02/24/2022 11:30 AM House WAYS & MEANS
| Audio | Topic |
|---|---|
| Start | |
| HB259 | |
| HB223|| OVERVIEW: INACTIVE FUNDS | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 223 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 259 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
February 24, 2022
11:36 a.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story
Representative Mike Prax
Representative David Eastman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 259
"An Act relating to use of income of the Alaska permanent fund;
relating to the amount of the permanent fund dividend; relating
to the duties of the commissioner of revenue; relating to
funding for state aid for school districts, the state boarding
school, centralized correspondence study, and transportation of
pupils; and providing for an effective date."
- MOVED HB 259 OUT OF COMMITTEE
HOUSE BILL NO. 223
"An Act relating to the curriculum improvement and best
practices fund; relating to the fuel emergency fund and fuel
emergency grants; relating to the Railbelt energy fund; relating
to the Alaska affordable energy fund; relating to the special
Alaska Historical Commission receipts account; relating to the
rural electrification revolving loan fund and loans from the
fund; relating to the Southeast energy fund and grants from the
fund; and relating to the Exxon Valdez oil spill unincorporated
rural community grant fund and grants from the fund."
- HEARD & HELD
OVERVIEW: INACTIVE FUNDS
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 259
SHORT TITLE: PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT
SPONSOR(s): REPRESENTATIVE(s) SPOHNHOLZ
01/18/22 (H) PREFILE RELEASED 1/7/22
01/18/22 (H) READ THE FIRST TIME - REFERRALS
01/18/22 (H) EDC, W&M, FIN
02/04/22 (H) EDC AT 8:00 AM DAVIS 106
02/04/22 (H) Heard & Held
02/04/22 (H) MINUTE(EDC)
02/14/22 (H) EDC RPT 3DP 3DNP 1NR
02/14/22 (H) DP: HOPKINS, STORY, DRUMMOND
02/14/22 (H) DNP: PRAX, GILLHAM, CRONK
02/14/22 (H) NR: ZULKOSKY
02/14/22 (H) EDC AT 8:00 AM DAVIS 106
02/14/22 (H) Moved HB 259 Out of Committee
02/14/22 (H) MINUTE(EDC)
02/15/22 (H) W&M AT 11:30 AM DAVIS 106
02/15/22 (H) Heard & Held
02/15/22 (H) MINUTE(W&M)
02/17/22 (H) W&M AT 11:30 AM DAVIS 106
02/17/22 (H) Heard & Held
02/17/22 (H) MINUTE(W&M)
02/22/22 (H) W&M AT 11:30 AM DAVIS 106
02/22/22 (H) -- MEETING CANCELED --
02/24/22 (H) W&M AT 11:30 AM DAVIS 106
BILL: HB 223
SHORT TITLE: REPEALING FUNDS, ACCOUNTS, AND PROGRAMS
SPONSOR(s): REPRESENTATIVE(s) KAUFMAN
01/18/22 (H) PREFILE RELEASED 1/7/22
01/18/22 (H) READ THE FIRST TIME - REFERRALS
01/18/22 (H) W&M, FIN
02/24/22 (H) W&M AT 11:30 AM DAVIS 106
WITNESS REGISTER
ALEXEI PAINTER, Director
Legislative Finance Division
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Offered a PowerPoint presentation on
inactive funds in the context of HB 223.
MARIE MARX, Attorney
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
223.
REPRESENTATIVE JAMES KAUFMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 223, as the prime sponsor.
ACTION NARRATIVE
11:36:47 AM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at 11:36 a.m. Representatives
Josephson, Story, Wool, and Spohnholz were present at the call
to order. Representatives Eastman, Schrage, and Prax arrived as
the meeting was in progress.
HB 259-PERMANENT FUND DIVIDEND; 25/75 POMV SPLIT
11:37:48 AM
CHAIR SPOHNHOLZ announced that the first order of business would
be HOUSE BILL NO. 259, "An Act relating to use of income of the
Alaska permanent fund; relating to the amount of the permanent
fund dividend; relating to the duties of the commissioner of
revenue; relating to funding for state aid for school districts,
the state boarding school, centralized correspondence study, and
transportation of pupils; and providing for an effective date."
CHAIR SPOHNHOLZ, as prime sponsor, sought final comment on HB
259.
11:38:09 AM
REPRESENTATIVE JOSEPHSON referred to slide 12 of the PowerPoint
presentation, titled "HB 259 Update Permanent Fund Funding for
Dividends, Education and other Essential State Services" [hard
copy included in the committee packet]. He pointed out that by
fiscal year 2026, additional funding beyond the base student
allocation (BSA) would amount to $218 million, which he deemed
"too much excess revenue." He suggested that the bill would be
more attractive if the revenue would be targeted formulaically
to a defined benefit for teachers, a pre-kindergarten ("pre-K")
fund, or an extended school year.
REPRESENTATIVE WOOL echoed the sentiments expressed by
Representative Josephson. He expressed his support for fully
funding education and increasing BSA, adding that more support
for education is needed in his district. He expressed his
support for the permanent fund dividend (PFD) formula in the
bill, noting that he maintained some reservations about the
proposed legislation.
11:41:58 AM
REPRESENTATIVE STORY saw the bill as prioritizing public
education in the state by signaling that the legislature would
be serious about economic development and training its
workforce. She acknowledged the "umbrella needs" referenced by
Representative Josephson and Representative Wool, such as
teacher retirement, and welcomed future discussions on the
matter. Further, she highlighted the $26 million in lost
revenue due to downward inflationary pressure on schools, noting
that she was sponsoring a bill to address that issue.
REPRESENTATIVE EASTMAN expressed his skepticism toward the
effectiveness of the proposed legislation. He opined that
increased test scores and performance metrics would be the best
signal to send to parents, as opposed to more funding.
Additionally, he shared his belief that increasing the funding
while maintaining the status quo, which he characterized as
"terrible" in Alaska, would place downward pressure on
performance.
11:44:59 AM
CHAIR SPOHNHOLZ reminded the committee that the statutory PFD
formula would create a $1.5 billion fiscal gap next year. She
opined that Alaskans deserved transparency in regard to the
annual dividend amount, adding that the bill would also resolve
a political problem for the legislature. She expressed a desire
to create fiscal stability for the future of Alaska and agreed
that the bill could intersect with other policy proposals
seeking to address some of the education challenges in the
state. She reported that today, Alaska spends $500 less per
child for public education when adjusted for inflation compared
to FY 08. She expounded on several policy proposals before the
legislature intended to restructure the BSA. She posited that
Alaska's educational outcomes weren't worsening; instead, other
states made strategic investments in education and implemented
evidence-based strategies to jump past Alaska in performance
metrics. She added that it was her intention to allow local
jurisdictions to determine how the additional dollars would be
spent; nonetheless, she said she would be happy to amend the
proposed legislation in the House Finance Committee. In
closing, she reiterated her belief that the state needed to make
investments in public education and could not afford an
unsustainable dividend formula, hence her introduction of HB
259.
11:49:21 AM
REPRESENTATIVE WOOL moved to report HB 259 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 259 was reported out of the House
Special Committee on Ways and Means.
^OVERVIEW: Inactive Funds
HB 223-REPEALING FUNDS, ACCOUNTS, AND PROGRAMS
OVERVIEW: Inactive Funds
11:49:54 AM
CHAIR SPOHNHOLZ announced that the final order of business would
be HOUSE BILL NO. 223, "An Act relating to the curriculum
improvement and best practices fund; relating to the fuel
emergency fund and fuel emergency grants; relating to the
Railbelt energy fund; relating to the Alaska affordable energy
fund; relating to the special Alaska Historical Commission
receipts account; relating to the rural electrification
revolving loan fund and loans from the fund; relating to the
Southeast energy fund and grants from the fund; and relating to
the Exxon Valdez oil spill unincorporated rural community grant
fund and grants from the fund," and an overview of inactive
funds.
11:50:19 AM
ALEXEI PAINTER, Director, Legislative Finance Division (LFD),
Legislative Agencies and Offices, directed attention to a
PowerPoint presentation, titled "Inactive Funds and HB 223"
[hard copy included in the committee packet]. He provided an
outline of the presentation on slide 2, which included an
overview of inactive funds; an impact of CBR sweep on fund
balances; and the history of funds contained in HB 223. He
proceeded to slide 3, titled "Differentiating Funds and Fund
Codes," which read as follows [original punctuation provided]:
• Each fund source spent in the budget has a "fund
code" a four-digit identifier assigned by
Legislative Finance that starts with a 1. Fund codes
start at 1001 (Constitutional Budget Reserve) and the
newest is 1272 (Oil/Hazardous Release Prevention Fund
Revenue).
• These fund sources often come from a particular fund
within the State treasury (such as 1243, the SBR
Fund). However, sometimes they are used to identify
revenue sources that are not kept in a fund (such as
1007, Interagency Receipts).
• Each fund within the treasury also has a code. Funds
that are spent in the budget have the same budget and
accounting codes. Funds that are not spent in the
budget typically have four-digit codes starting with a
3.
11:53:07 AM
MR. PAINTER moved to slide 4, titled "Inactive Funds and Fund
Codes," which read as follows [original punctuation provided]:
• Of the 272 fund codes LFD has assigned, 106 are
currently marked "inactive." Inactivating a fund code
is as easy as clicking a box in our budget system.
• In some cases, inactive funds are repealed by the
legislature. For example, code 1090 (Four Dam Pool
Transfer Fund) was repealed in 1999.
Some funds are established in statute and remain
even after the underlying program or original purpose
no longer exist. Occasionally, these funds retain some
balance.
• While the administrative burden associated with most
of these funds are low, there may be some efficiencies
and some balances to recover if they are repealed.
MR. PAINTER indicated that repealing the inactive funds was a
good exercise in cleaning up the statutes, which he understood
to be the purpose of HB 223.
11:55:06 AM
MR. PAINTER advanced to slide 5, titled "Not all Inactive Funds
Can Be Repealed," which read as follows [original punctuation
provided]:
• Some inactive funds still have ongoing obligations,
even though they have not been used in many years.
• For example, no loans have been made from the Mining
Revolving Loan Fund (code 1067) since 1986, but the
fund retains about $200,000 for a foreclosure reserve
for a single remaining asset in its portfolio.
• Others still have ongoing past capital
appropriations that pose a complication for their
repeal.
MR. PAINTER noted that the Railbelt Energy Fund was an example
of outstanding past capital appropriations included in HB 223.
He said the fund had not been used for its intended purpose in
over 20 years; however, it could not be easily repealed because
of the remaining obligations.
11:57:06 AM
MR. PAINTER continued to slide 6, titled "Impact of 2021 CBR
Sweep," which read as follows [original punctuation provided]:
• Some inactive funds are subject to Article IX,
Section 17(d) of the Alaska Constitution, commonly
called the CBR sweep.
• These funds cannot be spent by agencies without
further appropriation and are subaccounts of the
general fund.
• When the CBR sweep was not reversed at the end of
FY21, these funds were emptied.
• Non-sweepable inactive funds may still retain
balances.
11:58:20 AM
REPRESENTATIVE WOOL questioned the ramifications of sweeping the
Railbelt Energy Fund and asked whether the fund was replenished
annually. Further, he inquired about the Originator Surety
Fund.
MR. PAINTER stated that a forthcoming slide would address the
Railbelt Energy Fund. The Originator Surety Fund had been
marked inactive by the Legislative Finance Division (LFD) for
many years, he said, adding that he was unsure of the fund's
history.
11:59:32 AM
MR. PAINTER resumed the presentation on slide 11, which featured
a list of inactive funds swept in FY 21 totaling $4,854,345. He
noted that the Railbelt Energy Fund was the largest fund on the
list followed by the Municipal Capital Project Matching Grant
Program. He explained that these inactive funds could have been
used for another purpose or moved to the general fund (GF).
Now, however, the balances were no longer available, as the
funds had been transferred to the Constitutional Budget Reserve
(CBR).
12:00:36 PM
MR. PAINTER reviewed on slide 8, the inactive funds not subject
to the sweep. Several of which, he explained, could be spent
without further appropriation or revolving loan funds. The
largest fund was the Alaska Capstone Avionics Revolving Loan
Fund at $3,198,691, which had already been repealed by statute.
The existing balance was due to outstanding capital projects
that remained on the books, he noted. The second largest was
the Alaska Housing Finance Corporation - Alaska Capital Fund
("AHCC Account") at $1,867,832.
12:02:31 PM
CHAIR SPOHNHOLZ sought to confirm that Mr. Painter had stated
that the AHCC Account had not been used in a decade.
Mr. PAINTER confirmed that the fund had not been used for a
significant amount of time. The initial capitalization was over
10 years ago and was mostly spent in the first few years.
12:03:21 PM
REPRESENTATIVE STORY requested background on the Fund for the
Improvement of School Performance.
MR. PAINTER replied that the Fund for the Improvement of School
Performance had not been used in 20 years. He explained that
the fund had no source of revenue, acting as a placeholder for
the legislature to put money and spend on a particular purpose.
The fund predated the current budget system, hence the lack of a
funding code, he noted.
12:04:48 PM
MR. PAINTER offered background on the list of funds proposed for
repeal in HB 223, starting with the Railbelt Energy Fund, code
1012, on slide 10, which read as follows [original punctuation
provided]:
• Subject to CBR sweep, so fund balance is currently
zero.
• Established in 1986 for the purpose of meeting
Railbelt energy needs, including projects for
retrofitting state- owned buildings and facilities for
energy conservation. $412.6 million appropriated to
the fund across several years, but it has no ongoing
source of revenue.
• The full balance of the fund was appropriated in
FY2012. As capital projects lapsed back to the fund,
it rebuilt a balance until the FY21 CBR sweep.
• As a fund with no ongoing source of revenue, it is
essentially an empty endowment.
12:06:39 PM
MR. PAINTER proceeded to slide 11, titled "Code 1065, Rural
Electrification Revolving Loan Fund," which read as follows
[original punctuation provided]:
• Established in the Alaska Energy Authority in 1981
with a $6.5 million capitalization.
• The intent was to make loans available to rural
utilities that did not have access to the Rural
Electrification Administration (REA) loan programs or
that were experiencing difficulty obtaining REA loans
because of federal reductions in the REA program.
• This loan program was largely supplanted by the
Electrical Service Extension Fund in the 1990s,.
• Payments on outstanding loans continued until FY08
but were typically appropriated for electricity-
related capital projects rather than back to the fund
for new loans. No outstanding funds or loans remain.
12:07:55 PM
CHAIR SPOHNHOLZ sought to clarify how the Railbelt Energy Fund
could be an empty endowment if there were outstanding projects
associated with the fund, as mentioned by Mr. Painter.
MR. PAINTER clarified that the fund was empty because there was
no unobligated balance. He acknowledged that there were
outstanding capital projects; however, no funds were available
for any other purpose. Once the projects are completed, any
lapsing balances may be put back into the fund or reappropriated
if the dollars were completely expended.
CHAIR SPOHNHOLZ asked what would happen to the expended dollars
should the bill pass.
MR. PAINTER said without a reverse sweep vote, the dollars would
end up in CBR. With a reverse sweep, the outcome would be
ambiguous. He indicated that LFD would recommend including
language in the budget to reapproriate the lapsed funds back
into the GF.
12:09:42 PM
MR. PAINTER resumed the presentation on slide 12, titled "Code
1086, Southeast Energy Fund," which read as follows [original
punctuation provided]:
• Created from 40% of the Four Dam Pool Fund, which
consisted of loan payments from the Alaska Energy
Authority.
• In 1999, the legislature redirected these payments
to the Power Cost Equalization (PCE) Endowment Fund.
• A single grant was made from these funds in 1996 for
the Swan Lake-Tyee intertie. The remaining balance of
the fund was appropriated to the general fund in 2006.
• This fund no longer has a source of revenue or a
fund balance.
MR PAINTER Moved to slide 13, titled "Code 1260, Curriculum
Improvement and Best Practices Fund," which read as follows
[original punctuation provided]:
• Created in 2018 through a one-time capitalization to
fund a three-year pilot program to test the
appropriateness and effectiveness of curricula.
• The fiscal note called for a $19.5 million
capitalization in FY19. On the House floor in the 2018
session, this capitalization was given a delayed
effective date to FY20. In 2019, the legislature
repealed the capitalization of the fund at the
Governor's request.
• The fund was therefore never capitalized and never
used.
12:11:49 PM
CHAIR SPOHNHOLZ presumed that other funds could be appropriated
for the purposes of improving curriculums and best practices in
education.
MR. PAINTER explained that the Curriculum Improvement and Best
Practices Fund was designed for a specific three-year pilot
program established via legislation four years ago. If the goal
was to support curriculum more generally, this particular fund
would not be appropriate, as it ties back to a specific statute
related to the pilot program.
12:12:37 PM
MR. PAINTER proceeded to slide 14, titled "Code 3205, Alaska
Historical Commission Receipts Accounts," which read as follows
[original punctuation provided]:
• Subject to CBR sweep, so fund balance is currently
zero.
• Formerly used to track expenditures of the Alaska
Historical Commission within DNR. No longer in use by
the Commission.
12:13:24 PM
MR. PAINTER advanced to slide 15, titled "Code 3206, Fuel
Emergency Fund," which read as follows [original punctuation
provided]:
• Balance estimated to be $22,524.
• Used in the 1990s when the governor determined that
a shortage of fuel is sufficiently severe to justify
state assistance to make grants to a political
subdivision to purchase emergency supplies of fuel.
• In 2000, the Disaster Relief Fund statute was
amended to add fuel shortages as an allowable use,
making this fund unnecessary.
12:14:26 PM
MR. PAINTER continued to slide 16, titled "Exxon Valdez Oil
Spill Unincorporated Rural Community Grant Fund," which read as
follows [original punctuation provided]:
• Established in 1992 with the payment of $29.7
million from Alyeska Pipeline Company to the State of
Alaska stemming from the Exxon Valdez Oil Spill.
• These funds are distinct from the criminal fines
paid by Exxon, which are maintained for longterm
purposes.
• The Unincorporated Rural Community Grant Fund was
fully expended and no funds remain to distribute.
MR. PAINTER concluded on slide 17, titled "Alaska Affordable
Energy Fund," which read as follows [original punctuation
provided]:
• Designated to receive 20% of royalties from an
Alaska Liquefied Natural Gas (AKLNG) project for the
purpose of developing energy infrastructure for areas
that do not have access to the AKLNG line.
• No AKLNG project has yet been constructed, so this
fund has never been used.
12:16:22 PM
CHAIR SPOHNHOLZ sought questions from committee members.
12:16:27 PM
REPRESENTATIVE JOSEPHSON asked whether the Alaska Liquified
Natural Gas (AKLNG) project came from House Bill 4 or House Bill
138.
MR. PAINTER could not recall which bill established the project.
12:17:38 PM
CHAIR SPOHNHOLZ invited Marie Marx to provide an overview of a
lengthy legal memorandum ("memo") [included in the committee
packet] on the subject: "repeal of and amendment to funds."
12:17:59 PM
MARIE MARX, Attorney, Legislative Legal Services, Legislative
Affairs Agency (LAA), explained that HB 223 would repeal eight
inactive funds' enabling statutes. Repealing the funds would
not require any other changes to the Statutes. The memo, she
said, discusses a legal issue with repealing other state funds
and, subsequently, their associated statutes in one bill. The
issue raised in the memo highlighted Article II, Section 13, of
the Alaska Constitution, which states that every bill must be
confined to one subject, also known as the "single subject
rule." Failure to comply with the single subject rule could
jeopardize the bill if it was ever challenged, she added. In
essence, the memo concluded that the bill's inclusion of funds
that require changes to other statutes could violate the single
subject rule. She strongly recommended that repealing funds
which require other changes to the statutes be made in separate
bills confined to one single subject.
12:20:01 PM
REPRESENTATIVE EASTMAN asked whether moving the funds to another
location would violate the single subject rule.
MS. MARX explained that a transfer of money would require an
appropriation; consequently, any movement of funds would require
a corresponding appropriation bill.
REPRESENTATIVE EASTMAN sought to confirm that a transfer of
funds would require a separate piece of legislation.
MS. MARX confirmed that the transference of funds would require
an appropriation bill. She clarified that HB 223 would repeal
the funds, as opposed to transferring the money.
REPRESENTATIVE EASTMAN attempted to clarify the meaning of
"transfer." He asked whether the elimination of the [inactive]
funds within another fund would be considered a transfer of
money.
MS MARX said there was no clear answer to this question. She
recommended appropriating any remaining money in an
appropriation bill to avoid any legal ambiguity.
12:23:06 PM
The committee took a brief at-ease at 12:23 p.m.
12:23:11 PM
REPRESENTATIVE JAMES KAUFMAN, Alaska State Legislature, as prime
sponsor of HB 223, stated that the purpose of the bill was to
delete unneeded accounts. He acknowledged the difficulty of
repealing certain funds, adding that the list [of inactive
funds] may evolve as the bill moved through the committee
process.
12:26:22 PM
CHAIR SPOHNHOLZ inquired about the bill sponsor's process of
selecting the eight inactive funds.
REPRESENTATIVE KAUFMAN cited time and inactivity. He relayed
that he looked for funds that were sitting dormant, in addition
to considering the legal and financial implications.
CHAIR SPOHNHOLZ characterized the proposed legislation as
"looking through the couch cushions to try to find the pocket
change."
12:28:06 PM
CHAIR SPOHNHOLZ thanked Representative Kaufman for his
thoughtful process in working with Legislative Legal Services
and LFD. She announced that HB 223 would be held over.
12:28:42 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
12:28 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 223 Sponsor Statement.pdf |
HW&M 2/24/2022 11:30:00 AM HW&M 3/1/2022 11:30:00 AM |
HB 223 |
| HB 223 Supporting Document - Legal Memo.pdf |
HW&M 2/24/2022 11:30:00 AM HW&M 3/1/2022 11:30:00 AM |
HB 223 |
| HB 223 Supporting Document - Fund Table.pdf |
HW&M 2/24/2022 11:30:00 AM HW&M 3/1/2022 11:30:00 AM |
HB 223 |
| HB 259 Support, received by 2.21.22.pdf |
HW&M 2/24/2022 11:30:00 AM |
HB 259 |
| LFD Presentation on Inactive Funds, 2.24.22.pdf |
HW&M 2/24/2022 11:30:00 AM |
|
| HB 259 Opposition, received by 2.23.22.pdf |
HW&M 2/24/2022 11:30:00 AM |
|
| HB 223 Fiscal Note, OMB, 2.23.22.pdf |
HW&M 2/24/2022 11:30:00 AM HW&M 3/1/2022 11:30:00 AM |
HB 223 |
| HB 259 Letter of Support, ASD, 2.23.22.pdf |
HW&M 2/24/2022 11:30:00 AM |
HB 259 |