Legislature(2019 - 2020)SENATE FINANCE 532

07/18/2019 03:00 PM FINANCE

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Audio Topic
03:03:50 PM Start
03:05:20 PM Office of Management and Budget: Overview and Impacts of Cbr Sweep
04:07:35 PM David Teal, Director, Legislative Finance Division
04:53:26 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Senate Bill Regarding: TELECONFERENCED
"An Act Making Appropriations, Including Capital
Appropriations, Supplemental Appropriations,
Reappropriations, Operating Appropriations,
Repealing Appropriations, and Making
Appropriations to Capitalize Funds"
<Item Above Removed from Agenda>
+ Office of Management & Budget: TELECONFERENCED
Overview & Impacts of CBR Sweep by David Teal,
Director, Legislative Finance Division
                 SENATE FINANCE COMMITTEE                                                                                       
                  SECOND SPECIAL SESSION                                                                                        
                       July 18, 2019                                                                                            
                         3:03 p.m.                                                                                              
                                                                                                                                
3:03:50 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 3:03 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator David Wilson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Peter Micciche                                                                                                          
Senator Mike Shower                                                                                                             
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Neil Steininger, Chief Budget  Analyst, Office of Management                                                                    
and  Budget,   Office  of  the  Governor;   Paloma  Harbour,                                                                    
Division Director,  Office of  Management and  Budget; David                                                                    
Teal, Director, Legislative  Finance Division; Senator Cathy                                                                    
Giessel;  Senator Jesse  Kiehl;  Senator Elvi  Gray-Jackson;                                                                    
Representative    Kelly    Merrick;   Representative    Andy                                                                    
Josephson;  Representative  Geran Tarr;  Representative  Dan                                                                    
Ortiz;  Representative   Bart  LeBon;   Representative  Sara                                                                    
Hannan;  Representative  Cathy Tilton;  Representative  Neal                                                                    
Foster; Representative Scott Kawasaki.                                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
OFFICE  OF MANAGEMENT  and BUDGET:  OVERVIEW and  IMPACTS OF                                                                    
CBR SWEEP                                                                                                                       
                                                                                                                                
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION                                                                              
                                                                                                                                
^OFFICE OF  MANAGEMENT and BUDGET:  OVERVIEW and  IMPACTS OF                                                                  
CBR SWEEP                                                                                                                     
                                                                                                                                
3:05:20 PM                                                                                                                    
                                                                                                                                
Co-Chair   Stedman  remarked   that  it   was  substantially                                                                    
difficult  to  move money  to  and  from the  Constitutional                                                                    
Budget  Reserve  (CBR). He  remarked  that  the concern  was                                                                    
about the impacts of the CBR  sweep. He remarked that it was                                                                    
a legal  and accounting question  about what funds  could be                                                                    
swept. He remarked that the  Office of Management and Budget                                                                    
(OMB)  had  provided a  list  of  what would  be  considered                                                                    
"sweep-able."  He shared  that the  Legislative Auditor  had                                                                    
provided  a  list of  what  would  be considered  previously                                                                    
sweep-able. He  remarked that  the committee  would continue                                                                    
to  understand the  mechanics of  the sweep.  He added  that                                                                    
there were also concerns about  the reverse sweep. He shared                                                                    
that  the legislature  must proceed  with the  understanding                                                                    
that there  would not be  a vote to  use the money  from the                                                                    
CBR.                                                                                                                            
                                                                                                                                
3:11:30 PM                                                                                                                    
                                                                                                                                
NEIL STEININGER, CHIEF BUDGET  ANALYST, OFFICE OF MANAGEMENT                                                                    
AND BUDGET, OFFICE OF THE GOVERNOR, introduced himself.                                                                         
                                                                                                                                
PALOMA HARBOUR, DIVISION DIRECTOR,  OFFICE OF MANAGEMENT AND                                                                    
BUDGET, introduced herself.                                                                                                     
                                                                                                                                
Mr.  Steininger   discussed  the  presentation,   "State  of                                                                    
Alaska;  Office  of  Management and  Budget;  Constitutional                                                                    
Budget Reserve  Sweep Overview;  Presentation to  the Senate                                                                    
Finance  Committee;  July  18,  2019"  (copy  on  file).  He                                                                    
highlighted slide 3, "Sweep Guidelines":                                                                                        
                                                                                                                                
     The CBRF and its repayment or "sweep" provision                                                                            
                                                                                                                                
     The  Constitutional Budget  Reserve  Fund ("CBRF")  was                                                                    
     established  by  constitutional  amendment in  1990  in                                                                    
     article  IX, section  17  of  the Alaska  Constitution.                                                                    
     There  are  four  subsections  to  this  constitutional                                                                    
     amendment:                                                                                                                 
                                                                                                                                
          (a) Revenue  into the CBRF    money  received from                                                                    
          the  termination  of administrative  and  judicial                                                                    
          proceedings   involving    mineral   revenues   is                                                                    
          deposited into the CBRF;                                                                                              
                                                                                                                                
          (b) Expenditures  from the  CBRF by  majority vote                                                                    
          only if   "the  amount available for appropriation                                                                    
          for  a  fiscal  year   is  less  than  the  amount                                                                    
          appropriated  for the  previous  fiscal year"  and                                                                    
          the  appropriation   is  limited  to   the  amount                                                                    
          necessary  to make  total appropriations  equal to                                                                    
          the amount appropriated in the previous year;                                                                         
                                                                                                                                
          (c) Expenditures from the  CBRF by a three-fourths                                                                    
          vote  of   the  members   of  each  house      the                                                                    
          Legislature can appropriate from  the fund for any                                                                    
          public  purpose if  such a  supermajority vote  is                                                                    
          obtained;  (d)  Repayment  requirement     "If  an                                                                    
          appropriation  is  made  from the  budget  reserve                                                                    
          fund,  until the  amount  appropriated is  repaid,                                                                    
          the amount of money  in the general fund available                                                                    
          for appropriation  at the  end of  each succeeding                                                                    
          fiscal  year  shall  be deposited  in  the  budget                                                                    
          reserve  fund.  The  legislature  shall  implement                                                                    
          this subsection by law."                                                                                              
                                                                                                                                
3:14:48 PM                                                                                                                    
                                                                                                                                
Senator  Hoffman queried  the amount  of money  owed to  the                                                                    
CBR.                                                                                                                            
                                                                                                                                
Mr. Steininger replied that it was $14 billion.                                                                                 
                                                                                                                                
Co-Chair Stedman  shared that the  CBR had  accumulated debt                                                                    
over the most recent six years.                                                                                                 
                                                                                                                                
Co-Chair von  Imhof asked the method  in determining whether                                                                    
the $14 billion was enough.                                                                                                     
                                                                                                                                
Mr. Steininger responded  that the revenue into  the CBR was                                                                    
dictated by  the constitution, so  it was not  necessarily a                                                                    
choice of how much money would be put into the CBR.                                                                             
                                                                                                                                
Ms. Harbour  furthered that it  was known how much  was owed                                                                    
to the CBR based on how much was withdrawn from the CBR.                                                                        
                                                                                                                                
Co-Chair  von Imhof  noted that  $14  billion was  withdrawn                                                                    
from the CBR,  so that was the "line or  the norm." She also                                                                    
asserted  that   it  was  anomaly,   meaning  that   it  was                                                                    
impossible to  reach $14 billion again,  because the volumes                                                                    
of revenue stream would not meet that amount.                                                                                   
                                                                                                                                
Ms. Harbour replied  that the $14 billion  was owed, because                                                                    
that amount of money was withdrawn over time.                                                                                   
                                                                                                                                
Mr. Steininger  furthered that  the repayment  provision was                                                                    
in the constitution, and was  intended to be a constraint on                                                                    
borrowing from  savings. He explained that  the borrowing of                                                                    
$14 billion  was a  fact that the  state must  contend with,                                                                    
and consider when making budget decisions.                                                                                      
                                                                                                                                
Co-Chair  Stedman  announced  that   it  was  considered  an                                                                    
interest free loan.                                                                                                             
                                                                                                                                
Mr.  Steininger   looked  at  slide  5,   "Sweep  Guidelines                                                                    
Continued":                                                                                                                     
                                                                                                                                
     ?  Funds for  which  the legislature  has retained  the                                                                    
     power to  appropriate from and  that are  not available                                                                    
     to   pay  expenditures   without  further   legislative                                                                    
     appropriation      subject  to   the  sweep   unless  a                                                                    
     constitutionally dedicated  fund or not in  the general                                                                    
     fund                                                                                                                       
                                                                                                                                
     ? Funds that list purposes  for which money in the fund                                                                    
     can be  used but  still require a  second appropriation                                                                    
     to spend from the fund    subject to the sweep unless a                                                                    
     constitutionally dedicated  fund or not in  the general                                                                    
     fund                                                                                                                       
                                                                                                                                
     ? Money  in funds that is  already validly appropriated                                                                    
     to a particular purpose  not subject to the sweep                                                                          
                                                                                                                                
     ?  Federal  funds are  not  considered  subject to  the                                                                    
     sweep                                                                                                                      
                                                                                                                                
     ?  Other  trust  funds  such as  the  Public  Employees                                                                    
     Retirement Fund  that can only  be used for  a specific                                                                    
     stated  purpose  under  law  such  as  constitutionally                                                                    
     permissible  dedicated funds  and pension  funds should                                                                    
     not be swept                                                                                                               
                                                                                                                                
     ?  Donations -  the portion  of a  fund that  comprises                                                                    
     money  donated  to  a fund  for  a  particular  purpose                                                                    
     should not be included in the sweep                                                                                        
                                                                                                                                
     ? Public corporation funds                                                                                                 
                                                                                                                                
     ? Public corporation accounts/funds  are not subject to                                                                    
     the sweep  unless the  money is in  an account  or fund                                                                    
     that cannot  be accessed by the  corporation without an                                                                    
     additional legislative appropriation (eg. PCE)                                                                             
                                                                                                                                
     ?  Receipts  subject  to refund     eg.  Alaska  Marine                                                                    
     Highway,  University tuition  or  student housing,  not                                                                    
     subject to the sweep                                                                                                       
                                                                                                                                
3:22:41 PM                                                                                                                    
                                                                                                                                
Senator  Hoffman remarked  that the  second to  last bullet,                                                                    
and noted that the prior  governors did not believe that the                                                                    
Power  Cost Equalization  (PCE) to  be a  "sweep-able" item,                                                                    
which  he agreed.  The current  administration believed  the                                                                    
opposite, and felt  that it would be  determined through the                                                                    
legal process.                                                                                                                  
                                                                                                                                
Mr.  Steininger looked  at slide  6, "Sweep  Information and                                                                    
Details":                                                                                                                       
                                                                                                                                
     ?  Estimated amount  to  cover  all program  shortfalls                                                                    
     $115 million UGF                                                                                                           
          ? Section 8 would appropriate the funds needed to                                                                     
          address the shortfall                                                                                                 
     ? All accounts will  be swept after the reappropriation                                                                    
     period                                                                                                                     
          ? FY19 expenditure true-up period                                                                                     
          ? Finalized in late August  early September                                                                           
          ? Fund balances will be known at this time                                                                            
     ?  Notable differences  between  Legislative Audit  and                                                                    
     OMB/Law/Division of Finance                                                                                                
          ? Power Cost Equalization                                                                                             
          ? Higher Education Investment                                                                                         
          ? Program Receipts and Carryforward                                                                                   
          ? Vaccine Assessment Account  under prior fund                                                                        
          structure                                                                                                             
                                                                                                                                
Mr.  Steininger remarked  that OMB  had  not received  every                                                                    
bill from every vender, so the  state was currently in a bit                                                                    
of  an unknown  time.  He remarked  the notable  differences                                                                    
between  the   list  from  Legislative   Audit;  Legislative                                                                    
Finance Division; and OMB. He noted  all of the items on the                                                                    
slide's list.                                                                                                                   
                                                                                                                                
3:27:00 PM                                                                                                                    
                                                                                                                                
Senator Olson  asked how long  it would be until  the monies                                                                    
in the account were spent.                                                                                                      
                                                                                                                                
Mr. Steininger asked for clarification.                                                                                         
                                                                                                                                
Senator Olson asked  how the money would return  to the PCE,                                                                    
if the PCE was considered a non-sweep-able fund.                                                                                
                                                                                                                                
Mr. Steininger  replied that  he was  not an  accountant and                                                                    
could not speak to how the money was actually transferred.                                                                      
                                                                                                                                
Co-Chair Stedman  asked if  the question was  - if  the fund                                                                    
was swept whether there would be appropriations.                                                                                
                                                                                                                                
Mr.   Steininger  responded   that  they   were  categorized                                                                    
depending on the different funds.                                                                                               
                                                                                                                                
3:31:24 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  recalled a meeting  from July 9,  2019, at                                                                    
which the  committee was informed  that the money  would not                                                                    
be appropriated out  of the scholarship fund  after June 30,                                                                    
2019.  He  stated that  recipients  were  notified that  the                                                                    
checks would not be in the  mail, because there were no fund                                                                    
balances  available. He  assumed  that the  PCE had  similar                                                                    
notifications, until funds were available.                                                                                      
                                                                                                                                
Mr.  Steininger replied  that he  was not  aware of  exactly                                                                    
which  notifications had  gone  to multiple  parties by  the                                                                    
various departments with programs  that were affected by the                                                                    
PCE  and higher  education funds.  Those two  funds had  the                                                                    
most immediate issues with expenditures.                                                                                        
                                                                                                                                
Co-Chair   Stedman  asked   that   Mr.  Steininger   provide                                                                    
information at  a later date about  the formal notifications                                                                    
from OMB in connection with PCE.                                                                                                
                                                                                                                                
Senator  Hoffman  stated that  he  would  ask that  specific                                                                    
question  to the  recipients of  the higher  education fund,                                                                    
and the  PCE fund. He  understood that the  notification had                                                                    
been given to  the recipients of the  higher education fund.                                                                    
He explained that he, as  a resident of Bethel, was eligible                                                                    
for  PCE  assistance,  and  he had  not  been  notified.  He                                                                    
wondered  why  the  administration  notified  one  group  of                                                                    
people affected by the sweep, and not others.                                                                                   
                                                                                                                                
3:35:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman asked that the presenter share which                                                                           
recipient groups had and had not received notifications.                                                                        
                                                                                                                                
Co-Chair von Imhof appreciated the discussion about the                                                                         
Alaska Performance Scholarship (APS).                                                                                           
                                                                                                                                
Co-Chair Stedman suggested that there be a discussion of                                                                        
the list on slide 7.                                                                                                            
                                                                                                                                
Mr. Steininger discussed slide 7, "Funds Subject to Sweep                                                                       
Not Listed on Legislative Audit Presentation":                                                                                  
                                                                                                                                
     1005  General  Fund/Program  Receipts  1201  Commercial                                                                    
     Fisheries Entry Commission Receipts                                                                                        
     1049  Training  and  Building  Fund  1211  Cruise  Ship                                                                    
     Gambling Tax                                                                                                               
     1109  Test  Fisheries   Receipts  1213  Alaska  Housing                                                                    
     Capital Corporation Receipts                                                                                               
     1139 AHFC Dividend 1214 Whittier Tunnel Toll Receipts                                                                      
     1140 AIDEA Dividend 1218 146(c)                                                                                            
     1141   RCA  Receipts   1226  Alaska   Higher  Education                                                                    
     Investment Fund                                                                                                            
     1150 ASLC Dividend 1234 License Plates                                                                                     
     1154  Shore Fisheries  Development  Lease Program  1247                                                                    
     Medicaid Monetary Recoveries                                                                                               
     1155 Timber Sale Receipts 1249 Motor Fuel Tax Receipts                                                                     
     1156   Receipt   Supported  Services   1254   Marijuana                                                                    
     Education and Treatment Fund                                                                                               
     1162 Alaska  Oil and Gas Conservation  Commission Rcpts                                                                    
     3205                                                                                                                       
     Alaska    Historical   Commission    Receipts   Account                                                                    
     (Partially                                                                                                                 
     Sweep)                                                                                                                     
    1169 PCE Endowment Fund 3223 Abandoned Vehicle Fund                                                                         
     1173 Miscellaneous  Earnings 3233  Fish and  Game Civil                                                                    
     Fines and Penalties                                                                                                        
     1195   Snow    Machine   Registration    Receipts   N/A                                                                    
     Reappropriations of FY19 Operating Appropriations                                                                          
     1200 Vehicle Rental Tax Receipts                                                                                           
                                                                                                                                
Co-Chair Stedman requested that acronyms not be used in the                                                                     
presentation.                                                                                                                   
                                                                                                                                
Mr. Steininger explained the meanings of the acronyms.                                                                          
                                                                                                                                
Co-Chair Stedman  wondered whether there would  be a trigger                                                                    
of operational challenges when the  account balances went to                                                                    
zero on July 1, 2019.                                                                                                           
                                                                                                                                
3:40:45 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger  replied  that  there  were  no  operational                                                                    
concerns related  to the dividends.  He stated  that several                                                                    
other  items  on  the  list   had  operational  impacts.  He                                                                    
highlighted   the   education   and   treatment   fund   had                                                                    
appropriations that exceeded the anticipated revenue.                                                                           
                                                                                                                                
Co-Chair Stedman looked at the  license plate provision, and                                                                    
wondered whether there was another operational issue.                                                                           
                                                                                                                                
Mr.  Steininger replied  in the  affirmative.  He agreed  to                                                                    
provide further information.                                                                                                    
                                                                                                                                
Mr.  Steininger  looked  at "FY20  Operating  Budget  Issues                                                                    
Related to CBR Sweep" (copy on file).                                                                                           
                                                                                                                                
3:41:46 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:42:44 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
3:42:47 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman looked  at slide 8, and the  list of funds.                                                                    
He  noted  that the  dollar  amount  was approximately  $115                                                                    
million, but  it was  the shortfall  amount. He  queried the                                                                    
estimate of the sweep amount.                                                                                                   
                                                                                                                                
Mr. Steininger  replied that the current  sweep estimate was                                                                    
in the range of $2 billion.                                                                                                     
                                                                                                                                
3:46:36 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman asked for more specifics.                                                                                      
                                                                                                                                
Mr.  Steininger   looked  at  the  middle   section  of  the                                                                    
document,  which  had several  items  in  the Department  of                                                                    
Administration  (DOA)  Office  of  Public  Advocacy,  Public                                                                    
Defenders Agency, the Department  of Commerce, Community and                                                                    
Economic   Development  (DCCED)   Rural  Energy   Assistance                                                                    
Program,  several items  in  the  Department of  Corrections                                                                    
(DOC),  the  items in  the  Higher  Education Fund,  Library                                                                    
Operations, and laboratory services  in Department of Public                                                                    
Safety  (DPS).  He stated  that  the  Department of  Revenue                                                                    
(DOR) had  appropriations from the funds  for the management                                                                    
of the  funds, so much  of the operations from  the Treasury                                                                    
Division were funded  with some of the funds.  The other two                                                                    
items   were  the   re-appropriation  of   operating  budget                                                                    
appropriations that lapsed in FY 19.                                                                                            
                                                                                                                                
Co-Chair Stedman asked for explanation.                                                                                         
                                                                                                                                
Mr.  Steininger replied  that in  the Governor's  Office and                                                                    
Legislative  Branch there  were  unspent monies  from FY  19                                                                    
that  were re-appropriated  to capital  projects. He  stated                                                                    
that there  was guidance  from the  Department of  Law (LAW)                                                                    
that those balances were subject to the sweep.                                                                                  
                                                                                                                                
Co-Chair Stedman  asked whether the discussion  of the slide                                                                    
was complete.                                                                                                                   
                                                                                                                                
Mr. Steininger replied  that he was looking  at the document                                                                    
that showed the  budget issues related to the  CBR sweep. He                                                                    
noted that one of the  sections showed the issues related to                                                                    
the sweep  of carryforward  balances. The primary  issue was                                                                    
the   Division  of   Corporations,   Business,  and   Public                                                                    
Licensing in DCCED. He noted  that it was listed as unknown,                                                                    
because  there was  not a  good  estimate of  the amount  of                                                                    
carry-forward  balance that  would  be  swept. He  explained                                                                    
that the  operational issue was  that the  division operated                                                                    
on a two-year  cycle for their licensing, so  they relied on                                                                    
the  ability  to   carry  the  first  year   of  revenue  to                                                                    
operations  in  the  second year.  He  explained  that  many                                                                    
others  with  carry  forward  balance  would  be  collecting                                                                    
revenues  through the  course of  the year,  and the  issues                                                                    
would  not be  as pronounced  immediately, but  would become                                                                    
issues  later in  the fiscal  year. The  final section  were                                                                    
areas where general tax revenues populated a fund.                                                                              
                                                                                                                                
3:50:12 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman wondered  whether there  was an  affect on                                                                    
the  ability to  service the  securitization of  the tobacco                                                                    
bonds.                                                                                                                          
                                                                                                                                
Mr.  Steininger  replied  that it  was  tobacco  taxes  that                                                                    
populated  the funds  and  were used  in  the Department  of                                                                    
Health and  Social Services  (DHSS). He  stated that  it was                                                                    
not the tobacco securitization.                                                                                                 
                                                                                                                                
Senator Hoffman  noted that seniors  had been  notified that                                                                    
they would  no longer  receive the  Senior Benefits.  He did                                                                    
not see on the list where that fund was a sweep-able item.                                                                      
                                                                                                                                
Mr. Steininger  replied that the Senior  Benefits was funded                                                                    
with general funds,  so was not related to the  issue of the                                                                    
reverse sweep.                                                                                                                  
                                                                                                                                
Senator Hoffman  wondered what authority  the administration                                                                    
sent out notification to senior population.                                                                                     
                                                                                                                                
Mr. Steininger replied that the  item was part of the vetoes                                                                    
of the Operating Budget.                                                                                                        
                                                                                                                                
Senator Hoffman  stressed that  average annual  payment that                                                                    
those customers in  the community of Noorvik,  was $2077 per                                                                    
year per customer.  He stressed that the  communities in his                                                                    
district did not  have cash available, and  remarked that it                                                                    
was a substantial budget hardship for those individuals.                                                                        
                                                                                                                                
Co-Chair von Imhof remarked that  a three-quarter vote would                                                                    
affect all the funds.                                                                                                           
                                                                                                                                
Mr.  Steininger felt  that the  question  could be  answered                                                                    
with slide 4.                                                                                                                   
                                                                                                                                
3:55:00 PM                                                                                                                    
                                                                                                                                
Senator Bishop noted  the third bullet on slide  5, and felt                                                                    
that  the  subjects  were  not  subject  to  the  sweep.  He                                                                    
remarked that  Ms. Harbour understood  how those  funds were                                                                    
collected. He wanted to ensure  that his comments would help                                                                    
the working  people of Alaska.  He felt that  the Department                                                                    
of  Labor  and Workforce  Development  (DLWD)  might have  a                                                                    
potential hole in their budget.                                                                                                 
                                                                                                                                
Ms. Harbour stated that the  list was preliminary with rough                                                                    
estimates.                                                                                                                      
                                                                                                                                
Co-Chair Stedman  remarked that  the list  may grow  and the                                                                    
impacts would expand until a determination of a solution.                                                                       
                                                                                                                                
Mr. Steininger addressed slide 4, "Potential Solution":                                                                         
                                                                                                                                
     An amount equal to deposits  in the budget reserve fund                                                                    
     (art.  IX,  sec.  17,  Constitution  of  the  State  of                                                                    
     Alaska)  for   fiscal  year  2019  from   subfunds  and                                                                    
     accounts in  the general fund including  the power cost                                                                    
     equalization   endowment   fund   (AS   42.45.070)   by                                                                    
     operation of  article IX,  sec. 17(d),  Constitution of                                                                    
     the  State   of  Alaska,  not  to   exceed  the  amount                                                                    
     necessary  after  appropriations  and deposits  to  the                                                                    
     subfunds and  accounts from fiscal year  2020 revenues,                                                                    
     to   fund  appropriations   from  those   subfunds  and                                                                    
     accounts made  in ch. 1  -3, FSSLA 2019, and  any other                                                                    
     appropriation bills effective in  fiscal year 2020, the                                                                    
     general fund  to the subfunds  and accounts  from which                                                                    
     those  funds were  deposited  into  the budget  reserve                                                                    
     fund.                                                                                                                      
                                                                                                                                
Ms. Harbour furthered that it included PCE.                                                                                     
                                                                                                                                
Mr.  Steininger stated  that the  intention of  the language                                                                    
was to  be broad enough  to include  all the impacts  of the                                                                    
sweep to ensure that all impacts  were met in a way that was                                                                    
robust enough to not worry  whether an appropriation to fill                                                                    
a hole would be insufficient.                                                                                                   
                                                                                                                                
4:00:30 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman noted that the  first option would be to do                                                                    
nothing  and a  second  option  would be  to  have a  second                                                                    
appropriation bill  to backfill  all negative  fund balances                                                                    
that would be needed for FY 20.                                                                                                 
                                                                                                                                
Mr.   Steininger  replied   that   the  potential   solution                                                                    
displayed in  the presentation would pay  back approximately                                                                    
$2 billion of the debt to the CBR.                                                                                              
                                                                                                                                
Co-Chair Stedman  shared that there  would likely be  a draw                                                                    
from the CBR.                                                                                                                   
                                                                                                                                
Senator  Hoffman  looked  at   slide  8,  "FY2020  Estimated                                                                    
Program Shortfall Due to Sweep ($ Thousands)":                                                                                  
                                                                                                                                
     Shortfalls Due to Sweep:                                                                                                   
                                                                                                                                
          ?   Alaska   Energy   Authority       Power   Cost                                                                    
          Equalization: $32,355.0                                                                                               
          ? Alaska Court System  Trial Courts: $1,198.0                                                                         
          ?  Dept. of  Commerce    Corporation Business  and                                                                    
          Professional Licensing                                                                                                
          ?  Dept. of  Corrections    Physical Health  Care:                                                                    
          $4,045.3                                                                                                              
          ?  Dept. of  Corrections    Population Management:                                                                    
          $4,036.4                                                                                                              
          ?   Dept.  of   Education      Alaska  Performance                                                                    
          Scholarship Program: $11,750.0                                                                                        
          ? Dept.  of Fish  and Game    Commercial Fisheries                                                                    
          Entry Commission Receipts: $5,142.9                                                                                   
          ? Dept.  of Health  and Social Services    Vaccine                                                                    
          Assessment Program: $21,000.0                                                                                         
          ? Dept.  of Health  and Social Services    Alcohol                                                                    
          Receipts Shortfall: $1,542.5                                                                                          
          ? Dept.  of Health  and Social Services    Tobacco                                                                    
          Receipts Shortfall: $2,626.5                                                                                          
          ?  Dept.  of  Law     Civil  Division,  Regulation                                                                    
          Affairs Public Advocacy: $2,384.1                                                                                     
          ?  Dept.  of  Law    Criminal  Division,  Criminal                                                                    
          Justice Litigation: $1,602.7                                                                                          
          *See   full  list   provided   in  packets:   FY20                                                                    
          Operating Budget Issues Related to CBR Sweep                                                                          
                                                                                                                                
Senator Hoffman  wondered how the administration  would fund                                                                    
the shortfall.                                                                                                                  
                                                                                                                                
Ms. Harbour replied  the estimated total needed  to fill the                                                                    
hole  was  approximately  $115  million,  and  the  proposed                                                                    
solution on  slide 2  would fund  those shortfalls  with the                                                                    
general fund.                                                                                                                   
                                                                                                                                
Senator Hoffman wondered where the general fund was at.                                                                         
                                                                                                                                
Co-Chair  Stedman noted  that  there  were several  accounts                                                                    
from  which to  draw, and  the Legislative  Finance Division                                                                    
(LFD) would be discussing the different balances.                                                                               
                                                                                                                                
^DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION                                                                           
                                                                                                                                
4:07:35 PM                                                                                                                    
                                                                                                                                
DAVID TEAL,  DIRECTOR, LEGISLATIVE FINANCE  DIVISION, looked                                                                    
at slide 3, from the OMB presentation,  "Sweep Guidelines":                                                                     
                                                                                                                                
     The CBRF and its repayment or "sweep" provision                                                                            
                                                                                                                                
     The  Constitutional Budget  Reserve  Fund ("CBRF")  was                                                                    
     established  by  constitutional  amendment in  1990  in                                                                    
     article  IX, section  17  of  the Alaska  Constitution.                                                                    
     There  are  four  subsections  to  this  constitutional                                                                    
     amendment:                                                                                                                 
                                                                                                                                
          (a) Revenue  into the CBRF    money  received from                                                                    
          the  termination  of administrative  and  judicial                                                                    
          proceedings   involving    mineral   revenues   is                                                                    
          deposited into the CBRF;                                                                                              
                                                                                                                                
          (b) Expenditures  from the  CBRF by  majority vote                                                                    
          only if   "the  amount available for appropriation                                                                    
          for  a  fiscal  year   is  less  than  the  amount                                                                    
          appropriated  for the  previous  fiscal year"  and                                                                    
          the  appropriation   is  limited  to   the  amount                                                                    
          necessary  to make  total appropriations  equal to                                                                    
          the amount appropriated in the previous year;                                                                         
                                                                                                                                
          (c) Expenditures from the  CBRF by a three-fourths                                                                    
          vote  of   the  members   of  each  house      the                                                                    
          Legislature can appropriate from  the fund for any                                                                    
          public  purpose if  such a  supermajority vote  is                                                                    
          obtained;  (d)  Repayment  requirement     "If  an                                                                    
          appropriation  is  made  from the  budget  reserve                                                                    
          fund,  until the  amount  appropriated is  repaid,                                                                    
          the amount of money  in the general fund available                                                                    
          for appropriation  at the  end of  each succeeding                                                                    
          fiscal  year  shall  be deposited  in  the  budget                                                                    
          reserve  fund.  The  legislature  shall  implement                                                                    
          this subsection by law."                                                                                              
                                                                                                                                
4:11:09 PM                                                                                                                    
                                                                                                                                
Mr. Teal displayed the document titled, "Bold items are                                                                         
unconstitutional under Hickel v. Cowper":                                                                                       
                                                                                                                                
     Sec. 37.10.420. "Money available for appropriation"                                                                        
     defined.                                                                                                                   
                                                                                                                                
          (a) For purposes of applying  art. IX, sec. 17(b),                                                                    
          Constitution of the State of Alaska,                                                                                  
                                                                                                                                
          (1)  "the amount  available for  appropriation" or                                                                    
          "funds available for appropriation" means                                                                             
                                                                                                                                
               (A) the unrestricted revenue accruing to the                                                                     
               general fund during the fiscal year;                                                                             
                                                                                                                                
               (B) general fund program receipts as defined                                                                     
               in AS 37.05.146;                                                                                                 
                                                                                                                                
          (C)  the  unreserved,  undesignated  general  fund                                                                    
          balance carried forward  from the preceding fiscal                                                                    
          year  that   is  not  subject  to   the  repayment                                                                    
          obligation  imposed   by  art.  IX,   sec.  17(d),                                                                    
         Constitution of the State of Alaska; and                                                                               
                                                                                                                                
          (D) the  balance in  the statutory  budget reserve                                                                    
          fund established in AS 37.05.540;                                                                                     
                                                                                                                                
          (2)  "the  amount  appropriated for  the  previous                                                                    
          fiscal  year" means  the amount  appropriated from                                                                    
          the                                                                                                                   
                                                                                                                                
               (A) constitutional budget reserve fund under                                                                     
               the authority granted in art. IX, sec. 17,                                                                       
               Constitution of the State of Alaska; and                                                                         
                                                                                                                                
               (B) same revenue sources used to calculate                                                                       
               the money available for appropriation for                                                                        
               the current fiscal year; and                                                                                     
                                                                                                                                
     (3) "the amount of  appropriations made in the previous                                                                    
     calendar  year  for  the previous  fiscal  year"  means                                                                    
     appropriations made  from sources identified in  (2) of                                                                    
     this  subsection for  a fiscal  year that  were enacted                                                                    
     during the  calendar year that  ends on December  31 of                                                                    
     that same fiscal year.                                                                                                     
                                                                                                                                
     (b) If the amount  appropriated from the budget reserve                                                                    
     fund has  not been  repaid under  art. IX,  sec. 17(d),                                                                    
     Constitution of the State of  Alaska, the Department of                                                                    
     Administration  shall transfer  to  the budget  reserve                                                                    
     fund  the amount  of money  comprising the  unreserved,                                                                    
     undesignated  general   fund  balance  to   be  carried                                                                    
     forward as  of June 30 of  the fiscal year, or  as much                                                                    
     of it  as is necessary  to complete the  repayment. The                                                                    
     transfer shall be made on  or before December 16 of the                                                                    
     following fiscal year.                                                                                                     
                                                                                                                                
     (c) In this section,  "unrestricted revenue accruing to                                                                    
     the general fund"  or "unreserved, undesignated general                                                                    
     fund balance  carried forward" is money  not restricted                                                                    
     by law  to a specific  use that accrues to  the general                                                                    
     fund according  to accepted principles  of governmental                                                                    
     or  fund accounting  adopted for  the state  accounting                                                                    
     system  established under  AS  37.05.150  in effect  on                                                                    
     July 1, 1990.                                                                                                              
                                                                                                                                
     (d)  An  appropriation  under   art.  IX,  sec.  17(b),                                                                    
     Constitution  of  the  State  of  Alaska,  requires  an                                                                    
     affirmative  vote of  the majority  of  the members  of                                                                    
     each house  of the legislature. An  appropriation under                                                                    
     art.  IX, sec.  17(c) requires  an affirmative  vote of                                                                    
     three-fourths  of  the members  of  each  house of  the                                                                    
     legislature.                                                                                                               
                                                                                                                                
4:14:36 PM                                                                                                                    
                                                                                                                                
Co-Chair    von   Imhof    queried    the   definition    of                                                                    
"appropriation" when  the legislature  had set up  a statute                                                                    
to  create a  formula for  appropriation. She  surmised that                                                                    
the Higher Education  Fund was set up  to appropriate, based                                                                    
on the number  of students; versus, putting  into the budget                                                                    
every  year  by  guessing  the  number  of  applicants.  She                                                                    
wondered whether the  Court rule to say that  statute was an                                                                    
appropriation.                                                                                                                  
                                                                                                                                
Mr. Teal  used the example  of the Vaccine  Assessment Fund.                                                                    
He stated that it had  previously been subject to the sweep,                                                                    
and was  still currently subject  to the sweep,  even though                                                                    
the law made it non-sweepable.  That law did not take effect                                                                    
until  July  1.  He  stated  that the  fund  was  just  like                                                                    
scholarships, in that the statutes were changed.                                                                                
                                                                                                                                
Co-Chair  von Imhof  felt that  a possible  solution in  the                                                                    
previous presenter's  slides would  be to  include something                                                                    
to further clarify the meaning of an appropriation.                                                                             
                                                                                                                                
Mr. Teal replied there could  have been statutory changes to                                                                    
avoid the impacts of the expansion of the sweep.                                                                                
                                                                                                                                
Co-Chair  von Imhof  wondered whether  there was  a conflict                                                                    
with Hickel v. Cooper.                                                                                                          
                                                                                                                                
Mr. Teal replied in the affirmative.                                                                                            
                                                                                                                                
4:20:34 PM                                                                                                                    
                                                                                                                                
Senator Wilson  surmised that the information  was to change                                                                    
the statute to not end in this circumstance.                                                                                    
                                                                                                                                
Mr. Teal agreed, but it was too late to change the statute.                                                                     
                                                                                                                                
Senator Wilson  noted the  option to  reverse the  sweep. He                                                                    
wanted  to  find  the  quickest path  forward  to  lift  the                                                                    
burden.                                                                                                                         
                                                                                                                                
Mr.  Teal replied  that he  did  not believe  the issue  was                                                                    
constitutionality  in terms  of the  sweepable decision.  He                                                                    
felt that the constitution  did not provide enough guidance.                                                                    
He asserted  that the constitution  stated that,  "you shall                                                                    
implement this  by law." He  felt that the problem  was that                                                                    
the statutory guidelines  were missing, and it  was too late                                                                    
to implement statutory guidelines.                                                                                              
                                                                                                                                
4:25:49 PM                                                                                                                    
                                                                                                                                
Mr. Teal  looked at  the document  title, "Funds  Subject to                                                                    
Sweep" (copy on file).                                                                                                          
                                                                                                                                
4:31:37 PM                                                                                                                    
                                                                                                                                
Mr. Teal looked at page 2.                                                                                                      
                                                                                                                                
Mr. Teal continued to address the spreadsheet.                                                                                  
                                                                                                                                
4:37:56 PM                                                                                                                    
                                                                                                                                
Senator  Wilson wondered  whether  the ERA  be protected  by                                                                    
Article  9,  Section  7 of  the  constitution  by  dedicated                                                                    
funds,  and then  returning to  Section 15,  which addresses                                                                    
the  Permanent  Fund:  "all  tax   proceeds  should  not  be                                                                    
dedicated for an purpose except for Section 15."                                                                                
                                                                                                                                
Mr.  Teal  replied  that  the   section  also  stated,  "the                                                                    
Earnings   Reserve  was   general  fund,   unless  otherwise                                                                    
provided by law."                                                                                                               
                                                                                                                                
Senator  Olson remarked  that the  Hickel  v Cooper  opinion                                                                    
seemed  to be  in conflict  with the  Wielechowski case.  He                                                                    
asserted that  it seemed  that there  was advocacy  that the                                                                    
answer to  the question of sweeping  versus non-sweeping. He                                                                    
felt  that  the real  answer  was  that  the ERA  should  be                                                                    
sweepable and go into the general fund.                                                                                         
                                                                                                                                
4:40:37 PM                                                                                                                    
                                                                                                                                
Mr.  Teal  replied  that   Senator  Wielechowski  noted  the                                                                    
conflict between the two rulings.  He stated that, under the                                                                    
new ruling,  he felt that the  ERA was in the  general fund,                                                                    
and was subject to the sweep.                                                                                                   
                                                                                                                                
Mr. Teal  continued that there would  be incredible pressure                                                                    
to reverse  the sweep, if the  ERA were subject to  a sweep,                                                                    
because there would be no dividends.                                                                                            
                                                                                                                                
Mr. Teal continued displaying the spreadsheet.                                                                                  
                                                                                                                                
4:46:44 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  noted that  the  meeting  had 15  minutes                                                                    
remaining.                                                                                                                      
                                                                                                                                
Co-Chair  Stedman  shared  that   there  was  reverse  sweep                                                                    
language  in the  budget  bill, but  there  were not  enough                                                                    
votes to implement it.                                                                                                          
                                                                                                                                
4:49:53 PM                                                                                                                    
                                                                                                                                
Senator Olson  looked at endowments,  and how  they provided                                                                    
services. He  looked at PCE,  and noted that the  money came                                                                    
from the interest  to cut down on the power  issues for some                                                                    
subscribers  and  provided   for  community  assistance.  He                                                                    
wondered what happened to the  interest, if the PCE fund was                                                                    
swept.                                                                                                                          
                                                                                                                                
Mr. Teal felt that, although  the swept occurred on June 30,                                                                    
no money would be moved for a while.                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
4:53:26 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 4:53 p.m.                                                                                          

Document Name Date/Time Subjects
071819 7-10-19 Letter to Finance Committees Chairs re PCE Fund Sweep.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget
071819 Letter to Finance Co-Chairs 7-12-19.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget
071819 Funds Subject to Sweep.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget
7.18.19 SFC CBR Sweep Presentation 2.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget
071819 FY20 Budget Issues Due to Sweep.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget
071819 LFD sweep document.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget
071819 LFD Funds Subject to Sweep.pdf SFIN 7/18/2019 3:00:00 PM
SB 2002 Capital Budget