the Civil Division dealt with about
8,600 matters annually. She noted that every matter was
different, some cases took up an attorneys entire time for
a year and other small cases took much less time. She added
there were some attorneys who worked on agency advice
matters in addition to cases. She would follow up with the
information shortly.
2:18:47 PM
AT EASE
2:20:00 PM
RECONVENED
Representative Johnson stated that after some thought and
some input it sounded like DOL would be able to work with
the $2 million. She was willing to work with the number.
She WITHDREW her OBJECTION to conceptual Amendment 1 to
Amendment L8.
Representative Carpenter OBJECTED. He asked how much of the
$3 million to $6 million the department anticipated needing
by the March 2023.
Ms. Mills answered that if all of the current cases took
the least amount of time with two years being the least
amount of time and four years being the most the $3
million to $6 million would be spent by July through the
fall in 2023. The cases should be on a trajectory to be
finished within one to two years.
Representative Carpenter pointed out the committee was
either approving the additional $4 million (on top of the
previous $4 million appropriation) at present or it would
have to deal with finding the funding in the future. He
WITHDREW his OBJECTION.
There being NO further OBJECTION, conceptual Amendment 1 to
Amendment L8 was ADOPTED.
2:23:27 PM
Representative Edgmon would support Amendment L8 as
amended. He recalled an article he read in the past year
specifying that outside counsel could cost $600 per hour.
He estimated that the funding including the $2 million [in
Amendment L8 as amended] would provide for 8,666 hours of
counsel. He divided the amount by 15 months (the amount of
time that would lapse between the present time and the end
of FY 23) to get 600 hours per month at $600 per hour. He
had asked Mr. Painter what other programs the legislature
was forward funding. The legislature was attempting to
forward fund K-12 education. He stated there were several
other things in the budget that Mr. Painter could speak to
if the committee desired. He pointed out the appropriations
essentially forward funded litigation against the federal
government. He stated that the state's success rate in the
area was very mixed. He pointed out that the legislature
rarely forward funded other things in state government.
Representative Edgmon would support the $2 million. He
remarked that every governor on both sides of the aisle had
fought pushback from the federal government. He detailed
that the state was made up of up to 63 percent federal
land. He remarked that the heavy handedness of ANILCA would
be interpreted for another 100 years. Additionally, he
referenced the Wilderness Act from the 1960s and other
grand omnibus bills that landed on Alaska the hardest. He
remarked it was the nature of the DNA in the state was
fighting the federal government. He stressed the amount
given to the department combined with the amendment was a
ton of money for thousands of hours of legal work that
would not cost $600 per hour. He would support the
amendment. He reiterated that it was forward funding a lot
of money. He highlighted that the state could still be
paying for the litigation in ten years time. He mentioned
RS 2477 cases in Co-Chair Foster's district and navigable
waters. He clarified that he did not believe Mr. Sturgeon
had paid $2 million out of pocket; the funds had mostly
come from third-party sources. He would support the amended
amendment; however, he stated it was possible to argue
there were other places the funding could go.
2:27:21 PM
Vice-Chair Ortiz asked how long Ms. Mills had worked with
DOL.
Ms. Mills answered that she had been with DOL for 10.5
years.
Vice-Chair Ortiz stated that Ms. Mills experience included
several different administrations. He asked if the
departments size had gradually increased or remained
stable during her employment. Additionally, he asked if the
funding for outside counsel by the department increased or
remained stable during the same timeframe.
Ms. Mills answered that outside counsel for the
departments general budget was thrown in with the
departments general appropriation. The department used
outside counsel when deemed necessary and its goal had been
to reduce the number, which had been pretty successful. She
noted the department had shared a chart with the budget
subcommittee showing that the number had gone down. The
number would rise with the [statehood defense] work, but it
would not reach its historic levels associated with oil and
gas work. She reported that the Civil Divisions
undesignated general fund (UGF) budget had decreased around
30 percent since FY 15 or FY 16. The department had worked
to keep the reductions from impacting attorney positions;
however, it had been necessary to leave an increased number
of positions vacant for a longer period of time. There were
currently 17 vacancies. She did not see the departments
use of outside counsel as having increased substantially.
She reported there had been a decrease since the cuts to
the Civil Division. The funding in the amendment would be
an increased trend to the extra work in the area.
2:30:35 PM
Vice-Chair Ortiz referenced the $2 million included in the
amendment and the $4 million appropriation from the
previous year. He asked if there had been an appropriation
made for outside counsel two years back.
Ms. Mills answered there had not been an outside of
normal appropriation in the departments budget. She
relayed the last time the department received a multiyear
appropriation was for the Flint Hills litigation related to
the Fairbanks refinery and contamination. She estimated the
litigation had started six or seven years back and there
had been a multiyear appropriation for the specific case.
Vice-Chair Ortiz asked if there had been a significant
increase in engaging in lawsuits with the federal
government over the past several years.
Ms. Mills answered affirmatively. She estimated the
increase as about 30 percent year-over-year from the past
two years. Previously, the departments federal issues list
contained between 30 and 35 cases. The number was up to 50
in the current year. She clarified that in some of the
cases the state was aligned with the federal government and
had been sued by other parties. She explained the state was
involved to ensure its interest was represented. She
elaborated there were two types of litigation in the area,
but everything involved federal issues, state jurisdiction,
states rights, and state sovereignty. The state was
aligned with the federal government in some cases such as
the King Cove case where the state had just recently
received a positive ruling. In other cases, the state was
in conflict on its jurisdictional ground (determining
whether an issue was state or federal).
2:33:34 PM
Vice-Chair Ortiz asked Commissioner Brune about his recent
statement that the state was under attack. He asked if the
commissioner was referring to the federal government.
Commissioner Brune replied affirmatively. He stated it was
imperative for the state to defend its rights. He
elaborated that DEC was seeing everything from changing
definitions of waters of the U.S. to Endangered Species
Act. He stated the most concerning was the reopening of
projects with records of decisions having gone through the
environmental permitting process. He stated it brought a
level of uncertainty to the investment community that was
very concerning.
Vice-Chair Ortiz asked if the commissioner recalled his
testimony in the subcommittee process that the relationship
between DEC and EPA [Environmental Protection Agency] was a
really good relationship.
Commissioner Brune replied he had been referring to the
EPAs efforts to help on the contaminated sites issue as
well as the states efforts to assume primacy of 404 and
RCRA [Resource Conservation and Recovery Act]. He
elaborated that EPA had been extremely helpful in those
areas and the state and EPA had a good relationship in that
respect.
Vice-Chair Ortiz asked where the attack was specifically
coming from.
Commissioner Brune answered that it was coming from all
branches such as the Department of Interior in its efforts
to deny projects that had received records of decision
through the National Environmental Policy Act (e.g.,
projects on the North Slope and Ambler Road). Additionally,
the EPA had an everchanging definition of Waters of the
United States (WOTUS). He highlighted Fish and Wildlife
Service efforts on Endangered Species Act issues. He stated
that the current federal administration had Alaska in its
sights.
2:37:08 PM
Representative Wool directed a question to Ms. Mills. He
referenced the 17 unfilled positions out of 144 total
[within the Civil Division]. He estimated the vacancy rate
at 12 percent. He asked how many of the 17 positions were
currently funded.
Ms. Mills replied there were a total of 144 to 146
positions. She answered that the positions were funded, but
the department had a vacancy factor that was taken into
account. She believed the Office of Management and Budget
could speak better to the issue. She explained that the
department received general funds and reimbursable services
agreements; therefore, the number of positions the
department had to fund was dependent on what other
departments were able to provide in terms of legal
services. She clarified that DOL had to link all of its
matters to the specific funding source, whether it was a
department or general funds. The department was constantly
evaluating what that looked like.
Representative Wool stated his understanding there was
funding for 146 positions that were not all filled, and
part of the reason for using outside counsel was because
the department lacked certain expertise in-house. He asked
if DOL could use some of the funding to pay for outside
counsel. He thought it sounded like the department had more
funding than it was using.
2:39:34 PM
Ms. Mills did not believe it was completely accurate to say
the department had money sitting around. She clarified that
the departments budget was a balancing act with all of the
different sources. She stated the Natural Resources Section
was currently filled (although there may be one attorney
departing). She explained it depended on which section a
person was looking at. The departments work on the
[statehood defense] issues had increased about a 30
percent. She explained that even if a vacant position was
filled, the workload exceeded the number of attorneys. She
was uncertain where the department would be on its budget
at the end of the year because it required numerous
projections from various sources and some of the sources
could be used for some purposes and not others. She relayed
that the workload exceeded the funding included in the
departments annual budget.
Representative Wool supported the compromise on the
amendment. He highlighted the department had spent less
than a quarter of the $4 million multiyear appropriation
from the previous year. He understood the department had
bills coming in [that required payment]. He assumed the
department would come back the following year with another
multiyear appropriation request if it were to fully expend
the $2 million provided by the amendment. He noted that Ms.
Mills had referenced Flint Hills, but he did not believe it
would be covered by the funding in the amendment because it
did not pertain to statehood defense. He surmised that DOL
already had money for outside contracts within its budget.
He thought the funds could cover outside counsel if it ran
out of the $4 million [appropriated the previous year].
Ms. Mills replied that every year the department had to
review and prioritize referred cases and incoming funding
based on the timing of the cases and the statute of
limitations. The department was currently facing numerous
priorities with insufficient resources. She apologized if
her statement about Flint Hills had been misleading. She
clarified she had been using the case as a prior example of
a multiyear funding approach. She elaborated that the
multiyear funding approach had been used in the past for
Flint Hills and BP corrosion. She noted the language in the
past appropriation had been different and would not fit
under the current appropriation.
Co-Chair Merrick called the question on the amendment.
Co-Chair Foster asked Representative Johnson to provide
wrap up on the amendment.
Representative Johnson believed the amended Amendment L8
was a good compromise. She stated it would be good to hear
back sooner rather than later on the status.
Representative Josephson WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment L8 was ADOPTED
as amended.
2:44:12 PM
Co-Chair Foster provided a review of the total number of
amendments and where the committee was in the process.
Representative LeBon MOVED to ADOPT Amendment L9, 32-
GH2686\R.5 (Marx, 3/16/22) (copy on file):
Page 88, line 20:
Delete $22,800,000
Insert 29,800,000
Page 88, following line 30:
Insert new material to read:
Mariculture research and development $7,000,000
Representative Rasmussen OBJECTED for discussion.
Representative LeBon explained the amendment. The amendment
impacted the language section of the budget located on page
88, Section 37, and pertained to the University of Alaska.
He read from a prepared statement:
This amendment should look familiar, as it passed out
of the university subcommittee as a recommendation. If
adopted, this amendment would add $7 million to the
University of Alaskas mariculture North Pacific
Fisheries Arctic and Pacific North Ocean sciences. The
fund sources, the Coronavirus State and Local Fiscal
Recovery Funds or commonly known as CSLFRF, federal
money was consistent with other research development
projects in this section of the budget including the
drone program at UAF, critical minerals, heavy oil,
and fits in with the intent of CSLFRF funding to be
used for economic recovery.
Representative LeBon remarked that committee members were
all familiar with resource development that centered around
oil and gas and other essential minerals, but it could also
be found in fisheries and mariculture. He detailed that the
governors mariculture task force had set a goal of growing
the blue economy industry by $100 million in 20 years. He
reported the critical goal had a chance to be reached with
university training and research development. He elaborated
that the university was actively working on expanding
opportunities in mariculture and the funding provided by
the amendment was critical to support the young industry.
He highlighted there had been public testimony in support
of the amendment concept. He noted the university was
available to answer any questions.
2:47:44 PM
Representative Wool agreed that the university subcommittee
had dealt with the issue. He supported the amendment and
discussed that it used federal CSLFRF funding and
diversified the economy, which was needed. He highlighted
discussions on food security and investing in farming in
various areas such as Mat-Su, Nenana, and Delta. He stated
that mariculture was a key part of the discussion and would
become more central moving forward. He stated that drought
was not a concern when things could be grown underwater. He
hoped the program would grow.
2:49:00 PM
Vice-Chair Ortiz supported the amendment. He stated that
the difference in investing in mariculture development
compared to other resource development was mariculture is a
renewable industry. He highlighted that the market for the
products never went away, people would always need to eat.
He concluded it was a win-win situation and he was proud to
support the amendment.
Representative Rasmussen would likely not support the
amendment if it were funded with General Fund dollars;
however, she was open to giving it a shot because the
amendment utilized a federal grant. She was concerned about
expanding areas subsidized by the state. She thought it was
one thing to help a program get off the ground, but it was
another thing to heavily subsidize a private sector
business in perpetuity. She recognized there was currently
a workforce shortage across industries and state
departments. She spoke to the importance for the state to
be asking where the greatest need resided in the workforce
shortages and to ensure all state resources were being used
for areas that maximized the greatest benefit to all
Alaskans.
Representative Carpenter requested to hear from the
university on the results or outcome of the money being
spent by the university. He was aware his own efforts to
farm and sell peonies benefitted from studies by the
university a decade back. He agreed there was opportunity
in mariculture. The state had vast coastline and there were
many places in the world that eat things the state could
produce. He was concerned about funding studies that did
not result in anything. He wanted to hear what the
university thought it could achieve with the funding.
2:52:43 PM
CHAD HUTCHISON, DIRECTOR, STATE RELATIONS, UNIVERSITY OF
ALASKA, answered that one of the things the university
thought about was what it could do to help Alaska. He
shared that mariculture was on the universitys list when
the governor had asked the university for a list of its
most important viable research projects. He reported that
the amendment would benefit the University of Alaska
Anchorage, Southeast, and Fairbanks. He explained that $5
million of the funding would go to workforce development,
increasing capacity at the blue economy research center. He
detailed there would be a focus on genetic infrastructure
in Southcentral Alaska including a research component. He
elaborated there would be an increase in the future hiring
of faculty to ensure the university had enough personnel
for production quality and grade mariculture (kelp,
seaweed, and shellfish). The university was bullish on
kelp, which grew quickly, and Alaska had substantial
compatible coastline. Part of the universitys focus was to
try to make the most effective, efficient product growth
and to ensure the product was harvested in a productive
way.
Mr. Hutchison relayed that in 2019, the entire mariculture
industry in Alaska had been about $1.4 million. He reported
the goal was to increase the number to $100 million,
meaning it was necessary to increase workforce capacity. He
expounded that the University of Alaska Southeast planned
to ramp up its mariculture undergraduate and graduate
program. He spoke to the importance of sufficient personnel
to help harvest, run clinicals, and conduct testing to
ensure the kelp was healthy and in pristine conditions.
Under the University of Alaska Anchorage, the Institute of
Social and Economic Research (ISER) would be involved with
grading and analyzing commercial grade mariculture and
deciding locations throughout Alaska where mariculture
would benefit coastal communities. Additionally, the
university hoped to teach and outreach to coastal
communities in rural Alaska to boost their mariculture
capacity in the future. The $7 million increment in the
amendment would fund all of the aforementioned activities.
Representative Rasmussen WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment L9 was ADOPTED.
2:55:54 PM
Representative Thompson WITHDREW Amendment L10, 32-
GH2686\R.6 (Marx, 3/17/22) (copy on file).
2:56:08 PM
Representative Rasmussen MOVED to ADOPT Amendment L11, 32-
GH2686\R.19 (Marx, 3/18/22) (copy on file):
Page 98, following line 6:
Insert a new subsection to read:
"(w) The sum of $123,000,000 is appropriated from the
general fund to the oil and gas tax credit fund (AS
43.55.028)."
Reletter the following subsections accordingly.
Page 104, lines 29-30:
Delete "sec. 41(x)"
Insert "sec. 41(y)"
Page 104, line 31:
Delete "sec. 41(x)"
Insert "sec. 41(y)"
Representative Josephson OBJECTED for discussion.
Representative Rasmussen explained the amendment funded the
remainder of the oil and gas tax credits owed by the state.
She read from a statement:
We likely owe in the ballpark of $132 million. The oil
tax credits have been owed. Its the states
responsibility to ensure that these credits are paid.
The entire outstanding oil tax credit balance was paid
annually through fiscal year 15. The statutory
appropriation based on Department of Revenues
interpretation was paid through fiscal year 18. $100
million out of the statutory $184 million was paid in
fiscal year 19 and no credits were paid through fiscal
year 20 and 21. I believe that this is a time we can
pay this debt and reduce the debt service for
subsequent years. At this point I think its really
important that the state does everything we can to
encourage confidence in the private sector that Alaska
will make good on our promises and pay our debts.
Representative Rasmussen noted the committee had received
updated language from Mr. Painter. She added intent to
propose a conceptual amendment for clarity.
Representative Rasmussen MOVED to ADOPT conceptual
Amendment 1 to Amendment L11. She explained the conceptual
amendment would replace the current language with:
The amount necessary to purchase transferrable tax
credit certificates presented for purchase estimated
to be $472 million that is appropriated from the
General Fund to the Oil and Gas Tax Credit Fund.
Co-Chair Foster asked if Mr. Painter had anything to add.
Mr. Painter gave context for the conceptual amendment. He
explained the existing Section 41(v) in the bill
appropriated an amount equal to 10 percent of the revenue
collected, estimated at and not to exceed $349 million. He
detailed the amendment as currently drafted would add $123
million. He relayed there was some chance the $349 estimate
was incorrect or the estimate of the total amount of
outstanding tax credits was incorrect. The proposed
conceptual amendment would ensure the full balance of the
tax credits would be paid if one or both of the two
estimates was incorrect.
2:59:21 PM
AT EASE
3:15:44 PM
RECONVENED
Co-Chair Foster reviewed his intent related to the
remainder of the meeting schedule.
Vice-Chair Ortiz OBJECTED to conceptual Amendment 1 to
Amendment L11 for discussion.
Mr. Painter clarified the intent of the conceptual
amendment was to replace the existing language in Section
41(v) referencing the $349 [million] with language the
amount necessary to purchase transferrable tax credit
certificates presented for purchase estimated to be $472
million...
Representative Wool relayed that he did not have a problem
with the amendment to the amendment. He remarked that the
amendment sponsor had stated the amendment would save money
related to debt service and interest on tax credits. He
stated his understanding there was no debt service or it
did not save any money to pay the credits off in one year
as opposed to two years. He asked Mr. Painter about the
accuracy of his understanding.
Mr. Painter answered that the state did not pay interest,
although some of the recipients may be paying interest if
they owed money and the payment from the state would be
their repayment.
Representative Wool asked for verification that paying the
credits off in one or two years did not save the state any
money.
Mr. Painter agreed. He clarified that he had been referring
to a situation where a company may owe a lender. He
explained that in many cases the tax credits were owed to a
lender.
3:18:50 PM
Representative LeBon supported the amendment. He stated the
amendment offered the opportunity to be done with the
discussion on oil and gas tax credits that had been
lingering as an obligation to the state for many years. He
stated that by opportunity of revenues received by the
state from oil, the state had a chance to retire the
credits.
Representative Rasmussen clarified that she had noted in
her opening comments that the state would be reducing its
overall debt service. She explained that the oil and gas
tax credits were a debt the state carried and paying the
balance meant the state would not carry the debt another
year. She noted there were no cost savings to the state,
but it would eliminate a debt the state was statutorily
required to pay.
Vice-Chair Ortiz WITHDREW his OBJECTION to conceptual
Amendment 1.
There being NO further OBJECTION, conceptual Amendment 1 to
Amendment L11 was ADOPTED.
Representative Josephson asked for verification that prior
to FY 15, when the state had been affluent, it had
routinely paid all of the credits presented.
Mr. Painter answered that in many years by paying the
amount submitted to the state, the state had paid less. He
clarified that the language had been first adopted in order
to save the state money because the statutory formula had
resulted in more payments into the fund than there were
credits being returned to the state at that time. He
thought it would have shifted in FY 17 where the state had
been paying the statutory amount each year. He explained
the decision had been made to reduce annual contributions
to the tax credit fund, not to increase it.
3:21:43 PM
Representative Wool stated that there was $60 million in
the FY 23 budget to pay the past years credits.
Additionally, the budget included funds to pay the current
amount owed. He noted the amount owed would likely increase
for the current year because the price of oil had gone up
and the state had to pay 10 percent of its oil revenue. He
remarked that if the amendment did not pass, the state
would be writing a check for close to $400 million for the
oil tax credits. He continued that although the amount
would not be paid off in full, it would be 80 to 90 percent
paid off. He thought the state was paying off a substantial
amount already. He pointed out that paying the credits off
in full in the current year would not save the state any
money. He understood that paying off the debt would be nice
in a housekeeping way. He supported paying the statutory
amount and making the final payment in the following year.
He had heard the [credit] recipients got their amount based
on the instate hires; therefore, it was possible to look at
the list of payees to determine which companies were using
more instate hires. He asked Mr. Painter if his
understanding was accurate.
Mr. Painter replied there had been an amendment to the tax
credit statute for some of the last credits issued that
would prioritize payments based on Alaska hire.
Representative Wool thought it would be good information to
have. He noted that some of the credits would go to lending
institutions. He reasoned a bank in New York would not have
instate hire. He surmised the bank in his example would be
at the lower end of the list; however, it would be fully
paid off the next year. He thought the legislature should
stick to the statute and pay off the final amount the
following year.
3:24:21 PM
Co-Chair Foster summarized the amounts paid and owed. He
detailed that the previous year half of the statutory 10
percent minimum had failed to pass; therefore, $60 million
was owed for that year. He stated that the FY 23 budget
paid the $60 million. Additionally, according to the fall
forecast, the formula would have paid $199 million. He
noted the $60 million and $199 million increments had both
been included in the committee substitute. He elaborated
that when the spring forecast had been published, the
number had increased to $349 million due to the formula. He
calculated that combining the $60 million and $349 million
resulted in $409 million to be paid. He remarked that the
amendment would potentially add another $123 million. He
asked if his statements were accurate.
Mr. Painter agreed.
Co-Chair Foster highlighted there was a good amount
included in the budget for oil tax credits.
Representative Edgmon asked if the total payout would be
$532 million.
Mr. Painter agreed.
Representative Edgmon stated the committee had already put
$250 million in the CBR in an earlier amendment. He
highlighted the amendment would use $300 million on top of
the amount, meaning the actions used $550 million from the
surplus projection based on current oil prices. He surmised
the actions could result in foregoing the forward funding
of education.
Mr. Painter clarified that the amendment added $123 million
because the $349 million was in the current bill. He
explained that the $250 million was a supplemental. He
elaborated that the amount in the amendment would come out
of the projected $832 million surplus in FY 23 and would
reduce the amount to about $700 million.
Representative Edgmon concluded the overall amount was $532
million. He believed categorizing the amount as a debt was
a term of art because it was not like a general obligation
bond payment where interest was accumulating. He
highlighted that the money was not part of the debt ratio
computed for the debt owed by the state because it was
accompanied by conditional language. He pointed out that
the state was not obligated to pay the amount in the
amendment in the current year. He asked if he was mistaken.
3:27:45 PM
Mr. Painter answered that the item was subject to
appropriation. He elaborated that statute specified the
legislature may appropriate funds into the tax credit fund.
He remarked that companies currently had substantial tax
liability and there may be a secondary market to use the
credits against that tax liability if the state did not
purchase the credits.
Representative Edgmon was in favor of paying the amount
off; however, he considered the number presented and the
opportunity costs that may be out there in the minds of
many constituents.
Vice-Chair Ortiz stated that if the legislature put forward
the $560 million, the bottom line was the funding would not
go someplace else (e.g., the higher education fund, the
PFD, and the capital budget). He explained the additional
amount proposed in the amendment meant less money put into
other programs. He asked if his statements were accurate.
Mr. Painter agreed. He noted if the funds were paid the
next year, it would be just shifting the timing, but he
confirmed there would be less funding available [for other
things] in the current budget if the legislature paid the
amount [proposed in the amendment].
Representative Josephson referenced data the state would
not receive on local hire if the obligations were retired
altogether. He asked for verification the state could not
then provide incentives or privileges based on the data.
Mr. Painter answered that the question was outside of his
jurisdiction.
Representative Wool MAINTAINED the OBJECTION to Amendment
L11 as amended.
Representative Rasmussen provided wrap up on the amendment.
She thought it was great that private sector oil companies
had done so well that they were projected to pay the state
billions of dollars in taxes from their earnings that would
enable the budget to include full and forward funding for
K-12 education, in addition to putting money in savings,
paying a modest dividend, and keeping a strong level of
essential services intact. She continued that additionally,
the legislature had the ability to pay off an obligation
the state made when it had essentially begged the private
sector to explore in Alaska. She believed it was incumbent
on the state to make the investment in order to show good
faith to the industry. She highlighted there were several
years where the state had paid no credits. She speculated
that $130 million likely would have been paid in FY 20 and
FY 21 if the legislature stuck to the statute. She thought
it was important to pay the debt.
A roll call vote was taken on the motion.
IN FAVOR: Johnson, LeBon, Rasmussen, Thompson, Carpenter,
Josephson, Merrick
OPPOSED: Edgmon, Ortiz, Wool, Foster
The MOTION PASSED (7/4). There being NO further OBJECTION,
Amendment L11 was ADOPTED as amended.
3:33:30 PM
AT EASE
3:44:22 PM
RECONVENED
Co-Chair Foster noted that some committee members had other
commitments and he intended to recess the meeting to
possibly take up one more amendment prior to adjourning.
Representative Josephson thought the next amendment could
take time.
Co-Chair Foster agreed. The goal was to do the amendment
all at once.
HB 281 was HEARD and HELD in committee for further
consideration.
HB 282 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster recessed the meeting [note: the meeting
never reconvened].
ADJOURNMENT
3:46:43 PM
The meeting was adjourned at 3:46 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 281 Conceptual Amendment 1 to L 11 Rasmussen 032222.pdf |
HFIN 3/22/2022 1:30:00 PM |
HB 281 |
| HB 281 & HB 282 Op Budget Language Amendments Today's Actions 032222-.pdf |
HFIN 3/22/2022 1:30:00 PM |
HB 281 HB 282 |