Legislature(2023 - 2024)ADAMS 519
03/20/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB144 | |
| SB22 | |
| Overview: Budget Update |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 144 | TELECONFERENCED | |
| += | SB 22 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 268 | TELECONFERENCED | |
| += | HB 270 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 20, 2024
1:35 p.m.
1:35:05 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Bryce Edgmon, Co-Chair
Representative DeLena Johnson, Co-Chair
ALSO PRESENT
Representative Justin Ruffridge, Sponsor; Bud Sexton,
Staff, Representative Justin Ruffridge; Chad Hutchison,
Director of State Relations, University of Alaska; Senator
Elvi Gray-Jackson, Sponsor; Alexei Painter, Director,
Legislative Finance Division.
PRESENT VIA TELECONFERENCE
Brandon Spanos, Acting Director, Tax Division, Department
of Revenue; Karen Matthias, Executive Director, Alaska
Metal Mines, Anchorage.
SUMMARY
HB 144 REPEAL EDUCATION TAX CREDITS SUNSET
HB 144 was HEARD and HELD in committee for
further consideration.
SB 22 PROCLAIM JUNETEENTH DAY A HOLIDAY
SB 22 was REPORTED out of committee with five "do
pass" recommendations, three "no recommendation"
recommendations, and one "amend" recommendation
and with one new fiscal impact note from the
Department of Corrections, one new fiscal impact
note from the Department of Education and Early
Development, one new fiscal impact note from the
Department of Fish and Game, one new fiscal
impact note from the Department of Family and
Community Services, one new fiscal impact note
from the Department of Health, one new fiscal
impact note from the Department of Public Safety,
one new fiscal impact note from the Department of
Transportation and Public Facilities, and one new
zero fiscal impact note from the Department of
Military and Veterans' Affairs.
HB 268 APPROP: OPERATING BUDGET; CAP; SUPP; AM
HB 268 was HEARD and HELD in committee for
further consideration.
HB 270 APPROP: MENTAL HEALTH BUDGET
HB 270 was HEARD and HELD in committee for
further consideration.
OVERVIEW: BUDGET UPDATE
Co-Chair Foster reviewed the meeting agenda.
1:36:55 PM
AT EASE
1:38:40 PM
RECONVENED
Co-Chair Foster explained that the committee would take an
at ease to allow time for a presentation to be set up.
1:39:07 PM
AT EASE
1:44:31 PM
RECONVENED
HOUSE BILL NO. 144
"An Act relating to education tax credits; and
providing for an effective date by repealing the
effective date of secs. 1, 2, and 21, ch. 61, SLA
2014."
1:45:03 PM
REPRESENTATIVE JUSTIN RUFFRIDGE, SPONSOR, introduced the
PowerPoint presentation "HB 144 Education Tax Credit" dated
March 20, 2024 (copy on file). He relayed that the bill was
relatively simple and was designed to continue the
education tax credit that currently existed in the state.
The credit allowed businesses to donate dollars to
organizations that were educational in nature and deduct a
certain percentage of the donation from the business'
corporate taxes. The program had been successful throughout
the years and was due to sunset in the near future. The
bill proposed that the program should exist in perpetuity
and should no longer be eligible for a sunset. He turned
the presentation over to his staff.
BUD SEXTON, STAFF, REPRESENTATIVE JUSTIN RUFFRIDGE, began
the presentation on slide 2 and offered some background on
the Education Tax Credit Program. The program first began
in 1987 when the Education Tax Credit Program was
established. He reiterated that the goal was to encourage
private businesses to make charitable contributions to
schools. The program had evolved over the years and the
groups and entities that were eligible to contribute had
changed, as well as the education institutions that were
able to receive the donations. The sunset provisions had
been consistently extended since 1987.
Mr. Sexton continued to slide 3 and read through the
background of the program. The credit was for qualifying
contributions to accredited nonprofit two-year or four-year
colleges in the state. The credit could be used for a
variety of purposes, such as facilities, direct
instruction, and research and educational support purposes.
He clarified that technical training schools, vocational
education courses, and similar programs and facilities were
also eligible. He noted that Alaska Native cultural and
heritage programs were also a recipient of the tax credit
dollars and equipment.
Mr. Sexton advanced to slide 4 and reviewed some of the
recent education tax credit legislation. In 2014, HB 278
expanded the list of eligible recipients for donations and
and in 2018, HB 223 created the allowance for cash or
equipment contributions. He added that HB 223 also
established the current sunset expiration date of December
31, 2024.
Mr. Sexton continued to slide 5 which listed the taxes that
could be offset by the credits. The program was a wide
ranging opportunity, significantly impacted many
industries, and encouraged industries and businesses to
make donations to Alaska's institutions.
Mr. Sexton moved to slide 6, which included a chart of the
contributions and credits from 2011 through 2023. In 2023,
$2.7 million was the total amount of credits claimed, which
was about 50 percent of the total amount of contributions.
The institutions that received the most contribution
dollars were the University of Alaska (UA) and Alaska
Pacific University (APU), followed by secondary and
vocational schools. He explained that secondary schools
offered courses by an Alaska school district for
kindergarten through twelfth grade and could include
technical courses and college prep courses. Vocational
schools offered technical education training and some
apprenticeship programs. The entities that fell into the
"other" category were considered nonprofits and provided
different services. There had been a significant amount of
donations made over the years.
1:50:05 PM
Mr. Sexton continued to slide 7 which displayed the lowered
tax credits from 2018 through 2021 brought about by HB 223.
He directed attention to the middle column of the chart,
which showed the tax credits in the $100,000 to $300,000
range. There had been a reduction in recent years due to
the lowering of the cap. In 2018, the tax credit cap was $5
million but changed to $1 million in 2019. He continued to
slide 8 and reiterated that HB 144 would remove the sunset
date for the tax credit program, which had existed since
1987. He thought that the bill would present a good
opportunity for corporations and other entities to make
long-term financial plans. The bill would maintain the tax
deductions at the 50 percent level. He concluded the
presentation.
Co-Chair Foster asked how long the recent sunsets had been.
Representative Ruffridge responded that the sunset
timeframes had varied quite significantly over the years.
He thought that the last sunset was for six years.
1:52:07 PM
Representative Tomaszewski asked whether the cap was per
business or overall.
Representative Ruffridge responded that the cap was per
business.
Representative Ortiz thought the bill made sense. He asked
if the bill would eliminate the sunset clause if it were to
pass. He wondered if there was there any reason to maintain
a sunset date and if there had been previous attempts to
eliminate the sunset clause.
Representative Ruffridge replied that he was not aware of
any previous attempts to remove the sunset entirely. He
understood that sunsets were used to discuss a piece of
legislation that was slightly uncertain or ambiguous. He
noted that the tax credit had been around for over 30 years
and had been utilized well. He thought it did not make
sense to maintain the sunset on a piece of legislation that
has been around for such a long period of time. The only
reason to keep the sunset was to continue to bring the
legislation back in front of the body to ensure that it did
not need any updates. He argued that a sunset was the wrong
mechanism to produce change in legislation.
Mr. Sexton added he was also not aware of other attempts,
but he could follow up with the information.
Representative Ortiz noted that the state had a higher
influx of revenue in 2016 and 2017 and the tax credit
system was more active. The activity had decreased due to a
higher cap and other factors. He asked if the reason for
the decrease in activity was the change in the cap or if
there were other factors.
Representative Ortiz commented that there were a multitude
of factors that contributed to the decreased activity,
including the decreased cap. He noted that businesses or
contributors were encouraged to maximize contributions in a
previous version of this program while the tax credit
capacity was now equal across the board. The previous
iteration of the program in 2018 allowed for 100 percent of
a donation to be offset by a tax credit. He thought there
was an incentive to contribute higher amounts of money due
to the tax offset capabilities. He thought that the world
had also significantly changed due to the COVID-19 pandemic
and many businesses had become more cautious with money.
1:57:19 PM
Representative Galvin referred to slide 6 and asked for
clarification that the total contributions and credits were
$5,422,473 for 2023. She asked if the money would have
otherwise gone into the Department of Revenue (DOR) and
become unrestricted general funds (UGF).
Representative Ruffridge replied that the figure
represented the total contributions that were made on
behalf of the businesses. The first column on slide 6
included the dollar amount that would have been received by
DOR.
Representative Galvin understood that the total amount that
would have gone to DOR was about $2.7 million for 2023. She
noted that the number was higher prior to the pandemic. She
understood that the tax credit was important to the
university system. She was grateful for the opportunity for
the private industry to contribute to worthy causes. She
thought it was important to be aware that the bill would
require that the state surrender some of its revenue. She
also asked that there be awareness of the way in which
education was funded. She noted that the list of possible
organizations that were eligible to receive the
contributions included private nonprofit elementary schools
or secondary schools. She asked if Representative Ruffridge
could provide some examples of the eligible schools that
had received funds.
Representative Ruffridge answered that he did not have any
examples readily available, but he knew that the list of
schools that had received funds was lengthy. He noted that
the director of DOR was available online for questions.
Mr. Sexton responded that there were some confidentiality
issues at play, but the director might be able to provide
an example of some schools that would fall into one of the
eligible categories.
2:00:23 PM
BRANDON SPANOS, ACTING DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference) understood that
Representative Galvin was asking for some examples of
entities within the secondary, vocational, and other
category that were recipients of contributions. He
explained that there were restrictions on providing
specific examples when the department could not aggregate
information. The department was able to provide information
for the contributions to UA and APU because there were
multiple taxpayers that were making the contributions. If
there were not at least three taxpayers contributing to one
entity, the confidentiality statutes in AS 43.05.230
prevented the department from providing the information
which was why the entities were grouped together in one
category.
Mr. Spanos explained that statute stated that both public
and private non-profit elementary or secondary schools in
the state could be considered non-profit regional training
centers that were recognized by the Alaska Department of
Labor and Workforce Development (DLWD). He thought that the
information was likely published by DLWD. There were also
apprenticeship programs that were eligible for the credit.
He relayed that DOR included in its annual report the
secondary schools that offered courses operated by the
Alaska School District (ASD) and offered the general
technical and college preparatory courses for kindergarten
through twelfth grade. He noted that vocational schools
offered technical educational training and certain
apprenticeship programs and the other category included
nonprofit organizations that were receiving contributions.
Representative Galvin understood that the eligible
recipients could be both public and private, nonprofits,
elementary, or secondary schools in the state. She relayed
that she generally supported the concept behind the bill.
She noted that the wide range of eligible recipients stood
out to her because the state had yet to fulfill its
responsibility to maintain its public school system. She
was not sure how to fix the problem, but it was a concern
considering the challenges faced by legislators.
2:04:18 PM
Representative Josephson shared that his understanding was
that the Alaska Bible College (ABC) on the Kenai Peninsula
qualified for tax credits. He was familiar with
constitutional law and relayed that the courts were more
receptive to a receipt of a benefit involving a secondary
or college institution. He thought it was a similar
situation as holding a prayer on the legislative floor
while prayer was not permitted in a public school. He asked
if he was correct in his understanding that if ABC received
tax credits, a hypothetical rabbinical school in the state
could receive tax credits also.
Mr. Spanos responded that he would have to follow up with
the information and thought ABC existed in a gray area. He
would need to do more research into the constitutional law
surrounding religious organizations. He thought that if ABC
was eligible, other religious entities would also be
eligible.
Representative Josephson understood that Mr. Spanos could
not speak in depth on the topic, but noted that it had been
a significant story in the media recently. He liked the
bill, but wondered how it would interact with HB 89 which
proposed a child care tax credit. He understood that the
bills together would increase the cost from $1 million to
$3 million.
Representative Ruffridge asked Representative Josephson for
clarification on what he meant by the bill increasing from
$1 million to $3 million.
Representative Josephson replied that the fiscal note for
HB 144 stated that an affluent corporation could receive up
to $1 million in tax credits, but HB 89 would increase the
credit cap to $3 million. He did not think it would change
HB 144 and noted that future legislators could increase or
decrease the cap, but he wanted to know Representative
Ruffridge's thoughts on the possibility.
Representative Ruffridge responded that the cap could be
changed at any time. He thought that the possibility of HB
89 passing into law and adjusting the cap was irrelevant to
HB 144. He reiterated that HB 144 was focused on ceasing
the sunset on important and enduring programs. He referred
to Representative Galvin's earlier comments and remarked
that the amount of credits and contributions being made
under the program were small in comparison to the need. A
large portion of the credits were allocated to UA and the
university supported the program. He thought the issues
were separate.
2:10:11 PM
Representative Hannan referred to the constitutional
prohibition on public dollars going to private religious
schools. She understood that DOR was not able to share
details about the other category of eligible fund
recipients, which was concerning. She was uncertain if
there was a legal memo detailing whether any of the fund
recipients in the other category were in violation. She did
not know how to pursue the information if DOR could not
provide the committee with details on the recipients in the
other category. Private religious elementary schools should
not be receiving tax dollars and the prohibition was
explicit and clear in the constitution. She wanted to
ensure that the ambiguity was addressed before the bill was
moved. She understood that the issue was separate from the
sunset issue that the bill would establish.
Representative Ruffridge thought that Representative Hannan
answered her own question by stating that the bill was
dealing with the sunset authority. He directed attention to
a document in the committee packet [titled Department of
Revenue - Alaska's Education Tax Credit Program] (copy on
file). He relayed that page three of the document discussed
the responsibility to obtain and retain proper
documentation to verify that contributions were given to a
qualifying organization. By statute, there were qualifying
expenditures that were maintained for the Education Tax
Credit Program, which had to be applied for and verified by
the department. He thought the director could speak to the
process in more detail. He emphasized that expenditures had
to be proven to be proven in order to qualify for the tax
credit. There was a decision made by the Alaska Court
System to allow certain monies, particularly public monies,
to go to private religious institutions if the institution
had a separate program that was not religious in nature.
The dollars could only be used to pay for non-religious
educational programs. He thought there was a potential for
ABC to receive tax credit dollars because it offered
vocational and technical education in addition to religious
education. He agreed that there was ambiguity in the
program and thought it was the responsibility of DOR to
monitor ambiguous elements. The donors were responsible for
providing documentation that proved that the expenditures
were meeting both constitutional and statutory guidelines.
Mr. Spanos added that he was not sure which institutions
were in the other category off the top of his head. He
thought the question that should be posed to determine
eligibility was whether any religious organizations,
nonprofits, or private religious organizations had already
received an approved contribution. Taxpayers needed to work
with independent tax advisors and determine whether the
credit would apply. After making a contribution, taxpayers
could claim the credit on tax returns and DOR could audit
the credit.
2:14:07 PM
Mr. Spanos continued that as written, the statute appeared
to allow a broad range of organizations to receive
contributions. However, there had been a ruling on whether
the dollars were allowed in certain organizations, which
could be verified as part of the department's auditing
process. He emphasized that if funding would directly
benefit a religious or other private educational
institution, the tax credit would not apply. The department
provided an opinion to all superintendents written by a
former acting commissioner that he could also provide to
the committee.
Representative Hannan shared that her concern was not about
the superintendents of the 54 public school districts in
the state, but about the private schools. She wanted to
make sure that there were no loopholes that would allow
public revenues to be distributed to private nonprofit
religious elementary school programs because the schools
could claim that only certain programs were being funded by
public dollars. She was uncertain how in-depth an audit
would be. She did not want to create a pass-through that
would allow for violation of the state's constitutional
mandate that the public revenue go to public schools.
Representative Galvin understood that Mr. Spanos stated
that funds would not be used for the direct benefit of any
religious or other private educational institutions. She
thought that if a school was a private nonprofit, it was a
private educational institution. She did not want the bill
to have unintended consequences because it included other
private educational institutions in the group of eligible
entities. She suggested that clarity should be added to the
bill.
2:19:10 PM
Representative Stapp objected to the discussion. He shared
that he was born in 1987 and the extension had been
reauthorized every year since the year he was born. He
encouraged committee members to take up the issue in a
court case if members thought there was a constitutional
problem or legal problem with the way the state had been
administering the program. He argued that the bill was
simple and he found it irritating that the committee was
debating constitutional law considering there was no one on
the committee that was a constitutional lawyer.
Representative Josephson remarked that he had taught
constitutional law and he was aware of the evolving nature
of the law. For example, there was a pertinent case called
Lemon v. Kurtzman which was written by Warren Berger in the
1970s. He pondered that it was reasonable to be curious,
which included curiosity as to whether the bill should be
amended. He presumed that the bill would do well and would
pass the committee easily. He thought it was allowable to
ask questions.
Representative Ruffridge reiterated that the bill was
relatively simple and would move the program forward. He
suggested that there were other topics that might be more
worthy of the committee's time in the future. He encouraged
members to ask questions offline if more arose. He thought
that the bill should be moved forward.
2:21:54 PM
CHADHUTCHISON, DIRECTOR OF STATE RELATIONS, UNIVERSITY OF
ALASKA, relayed that UA strongly supported HB 144.
Throughout the years, there had been many strong
partnerships that the university had been able to forge
because of the program. Many of the donations that UA
received went directly to the workforce, research, or for
academic purposes. In particular, many students benefited
from the resources allocated to technical education. For
example, the diesel class at UA Southeast was able to
dissect the engines of four semi-trucks, including one with
a broken transmission. There was a lot of funding and
equipment that could be given to the university to help
educate students and build the technical workforce. He
listed some of the partners the university had worked with
over the years: the Glacier Fish Company, American Seafoods
Company, Hecla Mining Company, Fairbanks Gold Mining Inc.,
Conoco Phillips, Alaska Airlines, Holland America Princess,
Ravn Alaska, Aurora Animal Hospital, Bristol Bay Native
Corporation, and Northrim Bank.
Mr. Hutchison shared that the funds that were allocated to
the university through the credit program went directly
into a workforce need or for research purposes. For
example, if a donor was concerned about a crab population
and why there had been diminishing returns, a company could
inject directed funds right to the university and it could
conduct the necessary research and provide the company with
a product that would help the entire state. He expressed
gratitude for the $3.3 million in funding the university
had received over the past year. The university wanted the
program to continue, whether that meant a complete sunset
repeal or a multi-year extension. The stability of the
program and continuing the program for a long period of
time was very important to the university.
Co-Chair Foster OPENED public testimony.
2:25:27 PM
KAREN MATTHIAS, EXECUTIVE DIRECTOR, ALASKA METAL MINES,
ANCHORAGE (via teleconference), explained that Alaska Metal
Mines (AMM) was a professional association formed in 1992
to represent the interests of large metal mines and
advanced projects in Alaska. The association's purpose was
to inspire Alaskans to support a growing mining industry
that produced essential minerals while prioritizing safe
operations, community partnerships, and environmental
protection. Since it was established in 1987, the Education
Tax Credit Program had successfully encouraged private
sector investment in education in the state and helped many
Alaskans learn the skills for jobs in mining and other
industries. She shared that Alaska's largest mines had
welcomed the opportunity to partner with the state and
provide funding directly to Alaska's education programs
that supported workforce development, as well as research
that enhanced efficiency and safety in Alaska's mining
industry.
Ms. Matthias relayed that over the last decade, mining
companies in Alaska used the credit to invest in high
school programs in the Northwest Arctic Borough School
District and Angoon High School. Additionally, mining
companies had invested in a variety of UA programs
including engineering, environmental science, geology, and
the Mining and Petroleum Training Services (MAPTS), which
operated in Anchorage, Soldotna, and Juneau. The programs
supported young Alaskans who would be the next generation
of miners. Many of the programs provided educational
opportunities and training that could directly lead to
full-time mining jobs with high pay and excellent benefits
for Alaskans. The investment in education and training was
particularly valuable in the present day as Alaska grappled
with both out-migration and attrition and aging within the
current workforce. The mining industry strongly supported a
sustainable fiscal plan for Alaska that encouraged private
sector investment and economic growth, which included
innovative ideas like the tax credit to encourage private
sector investment in the education system, providing
Alaskans the skills to succeed and opportunities to stay in
Alaska.
Co-Chair Foster CLOSED public testimony.
Co-Chair Foster set an amendment deadline for Tuesday,
March 26, 2024, at 5:00 p.m.
HB 144 was HEARD and HELD in committee for further
consideration.
2:28:46 PM
SENATE BILL NO. 22
"An Act establishing Juneteenth Day as a legal
holiday."
SENATOR ELVI GRAY-JACKSON, SPONSOR, thanked the committee
for hearing the bill for a second time. She shared that the
bill would simply add Juneteenth to the list of other state
paid holidays.
2:30:07 PM
AT EASE
2:30:22 PM
RECONVENED
Representative Josephson MOVED to REPORT SB 22 out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
SB 22 was REPORTED out of committee with five "do pass"
recommendations, three "no recommendation" recommendations,
and one "amend" recommendation and with one new fiscal
impact note from the Department of Corrections, one new
fiscal impact note from the Department of Education and
Early Development, one new fiscal impact note from the
Department of Fish and Game, one new fiscal impact note
from the Department of Family and Community Services, one
new fiscal impact note from the Department of Health, one
new fiscal impact note from the Department of Public
Safety, one new fiscal impact note from the Department of
Transportation and Public Facilities, and one new zero
fiscal impact note from the Department of Military and
Veterans' Affairs.
2:31:19 PM
AT EASE
2:32:33 PM
RECONVENED
HOUSE BILL NO. 268
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making capital appropriations; making
supplemental appropriations; making reappropriations;
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. 270
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
^OVERVIEW: BUDGET UPDATE
2:33:08 PM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
shared that he would be providing a fiscal update based on
the spring revenue forecast, the latest round of governor's
amendments, and the committee substitute (CS) for the
operating budget. He introduced a PowerPoint presentation
titled "Fiscal Update" dated March 20, 2024 (copy on file).
He began on slide 2 with an updated fiscal summary of the
governor's amended budgets. The amendments received by the
Legislative Finance Division (LFD) on March 13, 2024, were
included in the update, as well as the impacts of the
spring revenue forecast.
Mr. Painter continued that the revenue forecast increased
the expectation in both FY 24 and FY 25, which could be
seen on the first line on the chart on the slide as an
increase of about $58 million in FY 24. The governor's
amended language included a provision that amended the
Permanent Fund Dividend (PFD) appropriation for FY 24 and
increased unrestricted general fund (UGF) revenue by
another $6.9 million. The UGF revenue increase was beyond
the spring forecast numbers. In FY 25, the difference was
about $140 million of UGF revenue over the fall forecast.
For agency operations in FY 25, the governor's amendments
resulted in an increase of about $1.9 million in UGF, which
was not significant. The capital budget increased slightly
in the governor's amended budget in FY 25, as well as in FY
24 supplementals.
Mr. Painter explained that the biggest change in the
governor's amended budget was to the supplemental. There
was a decrease of $19 million for fire suppression based on
updated estimates as well as some increases, particularly
for the Grid Innovation and Resilience Partnerships (GRIP)
projects and Alaska Energy Authority's (AEA) grid
resilience project. Overall, the governor's supplementals
had been reduced. The supplementals totaled $183 million
before the amendments were added and were now $175.8
million with the inclusion of the amendments. There would
be a post-transfer surplus in FY 24 of $116.5 million.
Mr. Painter continued to slide 3 and stated that in FY 25,
the main impact of the spring forecast was a reduction in
the deficit in the governor's budget. The deficit was $1
billion prior to the forecast and was currently down to
$867 million with the inclusion of the amendments. The
slide also included a visual representation of the FY 24
budget at various oil prices. The oil prices were on the
bottom and the revenue was on the y-axis on the graph. The
blue bar area on the bottom represented the revenue
allocated to the FY 24 budget that was authorized during
the previous legislative session. The dark blue section
represented the $175 million of new supplementals. If the
price of oil was below about $75 a barrel, the budget would
have an unfilled deficit, which was an increased price from
his previous report to the committee because of the
addition of the supplementals. He relayed that it was
theoretically possible for prices to crash and go below $75
a barrel for the year, but it was highly unlikely.
Mr. Painter noted that if revenue equaled the amount in the
spring forecast or higher, the budget would have a $292.3
million surplus. The governor's supplementals totaled
$175.8 million which would leave $116.5 in revenue
available for the supplementals in the current year. If the
surplus was not spent, the money would lapse into the
Constitutional Budget Reserve (CBR). The additional revenue
would be split equally between an energy relief payment
that would be distributed as part of the PFD in FY 25 or as
a separate payment, and all additional revenue would go
into the CBR. He thought the oil revenue would most likely
fall somewhere between the dotted lines on the graph which
indicated that there would be an energy relief payment, but
the payment would not be maxed out. The maximum would be
about a $500 dollar payment per person at the top of the
range. He estimated that the energy relief payment would be
about $220 dollars per person and a total of $143 million
dollars.
2:38:13 PM
Mr. Painter advanced to slide 4, which detailed the changes
in the CS for the operating budget as compared to the
governor's amended budget. He relayed that the CS was $6.6
million in UGF above the governor's amended budget for
agency operations. However, there was $10 million in UGF
allocated for the movement of a university capital budget
item to the operating budget, which netted out of the total
impact. He noted that the governor's operating budget
amendments, which were not introduced prior to the CS,
added $2 million in UGF.
Mr. Painter explained that the CS for statewide items for
the House was $5 million below government items. The CS
added $5.2 million of new mental health capital
appropriations to match the Alaska Mental Health Trust
Authority's (AMHTA) recommendation. There was a reduction
of roughly $4.8 million overall.
Mr. Painter continued to slide 5 which compared the FY 24
and FY 25 spring revenue forecast items. He explained that
the chart reflected adding the additional mental health
items in the CS and moving a $10 million project to agency
operations. There was no appropriation for a PFD yet. He
thought the most important item of note was that there was
about $1.45 billion remaining that could go to any number
of items, including the PFD.
Mr. Painter advanced to slide 6 and detailed some of the
major outstanding items in the fiscal update. He remarked
that upholding the governor's veto on SB 140 was a
significant action and fiscal notes for that bill had
totaled $241.3 million. The largest item in the bill was
the proposed Base Student Allocation (BSA) increase of
$680, which would cost about $175 million. There was also a
provision for broadband that may not be able to be
addressed in the current year due to time constraints. If
SB 140 or another education bill did not pass, broadband
would need to be addressed in FY 26. The majority of the
other items within SB 140 could be accomplished through
one-time items or permanent items in the budget, such as
the BSA increase and the pupil transportation increase. He
noted that SB 140 was the only bill that had passed both
bodies during the current legislative session and some of
the bills still in circulation would be costly if the bills
were to pass.
Mr. Painter shared that a significant bill that had only
passed the Senate thus far was the Senior Benefits Bill (SB
170]. The legislation passed with a fiscal note that
required $23.5 million in UGF and there were no other bills
with fiscal notes as large. The funding was not included in
the governor's budget because the benefits program was
expiring. The program had typically been funded each year
and extended when it was set to sunset. There was also a
potential shortfall in the Alaska Marine Highway System
(AMHS) that could be quite significant. If AMHS ran a full
seven-ship schedule but received the same sized grant as it
had in recent years, it would have a budget of about $38
million; however, the grant was not guaranteed. The state
was eligible for a grant that would be large enough to fill
AMHS's entire federal authority in the governor's budget,
but the state had not necessarily received the full grant
amount each year. In 2023, the legislature put in backstop
funding as a compensatory measure if federal receipts were
insufficient. He did not think the legislature needed to
exercise such caution because the state could assess
whether additional funds needed to be added every year. If
the state was not granted the entirety of the grant, the
costs would likely need to be made up with UGF.
Mr. Painter noted that there were four unions that were
currently negotiating bargaining contracts: the Alaska
Correctional Officers Association, the supervisory unit of
the Alaska Public Employees Association, the Labor, Trades,
and Crafts Unit, and the new University of Alaska union for
graduate student employees. The university union was
currently working on its first contract. All of the unions
were actively negotiating new contracts to begin in FY 25.
If salaries were increased as well, the potential cost
would increase.
2:44:33 PM
Representative Josephson understood that the total for the
new items was not known, but he anticipated the cost would
be around $20 million. If SB 140 were replaced with similar
legislation, the items would total around $341 million. He
understood that the $341 million would be subtracted from
the post-transfer surplus of $1.44 billion detailed on the
previous slide. He asked if he was correct in his
understanding that the total would be around $1.1 billion.
Mr. Painter responded that Representative Josephson's math
was correct as long as the items on slide 6 were funded. He
reiterated that negotiations were still occurring and the
totals could not yet be known. The negotiations were due
statutorily on day 60 of legislative session, but it was
rare to receive the negotiations by the statutory deadline.
He agreed that the items would total about $1.1 billion if
the budget were to remain balanced and savings were not
utilized.
Representative Stapp asked when he could expect to know
more details about the cost-budget analysis (CBA).
Mr. Painter responded that the CBAs were due in statute by
day 60; however, he was not certain if the deadline had
ever been met. He noted that last year, CBAs were added on
the last day that it could have been added to the budget.
He recalled that the University of Alaska (UA) had asked
for a CBA during a conference committee at one point but it
was not feasible. He noted that there was often very little
time to review the agreements and make a considerate
decision.
Representative Stapp asked why it was in statute if it was
not followed.
Mr. Painter responded that the point of the statute was to
ensure that CBAs were considered. He recalled one year in
which there was an item that the legislature felt there was
no time to review, and the conference committee wrote a
letter accompanying the conference committee report that
said that the exclusion of the union from the conference
committee budget would not represent denying the bargaining
unit. He relayed that there was simply not enough time to
consider some items and therefore, the items were delayed
until the following year's supplemental. He explained that
it was not an unusual action.
2:47:39 PM
Mr. Painter continued on slide 7, which included other
potential budget items. He explained that the
administration generated a list of funding requests. The
first item was $5 million in funding for a renewable energy
fund. When the governor prepared the budget, the list had
not yet been developed. He noted that AEA subsequently
requested $32 million and the governor's amount would pay
for the top two projects and about a quarter of the third
project. Last year, the governor added $7.5 million for
renewable energy and the legislature subsequently increased
the funding amount. The total list cost for school
construction was $260.5 million and the governor funded the
top project on the list for $4 million. The total list cost
for school major maintenance was $249 million and the
governor funded the top two projects for $4.3 million.
Finally, the state had a nearly $2.2 billion backlog of
deferred maintenance. The governor had $28.2 million for
deferred maintenance purposes coming from the Alaska
Capital Income Fund and the legislature had often allocated
additional funding. The university had a $1.5 billion
backlog and requested $35 million through a bill. The
university item had been frequently vetoed when the
legislature allocated additional funding for it.
Representative Galvin asked if the backlog was inclusive of
the actions that had taken place in the past. She asked if
the full list represented the current backlog.
Mr. Painter responded that the difference was that the
state as a whole had a $2.2 billion dollar backlog and the
university made up $1.5 billion of the backlog. The vast
majority of the state's deferred maintenance was at the
university. He shared that the university cataloged its
deferred maintenance more rigorously than the rest of the
state. The university had much larger square footage than
other agencies, which contributed to its deferred
maintenance.
2:51:06 PM
Mr. Painter continued on slide 8, which included additional
potential budget items. In 2023, the governor vetoed a $30
million capitalization for the community assistance fund.
Without the $30 million capitalization, the FY 25
distribution would have been $20 million. At the beginning
of a new fiscal year, one-third of the balance as of the
end of the previous fiscal year was added to the fund,
which would be $20 million for FY 25. The base payments
were distributed to every local government based on the
type of government. The additional amount was the per
capita payment and would be equally distributed to all
local governments in the state. The impact of that veto was
primarily felt in urban areas with higher populations.
Mr. Painter explained that there were a few potential
strategies to compensate for the funding that would have
been available if it was not vetoed. One strategy would be
to fully capitalize the fund in FY 24 and essentially
replace the amount that was vetoed. The other strategy
would be to allocate $10 million to the fund in FY 25.
However, there would still be a shortfall in the fund in
the following year because of the $20 million dollars
difference, but it would fill the distribution hole in FY
25.
Mr. Painter relayed that additionally, there were a number
of bills that were listed on the slide that had only passed
one body. There were a number of bills that had the
potential to become law. The list was not inclusive of all
legislation but represented a sampling for informational
purposes. He suggested that legislators leave some money
for fiscal notes to ensure that the bills that would likely
pass could be funded. The governor's capital budget would
not include legislative district projects, but it simply
reflected the governor's priorities. He noted that he had
heard much discussion on the university and noted that
there was a difference between the regents' request and the
governor's budget. There was a difference of $18.6 million
in UGF in the operating budget between the regents' request
and governor's budget and a $27 million difference in the
capital budget. He noted that $10 million in the operating
budget was changed from university receipts to UGF.
Mr. Painter noted that he had also heard significant
discussion on child care. In 2023, the legislature
allocated $7.5 million dollars as a one-time increment for
child care; however, the funding was not in the governor's
current budget. Also in 2023, the Council on Domestic
Violence and Sexual Assault (CDVSA) received $3.7 million
for one-time items, which was also not in the current
budget. There could be additional items that would emerge
in the legislative process that members could be interested
in funding that were not yet reflected.
2:55:37 PM
Representative Hannan asked for confirmation that an
additional $20 million for the Community Assistance Fund
would provide both the money needed for distribution in FY
25 and as well as the capitalization needed for the
following fiscal year.
Mr. Painter responded in the affirmative, but noted that
the timing would be different. The budget currently
included $10 million in FY 25, but $30 million would be
needed for FY 24. The difference was an increase of $20
million. The $10 million in FY 25 was intended to "top up"
the distribution.
Representative Hannan understood that the fund balance was
normally $90 million and one-third of it was paid out each
year. If the fund were to decrease to $60 million, the
total amount paid out would be $20 million. She understood
that $30 million should be added to compensate.
Mr. Painter responded that it would not put any more money
into the fund, but would add to the one-time distribution
in FY 25 alone. If $30 million was deposited into the fund,
the $10 million would be unnecessary. The cost would
increase by $20 million, but it would be directly
distributed to communities.
Representative Hannan asked if the recommendation was to
include a $30 million amendment into the FY 24 supplemental
capitalizing fund instead of leaving the $10 million in FY
25.
Mr. Painter responded in the affirmative. If $20 million
was added, the distribution would be based on $80 million,
and it would not function properly.
2:58:28 PM
Mr. Painter continued on slide 9 and gave an overview of
fire and disaster funding, which was often underfunded in
the budget and later paid with supplementals. From FY 14
through FY 23, the actual UGF spending for fire suppression
averaged $49.3 million dollars. He noted that the amounts
for FY 22 and FY 23 were based on the amount included in
the budget in addition to the final supplemental. The
reconciliation process for the funding took a number of
years, but $49.3 million was the average final authorized
amount. The governor's budget for fire suppression
preparedness included $14.2 million, which meant there was
a difference of $35 million. The governor's budget also
included an increment to increase firefighters' salaries.
The state would need to allocate about $49.3 million in
order to fund an average fire year. The governor's
supplemental budget included $75 million in supplemental
funding for fire suppression activity in the current year.
There had been a supplemental for fire suppression activity
almost every year since FY 14 and a history of
underbudgeting. The state overspent the original budgeted
amount every year and therefore needed to request a
supplemental every year. The green line on the chart
represented the average spend. There were several years
above the average as well as several years below the
average.
Mr. Painter noted that the Disaster Relief Fund (DRF)
supported other types of disasters. The fund was not
financed in a routine manner and the last deposit was $50
million in FY 22. The governor was requesting $5 million
for disaster relief purposes. The actual average spending
from the fund was about $20.5 million, but it was
impossible to predict whether disasters would occur. He
relayed that the state did not experience disasters every
year and it was impossible to know when a disaster would
occur, but it was routinely under budgeting. He expected
that the state would probably require a supplemental in FY
25.
Representative Stapp asked why fire service was grossly
underbudgeted every year.
Mr. Painter responded that it was a policy decision by the
legislature. He noted that in an effort to increase budget
transparency in FY 20, the legislature increased the
funding to be equal to the lowest funding level in the last
10 years. He shared that the state had never tried to fund
an average amount for fire suppression.
3:02:23 PM
Representative Josephson asked why it would be a problem if
the funding were to remain a supplemental item.
Mr. Painter responded that the downside of budgeting for
supplementals was that all of the costs could not be known.
For example, California had a history of underbudgeting
Medicaid and rolling bills to the next year. The costs
eventually had to be trued up which could be expensive. The
combination of routine underbudgeting and relying on the
supplementals meant the legislature would need to make
difficult budgetary decisions. He noted that sometimes it
was often easier to get a CBR vote for the supplemental
than for the current year, which happened in 2023. He
thought it was a political calculation. Routine
supplementals would not provide clarity for budgetary
purposes and could lead to potential misallocation of
resources.
3:04:31 PM
Mr. Painter continued to slide 10, which included the
change in budgeted positions. The state currently had a
high vacancy rate of about 14 percent. The FY 24 budget
would increase the number of budgeted positions by 115.
There was continued growth in the budget despite the
vacancies.
Representative Josephson understood that the standard cost
for a position with benefits was about $100,000, which
would mean that the total for the increased number of
positions would be $115 million. He asked if he was
correct.
Mr. Painter responded in the affirmative as long as all of
the positions were fully funded. The legislature had
occasionally chosen to partially fund new positions to
allow time for hiring.
HB 268 was HEARD and HELD in committee for further
consideration.
HB 270 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the agenda for the following day's
meeting.
ADJOURNMENT
3:06:21 PM
The meeting was adjourned at 3:06 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 22 Public Testimony Rec'd by 031524.pdf |
HFIN 3/20/2024 1:30:00 PM |
SB 22 |
| HB 144 Sectional Analysis ver A.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 Sponsor Statement ver A.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144- ETC Brochure.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 Education Tax Credit Presentation 032024.pptx.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144- Dept of Revenue Ed Tax credit FAQ.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 DOR 2011-2023 Summary Ed Tax Credits.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HFIN Fiscal Update 3-20-24.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 268 HB 270 |
| HB 144- Support letter Alaska's-Education-Tax-Credits-SB-120-and-HB-144.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 Presentation 3.18.24.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |