Legislature(2021 - 2022)SENATE FINANCE 532
02/02/2022 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB162 || SB163 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 162 | TELECONFERENCED | |
| *+ | SB 163 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 2, 2022
9:02 a.m.
9:02:07 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Amanda Ryder, Staff, Senator Bert Stedman; Alexei Painter,
Director, Legislative Finance Division.
SUMMARY
SB 162 APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 162 was HEARD and HELD in committee for
further consideration.
SB 163 APPROP: MENTAL HEALTH BUDGET
SB 163 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 162
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; making
supplemental appropriations; making appropriations
under art. IX, sec. 17(c), Constitution of the State
of Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
SENATE BILL NO. 163
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making capital
appropriations and supplemental appropriations; and
providing for an effective date."
9:03:17 AM
Co-Chair Bishop MOVED to ADOPT the committee substitute for
SB 162, Work Draft 32-GS2686\B (Marx, 2/1/22).
Co-Chair Stedman OBJECTED for discussion.
9:04:09 AM
AMANDA RYDER, STAFF, SENATOR BERT STEDMAN, explained the
committee substitute. She stated that the changes were
mostly formatting and some sections were moved for purposes
of ease in the bill evaluation. The bill was essentially
identical to the governors bill. The formatting changes
allowed for the legislature to bill comparisons and
determine any substantive changes moving forward.
Co-Chair Stedman REMOVED his OBJECTION There being NO
OBJECTION, it was so ordered.
Co-Chair Bishop MOVED to ADOPT the committee substitute for
SB 163, Work Draft 32-GS2687\B (Marx, 2/1/22).
Co-Chair Stedman OBJECTED for DISCUSSION.
Ms. Ryder stated that the same explanation for SB 162
applied to the committee substitute for SB 163.
Co-Chair Stedman REMOVED his OBJECTION. There being NO
OBJECTION, it was so ordered.
9:07:34 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation, Overview of the Governors FY
23 Budget (copy on file). He looked at slide 2, Outline:
? Update on Fiscal Situation
? Legislative Finance's FY23 Budget Baselines
? Governor's FY23 Proposal and FY22 Supplementals
? Long-Term Outlook and Governor's 10-Year Plan
? Federal COVID-19 and Infrastructure Funds
Mr. Painter pointed to slide 3, Update on Fiscal
Situation:
? Due to record investment performance in FY21 and
higher oil prices than a year ago, Alaska's fiscal
situation has improved.
? DOR's Fall Revenue Forecast calls for $1 billion
more UGF revenue in FY22 than the Spring Forecast, and
$800 million more in FY23.
? Before supplementals, there is a $428.6 million pre-
transfer surplus in FY22 ($1,074.6 million after use
of SBR and ARPA revenue replacement).
9:11:19 AM
Mr. Painter looked at slide 5, "Update on Fiscal Situation
(cont.):
? Department of Revenue changed oil price forecast
methodology this year.
? Pre-2019, the forecast used a "Modified Delphi"
approach, with a group of stakeholders making
predictions and DOR averaging them.
This had problems with timing lag between
forecasting session and forecast release, causing
DOR to frequently diverge from this method.
It also was not transparent no outsider could
validate the forecast.
Starting in 2019, DOR began using the futures market
(based on Brent, an international benchmark) for the
first two years and then held that price flat,
adjusted for inflation, for years beyond.
This improved transparency of the forecast.
DOR's statistical analysis (verified by LFD)
showed no loss of accuracy.
? Starting with the Fall 2021 forecast, DOR now uses
the futures market through FY29 (as far as they were
available at the time).
This change was due to statistical analysis by
DOR (verified by LFD) that showed that this
approach increases forecast accuracy.
? LFD is supportive of the changes to a more
transparent forecast informed by statistical analysis
Senator Hoffman wondered number of years in advance
determined the inflation rates, and noted that it was over
6 percent.
Mr. Painter replied that the Department of Revenue (DOR)
used Callans long-term inflation forecast, and would
change year to year. He stated that the current forecast
was 2 percent, but he felt that the first forecast used a
2.25 percent.
9:15:41 AM
Mr. Painter looked at slide 6, "Update on Fiscal Situation
(cont.):
DOR's 1/13/22 Futures Outlook forecasts $78.17/bbl and
$6,404.3 UGF Revenue in FY23 ($466.6 million above
DOR's fall forecast)
Co-Chair Stedman asked whether moving back two years in the
futures market would be predictive of the current price.
Mr. Painter replied that it would not quite match the
current price, because a lot had changed in the world
situation.
Co-Chair Stedman stressed that the forecast was not an
accurate depiction of the future.
Senator Olson wondered how much longer the futures market
would be used as the forecast.
Mr. Painter replied that he did not know what DOR had in
mind in terms of changes, but noted that the current
direction was to find the most accurate publicly available
metric to use. He felt that Callan was the most accurate
publicly available metric.
9:21:00 AM
Co-Chair Stedman pointed out that many presenters had noted
the unpredictability of oil prices, so the efforts were
related to staying solvent within their project goals at a
conservative price range. He stressed that budgeting at $90
per barrel would not be beneficial in the long run.
Mr. Painter looked at slide 7, "Update on Fiscal Situation
(cont.). He shared that the revenue data was incorporated
into the background and the bars were the budget.
Senator Hoffman wondered why, in FY 22 and FY 23, there was
a substantial increase in the Permanent Fund Dividend
(PFD).
Mr. Painter replied that there was a nearly $1 billion
increase in the PFD compared to the actual amount paid out.
Co-Chair Stedman asked about the incorporation of the
governors proposed catch up provision in the FY 22
supplemental request.
Mr. Painter replied that the slide did not include the
supplemental requests, but only dealt with the FY 22
enacted budget and the FY 23 governors budget.
Co-Chair Stedman queried the governors proposed
supplemental PFD amount.
Mr. Painter replied that it would be an additional $796
million that would get the total amount for PFDs in the
current fiscal year to the 50 percent of market value
(POMV) paid out in the fall.
Co-Chair Stedman wondered whether that was a significant
amount of money which would affect budget decisions.
Mr. Painter replied in the affirmative.
9:25:05 AM
Senator von Imhof surmised that the total would be $2.5
billion.
Mr. Painter stated that it would be $2.5 billion across the
two fiscal years.
Senator von Imhof wondered whether there was approximately
$6 billion in revenue.
Mr. Painter replied in the affirmative.
9:25:51 AM
Senator von Imhof surmised that the $2.5 billion of the $6
billion revenue was about one-third of the entire budget.
Mr. Painter replied that the $2.5 billion would be across
two fiscal years, so it was not quite one to one.
Mr. Painter addressed slide 8, "Update on Fiscal Situation
(cont.).He noted that the numbers were estimates, as there
were not yet audited financials for FY 21.
Co-Chair Stedman shared that there had been discussions
about reconstituting the fund or having a court determine
that it was not sweepable. He felt that it should be a
separate item outside of the CBR. He wondered when there
would be a comparison of the eroding of the savings
accounts.
Mr. Painter stated that the total savings accounts balance
between the CBR and SBR were comparable to FY 23 and FY 20,
because of the CBR sweep. He stated that removing the sweep
would show a difference of about $400 million to $500
million. He noted that in the last three years, the savings
balances were kept flat due to the CBR sweep.
Co-Chair Stedman pointed out that there should be a
conversation about reconstituting the savings.
9:30:22 AM
Senator von Imhof stressed that the budget had been
somewhat backfilled in recent years with COVID relief
funds. She felt that there was not the pain with loss of
services and programs, but that loss would be apparent in
FY 24.
Mr. Painter agreed to provide information related to the
one-time COVID relief funds.
Co-Chair Stedman stressed the importance of peeling back
the onion to make good decisions.
Senator Hoffman remarked that the legislature could move
money from the Permanent Fund Earnings Reserve Account
(ERA) with a simple majority vote.
Co-Chair Bishop pointed out that there had not yet been
repayment to the CBR of the borrowed money.
Co-Chair Stedman felt that there should be a financial path
the did not overdraw the permanent fund.
9:34:23 AM
Mr. Painter pointed to slide 9, "LFD's FY23 Budget
Baselines:
? Two baselines to consider: current policy and
current law. These are intended to create a "clean"
starting point for the current budget rather than
previous years that are distorted by one-time items.
? Both scenarios use a slightly modified version of
the FY23 Adjusted Base for agency operations.
? Current policy assumes roughly $1,100 PFD, continued
partial funding of school debt, REAA Fund, Community
Assistance, and Oil and Gas Tax Credits.
? Current law assumes statutory PFD, full funding of
school debt, REAA Fund, Community Assistance, and Oil
and Gas Tax Credits.
? Statutory PFD is projected to be about $2.76
billion, paying about $4,200 per recipient.
? Fully funding all statewide items that were
partially funded in FY22 are estimated to be
about $167.9 million UGF more than maintaining
FY22 funding levels.
Co-Chair Stedman noted that the slide was related to the
enacted budget signed by the governor, not the recommended
budget that came from the committee. He noted that there
was a disagreement related to the enacted budget.
Senator Hoffman wondered why the community assistance
programs was labeled as partially funded.
Mr. Painter replied that the statute did not allow for the
PCE to get up to $90 million.
Senator Bishop surmised that the governor had vetoed the
money.
Mr. Painter agreed.
Senator von Imhof asked about policy versus statute as it
related to retirement.
Mr. Painter replied that the amount owed legally was
recommended by the ARM board, which included not funding
the portion for health care. The ARM board determined it
was a one-time item, and the following days presentation
would show that it was a one-time decision.
9:40:21 AM
Mr. Painter looked at slide 10, "LFD's Budget Baselines
(Cont.). He stated that, absent any policy changes, the
agency operations budget was expected to reduce
significantly because of retirement.
Co-Chair Bishop wondered whether the retiree contractual
adjustments had in increase of $13.6 million due to health
care increases.
Mr. Painter replied in the affirmative.
Co-Chair Bishop noted that a surplus did not mean that
there was halt a health care increases.
Senator Hoffman wondered where the PFD was categorized in
the list.
Mr. Painter replied that it was its own category included
on the summary slide.
9:46:07 AM
Mr. Painter pointed to slide 11, "LFD's Budget Baselines
(Cont.)." He remarked that the policy numbers were
attempting to show that funding at the same percentage of
previous years as compared to the current years proposal.
Mr. Painter pointed to slide 12, "LFD's Budget Baselines
(Cont.). He noted that the biggest difference from the
year prior was the PFD, with an over $2 billion difference.
Senator von Imhof hoped that the committee focused on the
importance of savings when it comes to the surplus.
9:50:42 AM
Co-Chair Stedman stressed that there were billions of
dollars that helped the state through the most recent
economic dip.
Senator Hoffman wondered whether rules needed to be broken
in order to enact the budget.
Mr. Painter replied that the $1.44 billion deficit would be
greater that the CBR balance, but there could be a
utilization of other funds. He agreed that the proposal was
greater than the POMV.
Co-Chair Stedman wondered how there was a justification of
a zero balance in savings.
Mr. Painter replied that it would not be prudent to have a
zero balance in savings, but it would be costly for cash
flow.
9:55:41 AM
Co-Chair Stedman stressed that it was imprudent to depend
on the hope that oil prices remain high.
Senator von Imhof felt that the proposal was reminiscent of
a spending cap. She remarked that other states with
spending caps noted the importance of a savings account to
utilize when needed. She stated that she had sponsored a
current spending cap bill.
Co-Chair Stedman stated that those discussions would occur
going forward.
Mr. Painter shared that the last time there was a level of
revenue that was $6 billion, there was $10 billion in
savings. He stated that normally the state would draw from
savings in volatile years. He remarked that in 2013 there
was a $1 billion deficit, because there was $16 billion. He
stressed that the state was in a fundamentally different
position because of the lack of savings account balances.
10:00:48 AM
Mr. Painter looked at slide 13, Governor's FY23 Budget
Compared to Baselines.
Mr. Painter looked at slide 14, Governor's FY22/23
Budget:
? Includes supplemental PFD payment for FY22 to reach
50/50 and a 50/50 PFD in FY23.
? Agency Operations increases by $80.1 million (2.1
percent) over LFD baseline in line with inflation
assumption of 2.0 percent.
? Fully funds statewide items.
? Pre-transfer deficit of $348.4 million in FY23 is
filled with $375.4 million of one-time use of ARPA for
revenue replacement.
? No reverse sweep or deficit-filling CBR language.
Co-Chair Stedman asked about deficit-filling language.
Mr. Painter replied that there was language in the budget
about how there was a source to fill the deficit.
10:05:19 AM
Co-Chair Stedman asked about the change in the balance of
powers in the proposal.
Mr. Painter replied that a last resort in budget, the
governor could stop appropriations in order to keep a
balanced budget.
Senator Wilson stressed that the legislature could pass
legislation to define which accounts were sweepable.
Mr. Painter agreed.
Mr. Painter addressed slide 15, "Governor's FY22/23 Budget
(Cont.).
Co-Chair Stedman asked about the summer planning.
10:14:04 AM
Mr. Painter replied that the pretransfer surplus included
the governors supplemental request.
Senator Hoffman surmised that the SBR and CBR were being
considered savings, and wondered the categorization of the
ERA.
Mr. Painter replied that the ERA was not a budget reserve,
because it had a specific draw percentage, and therefore
was considered a revenue source.
Senator Hoffman surmised that the legislature could spend
all of the funds from the ERA with a simple majority vote.
Mr. Painter agreed.
Senator von Imhof remarked the vote to pull from the ERA
would diminish both the account and the POMV. She stressed
that there were consequences to those behaviors.
Senator Hoffman stressed that those funds were available to
the legislature.
Senator von Imhof appreciated that there was not advocacy
for that possibility.
Co-Chair Stedman noted that utilizing the ERA would
increase the chance of a budget issue in future years.
10:20:59 AM
Senator Olson wondered how much PFD money remained in the
state versus outside of the state.
Mr. Painter agreed to provide that information.
10:25:01 AM
Senator Hoffman felt that the reverse sweep at the end of
the previous session included a nearly $1 billion sweep. He
stressed that the fund was no longer a discussion item.
Mr. Painter looked at slide 16, Governor's FY22/23 Budget
(Cont.):
? Agency Operations are $80.1 million UGF above LFD's
baseline:
Medicaid: Increase by $45.0 million UGF due to
the expiration of federal increased FMAP
Alaska Marine Highway System: Decrease by $63.4
million UGF due to use of federal infrastructure
funds
Reverse sweep: $33.6 million UGF increase from
fund changes to offset lost DGF due to failure of
reverse sweep
Department of Public Safety: $16.5 million
increases for Alaska State Troopers, VPSOs, and
other items
Department of Transportation: $10.9 for
replacing one-time federal funds (still leaving
$22.4 million that will need to be
replaced in FY24)
Other items net to an increase of $37.5 million
Mr. Painter addressed slide 17, Governor's FY22/23 Budget
(Cont.):
? Statewide Items total $517.6 million
School Debt Reimbursement, REAA Fund
Capitalization, Oil and Gas Tax Credits all
funded at statutory levels
Community Assistance funded with $30 million
for PCE fund per statute
State retirement payments down $116.6 million
from FY23 due to a combination of two factors:
? Investment performance: $61.5 million
? ARM Board decision to adopt a zero additional
contribution rate for health care: $55.1 million
Mr. Painter looked at slide 18, Governor's FY22/23 Budget
(Cont.):
? Capital Budget totals $154.7 million UGF in FY23,
plus an additional $93.0 million of supplemental
capital projects
Of the supplementals, $47.9 million are in the
fast-track bill and $45.1 million are regular
supplementals
? Governor also introduced a $308.6 million general
obligation bond package
? The Governor does not yet incorporate the federal
Investing in Infrastructure and Jobs Act (IIJA) in his
capital budget that may come in future amendments
Senator Hoffman wondered whether the proposal could be
amended by the legislature.
Mr. Painter replied that the Infrastructure and Jobs Act
was a federal bill. He stressed that the legislature was
the appropriating body, so there could be a change in the
proposal.
10:29:24 AM
Co-Chair Bishop wondered whether the UGF assumed the $5
million match of $50 million for Federal Highway
Administration (FHWA) funds.
Co-Chair Stedman wanted to provide a rough layout of what
is ahead.
Senator Hoffman wondered whether the funds were available
for five years.
Co-Chair Bishop replied in the affirmative.
Senator von Imhof stressed that local communities may want
to match the one-time federal funds.
10:36:19 AM
Mr. Painter looked at slide 19, Federal COVID-19 and
Infrastructure Funds:
? In the 2021 legislative session, the legislature
appropriated about $1.5 billion of non-discretionary
federal COVID-related funds and $758.2 million of
discretionary COVID funds
The discretionary sources were the Coronavirus
State and Local Federal Relief Fund (CSLFRF) and
several transportation-related fund sources
? This left approximately half ($504.8 million) of the
CSLFRF for FY23/24, plus the $111.8 million Capital
Projects Fund, which must be appropriated by September
of this year
Mr. Painter discussed slide 20, Federal COVID-19 and
Infrastructure Funds (Cont.): CSLFRF:
? From CSLFRF, Governor proposes spending the
remaining $504.8m balance in FY22/23 budgets.
Highlights:
$375.4 million for revenue replacement (filling the
FY23 deficit)
$72.0 million for capital projects, including:
? $25.0 million mariculture incentive program
? $25.0 million food security agriculture grants
$22.8 million for three University of Alaska
research projects (drones, heavy oil, and critical
minerals)
$20.0 million for COVID-19 response in fast-track
$10.0 million for workforce training
Co-Chair Stedman stressed that there had been efforts in
maximizing workforce development and training at the same
time that the savings accounts were accumulating.
10:41:17 AM
Mr. Painter looked at slide 21, Federal COVID-19 and
Infrastructure Funds (Cont.): Capital Projects Fund:
? Capital Projects Fund guidance came out in September
2021 and funding must be appropriated by September
2022. Eligible uses include broadband and other
projects enabling remote work, education, and health
monitoring.
? Governor proposes spending $63.8 million out of the
$111.8 million Alaska has to spend the remainder
will
presumably come in future amendments.
? Proposals in FY23 budget:
$30.0 million for Healthcare Record System
improvements
$20.0 million for Student Information
Technology Systems
$13.8 million for Eagle River Fire Crew Facility
Senator von Imhof wondered whether the $111.8 million was
available for the legislature to help direct.
Mr. Painter replied in the affirmative.
Senator Hoffman queried the governor's timeline for the
amendments for the funds in the slide.
Mr. Painter replied that, statutorily, budget amendments
must be submitted by the thirtieth legislative day, but
some governors continued to submit amendments after that
day.
10:44:33 AM
Mr. Painter addressed slide 22, Federal COVID-19 and
Infrastructure Funds (Cont.): IIJA:
? IIJA increases several existing federal programs and
adds new ones, generally over FY22-26.
? Federal apportionments and guidance are still being
developed, so there is significant uncertainty about
how much money Alaska could receive and how much
matching funds that would take. Governor did not
incorporate these funds in his capital budget.
? LFD estimates up to $36.4 million of additional
match could be needed in FY23. However, that may be
reduced by using a previous appropriation for the
Tustumena replacement ($22.0 million of match
appropriated in FY18).
? The Alaska Marine Highway System (AMHS) is the one
area that the Governor uses IIJA funds to offset UGF
in its operating budget for a $63.4 million reduction.
In addition, funds are available on the capital side
for AMHS that are not in the Governor's budget yet.
Co-Chair Stedman wanted to examine the match money related
to dock replacements.
Senator von Imhof wondered whether the $62 million to
offset reduction was an annual appropriation.
Mr. Painter thanked the committee.
Co-Chair Stedman discussed committee business.
SB 162 was HEARD and HELD in committee for further
consideration.
SB 163 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:50:20 AM
The meeting was adjourned at 10:50 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 020222 LFD SFIN Presentation 2-2-22.pdf |
SFIN 2/2/2022 9:00:00 AM |
|
| SB 163 work draft version B.pdf |
SFIN 2/2/2022 9:00:00 AM |
SB 163 |
| SB 162 work draft version B.pdf |
SFIN 2/2/2022 9:00:00 AM |
SB 162 |