Legislature(2019 - 2020)SENATE FINANCE 532
07/19/2019 11:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB2002 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB2002 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
July 19, 2019
11:03 a.m.
11:03:55 AM
CALL TO ORDER
Co-Chair von Imhof called the Senate Finance Committee
meeting to order at 11:03 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Donny Olson
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
Senator Lyman Hoffman
Senator Peter Micciche
Senator Mike Shower
ALSO PRESENT
Senator Cathy Giessel; Senator Chris Birch; Senator Mia
Costello; Senator Shelley Hughes; Senator Gray-Jackson;
Senator Jesse Kiehl; Senator Lora Reinbold; Representative
Andy Josephson; Representative Tammie Wilson; Paloma
Harbour, Budget Director, Office of Management and Budget;
Donna Arduin, Director, Office of Management and Budget;
Shelly Wilhoite, Capital Budget Coordinator, Office of
Management and Budget; David Teal, Director, Legislative
Finance Division; Shareen Crosby, Staff, Senator Natasha
von Imhof Rob Carpenter, Analyst, Legislative Finance
Division.
SUMMARY
SB 2002 APPROP: CAPITAL; SUPP; OTHER APPROP
CSSB 2002(FIN) was REPORTED out of committee with
a "do pass" recommendation.
Senator von Imhof reviewed the agenda for the meeting.
SENATE BILL NO. 2002
"An Act making appropriations, including capital
appropriations, supplemental appropriations, and other
appropriations; repealing appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
11:04:46 AM
Co-Chair von Imhof commented that SB 2002 was the only item
on the agenda. It was the governor's appropriation bill for
capital, supplemental, and other appropriations. She
explained that in the previous month both bodies passed
SB 19, the capital budget. However, the necessary three-
quarter vote for funding many of these items was not
secured, leaving large gaps in the state capital budget,
including critical appropriations for federal highway
match.
Co-Chair von Imhof added that the legislature had not
addressed the Constitutional Budget Reserve (CBR) reverse
sweep', which was discussed at length the prior day. It
left further gaps in the budget, including funding for the
crime bill.
Co-Chair von Imhof thanked the administration and the
Office of Management and Budget (OMB) for providing the
capital bill to address the gaps in the state's fiscal year
2020 budget. She continued that the appropriations were
critical, as Alaska was large and spread out. She asserted
that the state needed to maintain capital infrastructure
for its roads, airports, and ports, so Alaskans can stay
connected to their livelihoods, natural resources, and to
each other.
Co-Chair von Imhof invited Paloma Harbour and Shelly
Wilhoite from OMB to present the bill. She asked committee
members to hold their questions to the end of each slide.
11:06:23 AM
PALOMA HARBOUR, BUDGET DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, introduced herself and thanked the committee for
the opportunity to present SB 2002. She would be reviewing
the budget at a high level, as she thought the committee
was familiar with the included projects. She began the
presentation, "SB 2002 FY2020 Capital Budget" (copy on
file).
Ms. Harbour showed slide 3, "SB 2002 FY 2020 Capital Budget
($Thousands). The bill provided over $170 million in
unrestricted general funds (UGF) that were necessary to
meet federal match requirements, maximize federal funding
for project grants, and support projects that were unfunded
when a draw from the CBR was not approved during the
passage of SB 19.
Ms. Harbour turned to slide 4, "SB 2002 FY 2020 Capital
Budget ($Thousands)," which showed a summary of both the
operating and capital funding in the bill by agency. She
would walk through them in the presentation.
Ms. Harbour displayed slide 5, "SB 2002 FY2020 Capital
Budget ($ Thousands)" which addressed the Department of
Commerce, Community and Economic Development, the
Department of Corrections, and the Department of
Environmental Conservation:
Department of Commerce, Community, and Economic
Development
• Community Block Grants $60.0 UGF (matching $6,000.0
Fed)
• Alaska Travel Industry Association $7,420.0 UGF
• Hope Community Resources, Inc. $85.0 UGF
Department of Corrections
• Mental Health: $2,540.0 UGF for Renovations Required
to Accommodate the Women's Mental Health Unit at
Hiland Mountain
• This will match funds provided by the Alaska
Mental Health Trust appropriated in SB 19 of
$1,145.0 (Mental Health Trust Authority
Receipts)
Department of Environmental Conservation
• Village Safe Water and Wastewater Infrastructure
Projects $12,080.0 (matching $52,250.0 Fed)
Ms. Harbour continued to slide 6, "SB 2002 FY2020 Capital
Budget ($ Thousands)" which applied to the Department of
Fish and Game, the Office of the Governor, and the
Department of Natural Resources:
Department of Fish and Game
• Cook Inlet Stock Assessment $1,000.0 UGF
Office of the Governor
• Capital Costs Related to Executive Branch Office
Buildings, Facilities, and IT Systems $2,500.0 UGF
Department of Natural Resources
• Critical Minerals Mapping $600.0 UGF (matching
$3,000.0 Fed)
• Geological Mapping for Energy Development $300.0 UGF
(matching $300.0 Fed)
• Arctic Strategic Transportation and Resources
(ASTAR) $2,500.0 UGF
11:09:39 AM
Senator Olson asked if there was more detail pertaining to
the governor's request for $2.5 million. He queried the
detail. He wondered if there was any federal match finding
associated with the appropriation.
Ms. Harbour stated that the money was not for matching
federal funds. She explained that in the approved SB 19
there was a reappropriation of unspent general funds at the
end of FY 19 to be used for capital projects for the
governor's office. The funding lapsed and was swept as part
of the sweep. There was currently a hole in funding for
capital projects, renovations, and maintenance that needed
to be funded. The Information Technology (IT) Systems
funding was related to the Elections System Replacement
Project. The funding would go towards a number of projects.
Senator Olson asked if the funds would be necessary if a
reverse sweep occurred. Ms. Harbour stated that the funding
was still necessary, as it was and operating appropriation,
regular general funds 1004, which were not included in the
traditional reverse sweep language. The funding was an
appropriation that lapsed and was returned to the account.
It was not a special fund where there was a balance, and
the money was returned to the fund.
Senator Bishop asked about Arctic Strategic Transportation
and Resources ASTAR funding. He asked how far the funding
would take the project. He indicated she could get back to
the committee with an answer. Ms. Harbour would get back to
the committee.
Co-Chair von Imhof referenced Senator Olson's questions.
She noted in the previous capital budget there were about
$7.5 million of reappropriations that were put into a
parking lot, so-to-speak, for future appropriations that
were vetoed by the governor. The appropriations were for a
variety of things including harbors and other projects
throughout the state. It was not limited to the Office of
the Governor. She asked if any of the items were
highlighted in the new budget other than the Office of the
Governor.
Ms. Harbour stated there was also an appropriation to the
legislature reflecting the same issue where the legislature
had operating funds that had been reappropriated for its
capital costs. The funding was no longer available due to
the sweep.
Co-Chair von Imhof indicated the committee would look at
the issue further when it came up in the presentation.
11:12:48 AM
Ms. Harbour advanced to slide 7, "SB 2002 FY2020 Capital
Budget ($ Thousands)" which covered the Department of
Public Safety and the Department of Revenue's Alaska
Housing Finance Corporation:
Department of Public Safety
• Reappropriation of $1,059.0 for
Maintenance/Renovation of Rural Trooper Housing
Department of Revenue Alaska Housing Finance
Corporation (AHFC)
• AHFC Competitive Grants for Public Housing $350.0
UGF (matching $750.0 Fed)
• AHFC Federal and Other Competitive Grants $1,500.0
UGF (matching $6,000.0 Fed)
• AHFC Housing and Urban Development Federal HOME
Grant $750.0 UGF (matching $4,000.0 Fed)
• AHFC Rental Assistance for Victims - Empowering
Choice Housing Program (ECHP) $1,500.0 UGF
• AHFC Senior Citizens Housing Development Program
$1,750.0 UGF
• AHFC Supplemental Housing Development Program
$3,000.0 UGF
Ms. Harbour read slide 8, "SB 2002 FY2020 Capital Budget ($
Thousands)" which addressed the Department of
Transportation and Public Facilities, the Judiciary, and
the Legislature:
Department of Transportation and Public Facilities
• Decommissioning and Remediation of Class V Injection
Wells $2,200.0 UGF
• Alaska Marine Highway System Vessel Overhaul, Annual
Certification and Shoreside Facilities
Rehabilitation $13,500.0 UGF
• Other Federal Program Match $1,300.0 UGF (matching
$10,000.0 Fed)
• Federal-Aid Highway State Match $60,000.0 UGF
(matching $690,000.0 Fed)
• Federal-Aid Aviation State Match $12,000.0 UGF
(matching $187,200.0 Fed)
• Highway Safety Grants Program $238.3 UGF (matching
$8,000.0 Fed)
Judiciary
• Cyber Security Courts $973.0 UGF
• Statewide Deferred Maintenance $1,500.0 UGF
Legislature
• Capital Costs Related to Legislature, Legislative
Council, Council and Subcommittees for Renovation of
Legislative Buildings and Facilities $4,195.0 UGF
Ms. Harbour indicated that the bill also included just over
$14 million in operating funding to replace Power Cost
Equalization (PCE) funds that were not available due to the
CBR sweep. She indicated that slide 9 and slide 10 simply
listed what the fund source changes were for.
Co-Chair von Imhof asked if the changes mostly applied to
the crime bill. Ms. Harbour responded, "That's correct."
Most of them were related to the crime legislation. They
were all fiscal notes. There were multiple fiscal notes
reflecting a fund source change from UGF to PCE funds. The
funds were being replaced.
Senator Olson asked how the $14 million total was derived.
Ms. Harbour responded that it was the addition of all of
the different fiscal notes that were part of legislation
that passed but without funding behind them.
Ms. Harbour reported that OMB separated the crime bill
funding to the Department of Corrections in a separate
slide, slide 11, for HB 49 [Legislation passed in 2019
regarding crimes, sentencing, drugs, theft, and reports]
specifically.
11:16:20 AM
Ms. Harbour turned to slide 12, "SB 2002 FY2020 Capital
Budget - Section 8 Fund Transfers":
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 reported that the last substantive part of the
bill appropriated funds from the general fund to subfunds
and accounts necessary to cover appropriations from those
subfunds in FY 20. The funds would be used to fill holes
resulting from the CBR sweep.
Co-Chair von Imhof thought the slide was similar to what
was discussed in the previous day regarding the reverse
sweep gaps in funding.
Co-Chair von Imhof observed that the general fund
appropriation for capital items plus the crime notes
equaled approximately $168 million. She noted that OMB had
estimated the previous day that the funding for the fiscal
gaps due to the reverse sweep was about $115 million. The
total combined amount was about $282 million. She wondered
if there was sufficient money in the general fund to cover
all of the expenses.
Ms. Harbour indicated that Chair von Imhof had asked for an
accounting in terms of how much money was available and how
much was needed for each item. She was still working on the
calculations. She reported there being some overlap between
the legislation, the holes being filled, and the $115
million figure.
Co-Chair von Imhof noted that David Teal, the director of
the Legislative Finance Division was available to assist
the committee. Based on his presentation in the previous
week, there was slightly less than $200 million in the
general fund after all of the governor's vetoes. She
thought there was a small deficit.
Co-Chair Stedman considered the current cash balances
without the proposed bill and with the vetoes in place. He
asked for an estimate of the cash position of the state.
Ms. Harbour assumed that Co-Chair Stedman was asking for
the balance to cover the holes.
Co-Chair Stedman noted there was a general fund balance
available for appropriations. He recognized there was about
$1 billion of the vetoed Earnings Reserve Account (ERA)
draw. He assumed the number was possibly $200 million. He
wanted to know OMB's position on the cash balance.
Ms. Harbour stated that OMB also believed the figure to be
about $200 million. However, she wanted to make sure she
was providing the committee with a good number.
Co-Chair von Imhof asked if Ms. Harbour could provide a
good number by the following day. Ms. Harbour thought the
request was reasonable. Co-Chair von Imhof thought that in
consideration of the bill it was important to know if there
was enough funding for it.
11:20:04 AM
Senator Wilson wanted to clarify the only new items were
the governor's office, the legislature, and the crime
bills' reallocations restored.
Ms. Harbour affirmed that the funding for the governor's
office and the legislature were both in SB 19 [The
appropriation, capital budget, and supplemental legislation
passed in 2019] that passed. She indicated that because the
three-quarter vote failed the funding was no longer
accessible.
Co-Chair Stedman referenced Section 8 of the bill related
to fund transfers. He was sure there were questions from
the public and noted there were new people in the audience.
He thought it was important to discuss the bill section in
order to be clear what was and was not included in the fund
transfer.
Co-Chair von Imhof indicated on the previous day Mr. Teal
had discussed the impacts of the lack of a reverse sweep.
She reported that in a high-level overview it was estimated
to be about $115 million in total funding gaps statewide.
She asserted that one of the well know gaps was $18 million
for the Alaska Performance Scholarships, about $3 million
for the Washington, Wyoming, Alaska, Montana, and Idaho
(WWAMI) Program, and about $30 million for the PCE Program,
among others. She invited Ms. Harbour to comment.
Ms. Harbour appreciated the opportunity to make a
clarification. The amount simply filled the holes for
FY 20. It was not the same as a reverse sweep and did not
put all of the funding back in the funds. She suggested
that if there were enough funds in the general fund, it
would take a majority vote, rather than a three-quarter
vote required to draw from the CBR. It would help to
address immediate needs and would ensure that unanticipated
needs were also covered. For example, for a fund that was
not thoroughly analyzed yet, if it were to run out of money
in March and $60,000 was needed, the language would cover
it.
11:23:27 AM
Senator Wielechowski asked about the rationale for not
including university scholarship funding in the budget. Ms.
Harbour did not understand the Senator's question. Senator
Wielechowski clarified that the Higher Education Fund was
not listed like the PCE fund. He was curious why it was the
case.
Ms. Harbour stated that the only items specifically listed
in the bill to replace PCE funds were where UGF should have
been used to support the programs like those resulting from
the crime bill and regular operating programs. She
indicated in the original fiscal notes the funds were UGF.
She indicated they should be UGF rather than PCE funds. The
solution for PCE and the Higher Education Fund could be
found in Section 8 of the bill along with the rest of the
funds. They were part of the $115 million being discussed.
Senator Wielechowski noted that there were 5,000 students
who received scholarships funds for the university through
the Higher Education Fund. He asked if the scholarships
were covered in Section 8 of the bill. Ms. Harbour answered
in the affirmative.
Co-Chair von Imhof emphasized that Ms. Harbour had iterated
"If there was enough in the general fund." She wondered if
the scholarship was awarded on a first-come, first-serve
basis. She wondered what students would be covered. She
discouraged Ms. Harbour from answering her question.
Senator Wielechowski wanted an answer to Co-Chair von
Imhof's questions. He asked about the determination of
recipients.
Co-Chair von Imhof added that it was not necessarily
student-wide but program-wide.
Senator Wilson requested an at-ease.
11:25:44 AM
AT EASE
11:27:56 AM
RECONVENED
Co-Chair Stedman commented that some of the concern at the
finance table had to do with having an accurate account of
the general fund balance. As the legislature drew the
general fund balance down, if there were shortfalls, there
might also be prorating. He thought something would not get
funded which was what the legislature wanted to avoid. He
referenced Section 8. He recalled from the previous day's
meeting that there was approximately $2 billion that was
added in the cash balances of numerous accounts including
PCE and the Higher Education Fund. He thought the policy
discussion was pertinent to the committee as to the
question of a reverse sweep. He believed the language would
backfill FY 20 appropriations. He wanted to hear from OMB
about the administration's position on the reverse sweep.
Depending on the administration's position, the legislature
would have to have certain discussions about the assets of
the state.
11:30:33 AM
DONNA ARDUIN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
responded that the administration supported the
constitution. In the governor's budget proposal, a reverse
sweep was not proposed. Rather, the programs were funded
with general funds.
Co-Chair Stedman assumed that the administration did not
support the reverse sweep and reconstituting the fund
balances. He suggested at some point the committee needed
to have a discussion and a thorough understanding of the
account balances. The legislature needed to talk about how
to deal with sinking funds and other things such as major
renovations for which the legislature wanted to set money
aside. He wanted it to avoid a misunderstanding of thinking
money was set aside when it was not. He wanted everyone to
be on the same page. He asked if the administration had
contemplated a discussion between now and the following May
as to how the state would operate going forward without a
reverse sweep. He noted that it was an undisputed fact that
in the constitution the sweep was required. He wondered how
the legislature should go forward with not having a reverse
sweep.
11:33:26 AM
Ms. Harbour opined that the bill language was perfect in
that the state would have a year to find out the true costs
associated with operating the programs. The costs could
then be built into the budget every year moving forward.
The costs could also be reduced if needed. She thought the
language was very similar to the CBR headroom language and
provided an example. She concluded that it would be an
accounting exercise.
Ms. Arduin clarified that every year revenues could fall
from projections. Every year that revenues fell from
projects the state had to evaluate the general fund
situation.
Co-Chair von Imhof addressed Ms. Harbour's assertion that
it was an accounting exercise. She emphasized that the
vaccine assessment fund was not an accounting exercise.
Rather, it was an emergency response. She continued the
reason there were millions of dollars in the fund was for
the legislature to be able to draw on them for emergencies
such as a measles outbreak. She added to Co-Chair Stedman's
comment. She suggested that rather than making a blanket
statement about each of the hundreds of funds that would be
swept based on the administration's interpretation of the
Alaska Constitution, it would make sense to look at some of
the funds and make changes to them protecting them. She
returned to the example of the vaccine fund where the state
was a day short.
Senator Bishop noted that the state had its first case of
confirmed measles in Kenai. He returned to the notion of a
different way of accounting and fund source changes going
forward. He thought a wholesale change of the magnitude
proposed in the bill was not a wise move. He believed that
with such a change, the committee needed to fully
understand it. He did not want any surprises and suggested
the administration needed to be very careful about how a
change was rolled out. He wondered if the bill placed the
Alaska Performance Scholarships back in the budget.
Ms. Arduin stated that the bill language covered all the
programs that would have otherwise been funded with the
reverse sweep. The programs would be covered for the year.
Senator Bishop wanted to confirm that the recipients would
be funded. Ms. Harbour responded in the affirmative.
Senator Bishop assumed that the state would have a
university for students to attend.
11:37:59 AM
Senator Olson commented on the uncertainty of the budget
and reflected on deadlines that were creating significant
consternation. His comments were based on what he had been
hearing traveling throughout the state.
Senator Wielechowski asked what was being repealed in
Section 9 of the bill. Ms. Harbour thought it was the PCE
appropriation. She would verify her answer and get back to
the committee.
Co-Chair von Imhof asked if it was an accounting exercise.
Ms. Harbour responded that there was contingency language
in SB 19 related to the funding of the Palmer Correctional
Center. Section 9 was repealing the contingency language.
She would get back to the committee with additional
information.
11:40:01 AM
SHELLY WILHOITE, CAPITAL BUDGET COORDINATOR, OFFICE OF
MANAGEMENT AND BUDGET, indicated that the fiscal notes had
contingency language based on population. She could provide
exact numbers to the committee later. The funding was
contingent on having a certain population at the Palmer
Correctional Center, which was repealed.
Co-Chair von Imhof indicated the committee would take a
brief at-ease before hearing from Director David Teal from
the Legislative Finance Division (LFD) who would focus on
answering additional questions and review the short fiscal
summary he provided the committee.
11:41:24 AM
AT EASE
11:43:35 AM
RECONVENED
Co-Chair von Imhof indicated Mr. Teal with the Legislative
Finance Division (LFD) would be reviewing the balances of
the general fund.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, noted
the committee had asked him to extend a spreadsheet that he
had shared two weeks previously to include SB 2002. The
spreadsheet entitled "FY20 Surplus/Deficit under Various
Scenarios" (copy on file) currently reflected the
inclusion. He reported the budget adopted by the
legislature reflected spending of $4.4 billion and $5.2
billion in revenue with a surplus of $800 million before
dividends. He continued that with the governor's vetoes,
the surplus was reduced to $180 million. With the addition
of the governor's version of SB 2002 to the enacted budget,
total expenditures equaled $4.3 billion.
Mr. Teal continued that the additional expenditures were
the fiscal notes related to the crime bill funded through
PCE and being replaced with general funds; the capital
budget of $131 million; and $100 million of GF expenditures
for the shortages in programs that would be affected by the
reverse sweep. The governor's bill added $282 million in
appropriations creating a deficit of $102 million.
Mr. Teal recalled that Governor Walker had to veto a number
of items because he believed it to be unconstitutional to
sign appropriation bills that left the state in a deficit
situation. His point was that if the legislature were to
give the bill back to the governor exactly as he submitted
it, he could not sign it with a deficit. It was possible
that if the sweep were reversed, the $115 million [In
transfers to address the lack of a reverse sweep] would go
away. The money would not be swept or needed, and the $35
million in fiscal notes would not be incurred. Essentially,
the budget would switch from a deficit of $102 million to a
surplus of $35 million making it a legal budget to sign.
However, he pointed out that there would not be access to
the CBR to handle any shortage in revenue in the year.
Mr. Teal also brought up the fact that if the state met
expectations in revenue, there would be no headroom other
than the $35 million surplus to spend on fire suppression,
which he anticipated to be a sizable supplemental in the
current year or for earthquakes. The legislature had only
funded about half or more of what the department believed
it would need for earthquake response. He mentioned other
programs that could potentially need supplemental funding
such as Medicaid. The legislature might have to get a super
majority vote to access money from the CBR to pay for the
supplemental needs of the budget.
11:48:18 AM
Co-Chair von Imhof commented that as the bill was
presented, based on Mr. Teals' calculations, there was a
yield of a $101 million deficit in the general fund. She
asked if she was correct. Mr. Teal replied, "That's
correct."
Co-Chair von Imhof noted Mr. Teal's comment previously that
technically, the governor could not sign a bill with a
known deficit at the time of signing a bill. She asked if
she was accurate. Mr. Teal concurred. Additionally, he
offered that he was talking about the sum of all of the
bills rather than just SB 2002. Senate Bill 2002 itself was
not a deficit bill. However, when it was added to the bills
that were already enacted the state would be thrown into a
deficit situation.
Co-Chair von Imhof noted Mr. Teal's remarks about the
potential hardy amount of additional funding that might be
needed for wildfire suppression in the form of a
supplemental request in the following year. Currently, the
legislature was not leaving much headroom in anticipation
of that need. She asked if she was correct. Mr. Teal
responded, "Correct, Madam Chair."
Co-Chair von Imhof thought Mr. Teal had indicated that if
the legislature obtained a three-quarter vote in the
future, it would have to do the accounting for all of the
funds for 6 months of detail from July 1st to the date of
the three-quarter vote. She asked if she was correct.
Mr. Teal thought it was a difficult question for him to
answer, as he was not an accountant. He thought there was
confusion and concern about retroactive dates and when the
actual date of the reverse sweep would occur. It was known
when the effective date would occur, June 30th. However,
the accountants would not know what the numbers would be
until much later. He added that as OMB testified on the
impact of Section 8 (the governor's answer to not doing the
reverse sweep), they did not know what the costs were. The
estimate from OMB was $115 million and LFD's estimate was
approximately $125 million, the difference of which he did
not think was worth quibbling over. He reiterated that OMB
would not know what Section 8 would cost until 1.5 years
from the present day.
Senator Bishop thought Mr. Teal had made his point. He
advocated moving cautiously, as the state was in
unchartered waters.
11:51:39 AM
Senator Wielechowski referenced an earlier discussion about
the applicability of Section 8 and the Higher Education
Fund. He questioned how the funds would be appropriated if
there was not enough money in the general fund.
Mr. Teal did not know how the funds would be spent, since
the state had never been in a situation where it had been
short-funded. It was not merely a matter of Section 8, as
it was an appropriation just like any other. He explained
that the funds were all GF appropriations, without one
having priority over another. He assumed it would be up to
the governor to restrict various programs. He recalled a
court case which Governor Sheffield chose which
expenditures to reduce. The court case decision required
that the legislature must be involved in the determination
of the appropriation of general funds.
Mr. Teal continued that if Section 8 threw the state into a
deficit situation might require the legislature into a
special session. The legislature might not know it was in a
deficit situation until regular session. It was difficult
to determine timing and impacts on programs.
Senator Olson was glad Mr. Teal had mentioned Governor
Sheffield and the massive cuts incurred as a result of a
drastic decrease in the price of oil per barrel. However,
at the time things were different. For example, a CBR was
not in place. Now that there was a CBR in place the
perspective was different in terms of being able to find
answers if the state budget was short-funded. He asked if
what he stated was true.
Mr. Teal stated that it was the reason the CBR existed. He
reminded members that the CBR did not do the state any good
if there was no access to it. Access to the CBR required a
super majority vote. Acquiring a super majority vote had
been a problem. If the legislature had a super majority
vote to reverse the sweep, many of the problems being
discussed, including the deficit, would be eliminated. The
CBR vote ensured that if revenue fell during the year, even
though the legislature submitted a balanced budget,
government would not shut down. Money would be taken from
the CBR needed to continue all programs. The legislature
was currently in uncharted territory. Other state had
procedures in place to handle such circumstances, whereas,
Alaska did not.
11:55:29 AM
Senator Olson considered what happened in the time of
Governor Sheffield, where he took the bull by the horns to
figure out an answer to the issue in front of him. He
wondered if the present governor would step in to put
pressure on legislators to come up with a three-quarter
vote. Mr. Teal could not answer the question. Thus far, it
did not appear the governor supported a three-quarter vote.
He had not discussed the issue with the governor.
Senator Wielechowski asked if the governor could veto
partial amounts of a reverse sweep. Mr. Teal did not
believe the governor could, as it was an appropriation of
unnamed funds. He would not be able to add a list of funds
he wanted to reverse to the budget. He could only cross out
line items. He thought the question was legal in nature and
would be better directed to Megan Wallace [Director of
Legislative Legal Services].
Senator Wielechowski asked if Mr. Teal was familiar with
the repeal language in Section 9 and what it would repeal.
Mr. Teal recalled that the repeal was the Department of
Corrections' fiscal note regarding $16 million of PCE funds
to reopen the Palmer Correctional Center. He added that
there was an important distinction in the way the matter
was addressed. The fiscal note was added in the original
bill because of a desire to add specific limitations. The
limitation included population counts. If the facility
population reached a certain level, one wing could be
opened. If the department's projections were reached, the
entire correctional facility could be opened. The money was
prohibited from being used for anything except the Palmer
Correctional Center.
Mr. Teal continued that the change currently in the bill
removed any conditions associated with the $16 million. The
Department of Corrections would receive the funding
regardless of population or prisoner count. There was also
a structural change. Instead of being limited to reopening
the Palmer Correctional Center, the money could be used for
management of inmate population for anything within the
appropriation including moving prisoners out of state or
purchasing equipment unrelated to the Palmer facility.
11:58:48 AM
Senator Wielechowski asked, if the repeal language passed,
whether the Department of Corrections could shift prisoners
to out-of-state private prisons. Mr. Teal replied in the
affirmative.
Senator Wilson asked about the version of the bill that
passed over to the other body and whether the language
provided a broader use of the funds. Mr. Teal could not
answer the question.
Co-Chair von Imhof clarified that Mr. Teal was present to
discuss cash balances. Mr. Teal stated that there had been
so many versions of the bill that he was unclear which
version Senator Wilson was referring to.
Co-Chair von Imhof thanked Mr. Teal for putting the
spreadsheet together, as it was clear and informative. She
would be setting the bill aside. The committee would be
recessing to the call of the chair.
12:00:35 PM
RECESSED
6:14:00 PM
RECONVENED
Co-Chair von Imhof relayed that earlier the committee had
heard an overview of SB 2002 as introduced by the governor.
The governor's bill was introduced to fill critical funding
gaps in the capital budget. However, the bill did not
include all of the items in SB 19 as was passed by both
bodies. Both bodies worked on their respective capital
budgets throughout the regular session, the extended
session, and the first special session and reached an
agreement over which projects should be included. The
committee substitute before the committee reflected the
agreements. However, it was still a bare-bones capital
budget which paid for essential capital items and ensured
the state's federal highway and aviation match monies were
secured. The funding for the capital budget was the CBR
unless otherwise noted.
Co-Chair von Imhof continued that the committee also heard
extensively on the impacts of the failure to reverse the
CBR sweep. The legislature had learned that failing to
reverse the sweep would cost the state more than $100
million in general funds to fill budget holes and thousands
of hours of staff time. Without the reverse sweep the state
had no funding for the crime bills, the Alaska Performance
Scholarships, power cost subsidies for rural Alaskans, the
WWAMI program, or basic operational funding for the
Department of Commerce, Community and Economic Development
to issue business licenses.
Co-Chair von Imhof relayed that all of the capital items
before the committee had been previously heard and vetted.
Therefore, the committee would not be taking additional
public testimony in the present day. As always, she
encouraged Alaskans to reach out to specific offices or to
send a message to finance.committee@akleg.gov.
Co-Chair Stedman MOVED to ADOPT proposed committee
substitute for SB 2002, Work Draft 31-GS3565\M (Caouette,
7/19/19)(copy on file).
Co-Chair von Imhof OBJECTED for discussion.
6:17:15 PM
SHAREEN CROSBY, STAFF, SENATOR NATASHA VON IMHOF, recounted
that in June the House and Senate voted to concur on the
had concurred on a vote on the capital budget, SB 19. She
relayed that in the budget many items were funded through
the CBR which required a three-quarter vote. Due to the
failure of the three-quarter vote, a large portion of the
bill was not funded, including critical appropriations
needed for federal match for state highways and airports.
Other appropriations in the capital budget were vetoed by
the governor, including Alaska Housing Finance Corporation
grants. The bill in front of the committee was essentially
the bill that both bodies past in June minus the items that
were enacted, including federal funds. She added that the
appropriations in the bill were either lost when the CBR
vote failed in the other body or vetoed by the governor. If
the bill did not pass the fiscal notes for the crime bill
would not be funded. The primary funding source for the
bill was the CBR account. There were a few appropriations
being funded through other funds, which she would point
out. The bill also included language for the CBR reverse
sweep. She offered to go through the sectional analysis.
Co-Chair von Imhof asked Ms. Crosby to review the sectional
analysis.
Ms. Crosby presented the sectional analysis beginning on
page 2, Section 1 which reflected agency capital projects
as passed in SB 19 minus the enacted items. She referenced
page 8, Section 2 and Section 3 which represented funding
sources for departments. The total equaled $161,431,629.
She reiterated that the funding source was the CBR account.
She continued to page 11, Section 4 which showed
supplementals. Section 5 and Section 6 detailed the funding
sources for the supplementals for agency funding totaling
$3,220,200. She highlighted page 14, Section 7 which
reflected the Alaska Mental Health Trust Authority (AMHTA)
capital appropriations.
6:20:36 PM
Senator Wilson referenced page 14 of the bill and asked if
the UGF dollars would be used to supplement the AMHTA
Alaska Mental Health Trust Authority budget that was
already a separate appropriation. Ms. Crosby responded that
the items were projects vetoed by the governor.
Senator Wilson clarified that the fund source for the
original items was UGF dollars to supplement the AMHTA. He
asked if the appropriation was a subsidy outside of the
AMHTA budget that had already passed. Ms. Crosby stated
that AMHTA encouraged a state match when using additional
mental health funds. It was the state's portion towards
state programs.
Co-Chair von Imhof asked Mr. Carpenter to offer additional
comments.
6:22:12 PM
ROB CARPENTER, ANALYST, LEGISLATIVE FINANCE DIVISION,
stated that Ms. Crosby was correct in her assertion that
AMHTA proposed a comprehensive mental health plan for the
required program, of which a large portion was state
funded, and a large portion was paid from the mental health
trust. He furthered that AMHTA submitted the proposal to
the legislature. The legislature then vetted the proposal
and decided on the funding level. The governor chose to
veto all of the state money leaving only the trust money.
The current bill reinstated the state money.
Senator Wilson asked for the total amount of the AMHTA
portion.
Co-Chair von Imhof asked if what was being proposed in the
bill was consistent with previous years' funding. Mr.
Carpenter replied that it was consistent with past years.
He did not have the total amount but thought it was
approximately $15 million, of which $11 million was state
funding.
Ms. Crosby was happy to get the amount to Senator Wilson.
Co-Chair von Imhof noted that it was a policy to include
the mental health capital projects in the bill into one
capital bill. The items were vetoed. She felt that the AHFC
Homeless Assistance Program was important in addressing a
critical issue in the state. The trust had indicated it had
only two priorities: homelessness and behavioral health
therapy. The Trust was acting in line with their priorities
and had asked the state to help them leverage their funds.
She continued that there were several entities trying to
make progress in the area of homelessness. She noted
devoted an entire finance committee hearing to the issue of
homeless and heard from a variety of stakeholders. There
was a call to place the amount back in the budget.
6:24:44 PM
Ms. Crosby returned to page 15, Section 8 and Section 9
reflected funding sources for mental health trust capital
appropriations for a total of $11,700,000. She continued to
page 17, Section 10 which contained ratifications. The
change was a technical addition requested by the
administration. It righted a wrong granting the
administration authority for prior years' expenditures.
Ms. Crosby stayed on page 17 to discuss Section 11(a). The
section showed an appropriation of $200,000 EVOS [Exon
Valdez Oil Spill] earnings to Prince William's Science
Center. She continued to Section 11(b), an appropriation of
$2 million to the Alaska Industrial Development and Export
Authority. She explained that it was for the construction
and major maintenance of the Northwest Arctic Borough
School. She addressed Section 11(c) on page 18. It
contained an appropriation of $4 million for the
construction and expansion of the Liquified Natural Gas
Storage Facility in North Pole, AK. The funding source was
the Sustainable Energy Transmission and Supply Development
Fund (SETS).
Ms. Crosby continued on page 18 of the bill. Section 12
contained intent language for the Department of Education
and Early Development regarding the proceeds of the sale of
land in Sitka to Mt. Edgecombe School. Section 13 was a
reappropriation of $34,577 for Flat Top Mountain Trail
Clean Up Pilot Project. Section 14(a) reflected intent
language for the Alaska Marine Highway System (AMHS)
regarding the proceeds of sales.
Ms. Crosby continued to page 19, Section 14(b) reflected a
reappropriation of $1.6 million of harbor facility grant
projects to the Harbor Facility Grant Fund. Section 15
outlined a scope change for the Ketchikan Moorage Facility
Project. She remained on page 19, Section 16 which showed
reappropriations of past capital projects to Alaska Housing
Capital Corporation. She reminded members that the
reappropriations in Section 16 were funds that would be
sitting available for the committee to discuss and
reappropriate in the following year.
Ms. Crosby moved to page 24, Section 17 was the reverse
sweep language. Section 17(b) contained deficit filling
language. If revenues were lower than projected for all
appropriation bills, the CBR would be used to balance the
budget. The language was standard. On page 25 in Section
17(c) she reported headroom for supplementals requested for
FY 20 which was capped at $250 million. Section 17(c) made
appropriations from the CBR.
Ms. Crosby indicated Section 18 on page 25 repealed
population triggers enacted in SB 19 for the Palmer
Correction Center. Section 19 detailed lapse provisions for
when appropriations would lapse. Retroactivity could be
found on page 26 in Section 20 and was standard language.
Section 21 contained contingency language regarding the
reverse sweep. The last section of the bill, Section 22,
indicated an immediate effective date.
6:29:28 PM
Senator Olson referenced page 8 of the bill and the Office
of the Governor. He asked if there was a list of what was
included in the $10,700,000 figure.
Co-Chair von Imhof directed Mr. Carpenter to respond to the
senator's question.
Mr. Carpenter asked if Senator Olson was speaking to
page 4, line 28.
Senator Olson clarified he was referring to page 8, line 17
referring to the Office of the Governor. He asked for an
itemization of the funds.
Mr. Carpenter referred to page 4, line 28 which denoted the
project associated with the funding source. The funding was
for the statewide deferred maintenance and renovation to
the Office of the Governor to manage the project for all
state facilities.
Senator Olson asked if the funds were primarily for
deferred maintenance. Mr. Carpenter responded, "100
percent."
Co-Chair von Imhof thought Senator Olson had a question
about a bill that had been heard earlier in the day. She
reported that $2 million was going towards an Information
Technology item. She did not think the item that was
discussed earlier was reflected in the $10 million. She
asked if she was correct.
Mr. Carpenter believed so. He did not recall the IT project
unless it was related to the reappropriation that was added
back in the governor's bill because of the reappropriation
sweep. He thought it was different.
Senator Olson referenced Section 18 on page 25 of the bill.
He noted that earlier in the day the committee had a
presentation in which he heard the repeal had to do with
the Palmer Correctional Center. The money that was slated
for the facility could also be used for out-of-state
transport of prisoners. He wondered if it was still the
case.
Ms. Crosby answered in the negative. The funds were
designated for the Palmer Correctional Center only. The
section simply repealed the language that the facility was
required to have a certain number of inmates in order to
use the facility.
6:32:50 PM
Senator Wielechowski asked if the bill restored funding for
homelessness grants, PCE, WWAMI, and University
scholarships. Mr. Carpenter answered that it did with the
reverse sweep.
Senator Wilson wanted the committee to be cautious with the
bill. He referenced the separation of powers issue. He did
not want anything to threaten his road safety projects in
action. He noted most people were aware of the KGB highway
[Knik Goose Bay Road], the deadliest highway in the state,
and the importance of the associated road upgrades. He
noted the doubling of the page length in the bill. He did
not want to jeopardize the good faith and trust of finding
a path forward to ensure the capital project bill, or what
he called the state's "job appropriation" bill across the
finish line.
Co-Chair von Imhof thought it was the intent of the
committee to meet the July 31st deadline for federal
matching funds. She opined that connecting the state with
its people, resources, and lands was a legislative
priority.
Senator Wielechowski asked if the repeal language in
Section 18 deleted the reports that the Department of
Corrections would issue. Mr. Carpenter answered in the
negative. The language merely deleted the inmate count
contingencies for the release of the monies.
Ms. Crosby confirmed that she had verified the information
many times, as it was the intent of the co-chairs to remove
the contingencies.
Co-Chair von Imhof WITHDREW her objection. There being NO
OBJECTION, it was so ordered. The committee substitute for
SB 2002 was adopted.
Co-Chair Stedman MOVED to report CSSB 2002(FIN) out of
Committee with individual recommendations.
There being NO OBJECTION, it was so ordered.
CSSB 2002(FIN) was REPORTED out of committee with a "do
pass" recommendation.
Co-Chair von Imhof thanked the presenters and her staff.
She reported the next meeting would be announced and posted
online.
ADJOURNMENT
6:36:44 PM
The meeting was adjourned at 6:36 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 7.19.19 SFC SB 2002 Capital Budget.pdf |
SFIN 7/19/2019 11:00:00 AM |
SB2002 |
| 7 15 19 Short Fiscal Summary.pdf |
SFIN 7/19/2019 11:00:00 AM |
SB 2002 Capital Budget |
| SB 2002 Capital Budget work draft Version M.pdf |
SFIN 7/19/2019 11:00:00 AM |
SB2002 |