Legislature(2019 - 2020)SENATE FINANCE 532
03/04/2020 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Legislative Finance Review of Governor's Amendments | |
| HB234 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 234 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 4, 2020
9:01 a.m.
9:01:47 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Donny Olson
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Alexei Painter, Analyst, Legislative Finance Division; Pete
Ecklund, Staff, Senator Bert Stedman; Caroline Schultz,
Staff, Senator Natasha von Imhof; Nils Andreassen,
Executive Director, Alaska Municipal League, Juneau; Vikki
Jo Kennedy, Gramma Brigade, Juneau; Senator Cathy Giessel.
SUMMARY
CSHB 234(FIN)
APPROP:SUPP; REAPPROP; CAP; AMEND; CBR
CSHB 234(FIN) was HEARD and HELD in committee for
further consideration.
^LEGISLATIVE FINANCE REVIEW OF GOVERNOR'S AMENDMENTS
9:02:58 AM
ALEXEI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION,
discussed, "Governor's Amended Budget; Overview; Senate
Finance Committee; March 4, 2020" (copy on file). He
highlighted slide 2, "Short Fiscal Summary FY19 to FY21."
He stated that the slide showed UGF only. He remarked that
the FY 20 figures showed the management plan and the
governor's proposed supplemental amendments.
Co-Chair Stedman asked for a specific addressing of the
document.
Mr. Painter agreed.
Mr. Painter looked at line 6, which was the total operating
budget. He remarked that line 7 showed that $120 million
was in agency operations. He stated that line 8 reflected
that $109 million was statewide items.
Co-Chair Stedman noted that the numbers were from FY 19 to
FY 21.
9:05:12 AM
Mr. Painter continued to discuss slide 2. He looked at the
reserve balances in the bottom right corner. The Statutory
Budget Reserve (SBR) balance was zero after FY 20, and the
entire balance was used for the dividend. He noted that the
Constitutional Budget Reserve (CBR) balance, which was an
updated balance, was $429.8 million.
Co-Chair Stedman wondered if that was a concern.
Mr. Painter replied that the governor's budget had a budget
deficit of $1.6 billion, which was approximately three-
quarters of the remaining CBR balance. He noted that there
would not be a possibility to use the SBR in FY 22.
Co-Chair Stedman stressed that the hearings were for people
to understand the impact of using the CBR.
Mr. Painter replied the other accounts would be addressed
in the conversation about the reverse sweep.
Co-Chair Stedman surmised that the Earnings Reserve Account
(ERA) was the non-constitutional protected portion of the
Permanent Fund. He noted that the SBR had been liquidated,
so it was not usable. He asked how much of the CBR had been
used to arrive at the $429 million number.
Mr. Painter explained that at its peak, the CBR had
approximately over $12 billion, and the SBR had over $5
billion. The total draw for both accounts was approximately
$18 billion since FY 13.
Co-Chair Stedman stressed the magnitude of the situation.
Senator Hoffman remarked that from FY 19 to FY 20 the ERA
showed a reduction of $5.2 billion. He noted that the
reduction was not spent by the legislature, but was
transferred to the corpus of the fund.
9:10:23 AM
Co-Chair Stedman agreed with the point. He wanted to
continue to point out that transfer.
Senator Hoffman wondered how it was possible to make the
allocation, which was larger than authorization of 5.25
percent.
Mr. Painter replied that inflation proofing was a transfer
from one account to another, so it did not count toward the
5.25 percent draw. He stated that it was counted as a net
zero in the budget, because it was moved from one account
to another.
Senator Hoffman asked whether the same logic applied to
moving funds from the ERA to the CBR.
Mr. Painter replied that he was not sure that it would fall
under the percent of market value (POMV) limit, but would
be in two different lines.
Co-Chair Stedman asked why the ERA had a reduction.
Mr. Painter looked at line 15 of slide 2, which address
inflation proofing.
Co-Chair Stedman stated that there was not a balance,
because the legislature chose to use the entire royalty
payments for the Permanent Fund.
9:15:27 AM
Senator Bishop pointed out that the legislature had put
$7.2 billion above the statutory formula for inflation
proofing.
Co-Chair Stedman asked that Legislative Finance address the
different years, and what makes the expenditures move to
see the major components.
Mr. Painter addressed slide 3, "Agency Operations Detail."
Co-Chair Stedman surmised that the reductions were "gobbled
up" by K-12 increases. He felt that the state was in the
same place as one year prior.
Mr. Painter agreed, and explained that the fire suppression
would require the make-up funds.
Co-Chair von Imhof noted that removing the fire suppression
activity, would show that the reductions were in Alaska
Marine Highway System (AMHS), University of Alaska (UA),
and Medicaid. She felt that there should be an examination
of each of those divisions. She felt that those divisions
were significant impacts.
9:20:25 AM
Co-Chair Stedman remarked that the AMHS reductions were
buried in the Department of Transportation and Public
Facilities (DOT/PF), and their total number did not have
significant adjustment.
Senator Bishop remarked that the different departments
required extraordinary amounts of money.
Co-Chair Stedman requested highlights from FY 20 to FY 21.
Mr. Painter continued to discuss slide 3.
Co-Chair Stedman felt that it was unlikely that the
committee would put forward a budget with the expectation
of a supplemental budget. He felt that the committee should
address the probable fire suppression issue.
Senator Wilson wondered whether there were expendables that
had not been reimbursed from the last fire season.
Mr. Painter replied that the fire suppression numbers in
the supplemental was before all of the reconciling of the
federal cross billing. He explained that the amounts in the
supplemental budget was based on an estimate, but may be
reimbursed more by the federal government.
9:24:53 AM
Senator Hoffman noted that Department of Education and
Early Development (DEED) had a net increase of $5 million,
Department of Corrections (DOC) had net increase of $39
million, the AMHS had a net reduction of $40 million, UA
had a net reduction of $50 million, and Medicaid had a
reduction of $32 million. He remarked that DOC money might
be beyond control, but there was more control over the
other organizations. He noted that UA had the largest
reduction of any proposal.
Co-Chair Stedman asked for some verbal comparisons from FY
19 to FY 21.
Mr. Painter replied that the total difference from FY 19 to
FY 21 was just over $120 million, and almost all of the
difference came from FY 20 and FY 21. He stressed that
almost all of the difference was because of fire
suppression.
Co-Chair Stedman pointed out that it was extremely
difficult to continually reduce, after significant
reductions in recent years.
Mr. Painter looked at slide 4, "Statewide Items Detail." He
stated that the slide showed comparison from FY 19 to FY 21
in statewide items.
Co-Chair Stedman asked for a definition of school debt
reimbursement.
Mr. Painter explained that school debt reimbursement was
the program where the state reimburses municipal
governments for funding of school construction.
Co-Chair Stedman asked about the Regional Educational
Attendance Area (REAA) fund.
Mr. Painter replied stated that it was created to bring
equity to rural districts.
9:32:03 AM
Co-Chair Stedman surmised that it was the unfunded
liability.
Mr. Painter furthered explained the slide.
Co-Chair Stedman noted that the school debt reimbursement
was a transfer to the major municipalities.
Co-Chair von Imhof stressed that the two school funds did
not resolve the debt, but the state was no longer on the
hook to pay that debt.
9:35:44 AM
Senator Wielechowski recalled that there were some bonds
that were issued that had not been spent, and asked for
more information.
Mr. Painter replied that the most recent issued bond
package was in 2012, and was still substantial unissued
bonds that would add to the debt service.
Co-Chair Stedman stressed that the committee should take up
the issue of the bonds, because the legislature had a
substantial amount of authority over those bonds.
Senator Hoffman noted that the result of the Kasayulie case
was a formula for rural schools. The formula was primarily
based on the amount of school debt in the state. He
remarked that there was a potential that the state would
still need to pay $20 million.
Co-Chair Stedman remarked that there was a policy concern
because the state was responsible for education but was not
required to reimburse the local municipalities.
Mr. Painter explained that the total difference from FY 20
to FY 21 was an increase of $68 million.
Co-Chair Stedman stressed that there was not yet
legislative action on the FY 21 budget, and it was
currently in the subcommittee process. He stated that the
subcommittee reports may not reflect the governor's
proposed budget.
Mr. Painter pointed to slide 5, "Impact of Natural
Disasters":
? FY19 and FY20 saw unusually high spending on natural
disasters due to the Southcentral earthquake and the
record-breaking fire season.
? However, the fire suppression activity budget is
underfunded so supplementals for this item are
routine, even in normal fire years.
Mr. Painter displayed slide 6, "Short Fiscal Summary Less
Disasters."
9:44:35 AM
Co-Chair Stedman noted that there was an attempt to provide
clarity on the major components.
Mr. Painter discussed slide 7, "A Note on Revenue":
? Spring Revenue Forecast is expected later this month
? Based on current prices ($50.85 per barrel on 3/2)
and production, FY20 revenue may end up below the fall
forecast by $100-200 million
? The FY21 forecast is based on an oil price of $59
per barrel. FY21 Brent futures are currently several
dollars below that. This could reduce FY21 revenue by
$100-200 million as well
? The CBR balance projection at the end of FY21,
$429.8 million, may be optimistic by $200-400 million
Co-Chair Stedman felt that without the adjustments, there
was an expectation of around $429.8 million balance in the
savings. He stressed that accounting the changes could
result in a zero balance in the savings if there was a
payout of a statutory calculated Permanent Fund Dividend
(PFD). This would result in the Permanent Fund being the
only savings in the state.
Mr. Painter replied in the affirmative.
Co-Chair Stedman asked that there not be a complete draw on
the savings.
Co-Chair von Imhof looked at the second and third bullet,
and noted that the FY 20 and FY 21 were both reductions.
Co-Chair Stedman pointed out that the adjustments were very
sudden and extreme, and there would be an updated revenue
forecast before the operating budget.
9:51:08 AM
Mr. Painter explained that there was an amendment from the
governor that would address the coronavirus, which was a
supplemental amendment. He stated that it was approximately
$4 million of UGF, and $9 million of federal funds.
Co-Chair Stedman stated that there was an additional $1
million for the statewide audit, and who would receive the
payment.
Mr. Painter addressed slide 8, "Reverse Sweep":
? $1.7 billion was swept to the Constitutional Budget
Reserve (CBR) from subaccounts at the end of FY19 and
subsequently appropriated back to those accounts in
FY20 (the reverse sweep)
? The FY21 Governor's budget appropriates $651 million
from these funds. The failure to get a reverse sweep
in FY21 would cause major issues for appropriations of
many of those funds
Co-Chair Stedman asked for more information about the
significance of the sweep.
Mr. Painter explained the sweep of the general fund to the
CBR because the use of the CBR was considered a
"borrowing", so must be repaid.
9:55:54 AM
Co-Chair von Imhof remarked that the funds were not
considered static funds.
Mr. Painter replied that the only time that the sweep was
not reversed in a timely fashion was FY 04.
Senator Olson recalled that in FY 04, there were no
significant impacts to the services provided by the state.
Mr. Painter replied that in subsequent years, funds would
have more immediate impacts.
9:58:53 AM
Mr. Painter highlighted slide 9, "Reverse Sweep Impacts":
? Example 1: Alaska Higher Education Fund
This fund is used for the Alaska Performance
scholarship, Alaska Education Grants, and WWAMI
Its balance at the end of FY20 is estimated to
be $346 million. Scholarships are paid using
earnings on that balance. The Governor's budget
appropriates $22.5 million from this fund
Sweeping the balance would leave no funding for
those scholarships
Co-Chair Stedman asked for an outline of slide 8.
Mr. Painter addressed slide 8, "Reverse Sweep":
? $1.7 billion was swept to the Constitutional Budget
Reserve (CBR) from subaccounts at the end of FY19 and
subsequently appropriated back to those accounts in
FY20 (the reverse sweep)
The FY21 Governor's budget appropriates $651 million
from these funds. The failure to get a reverse sweep
in FY21 would cause major issues for appropriations of
many of those funds
10:01:07 AM
Co-Chair Stedman stressed that there were many
considerations of billings and settlements in accounting
before the determinations of the sweep could be finalized.
He stated that there would be cash flow problems in the
agencies.
Mr. Painter agreed, and explained that revenue may not be
made until later in the year.
Co-Chair Stedman asked about her concerns about the draw in
the Permanent Fund.
Co-Chair von Imhof stated that the ERA was not cash, and
the POMV was converted into cash on a periodic basis. She
stated that if the GF needed cash, the GF would look to the
SBR and ERA.
10:05:17 AM
Co-Chair Stedman stressed that it was a significant issue.
Senator Bishop stated that the going to the ERA would break
the model of cash flow.
Co-Chair Stedman explained the intent of the GF.
Mr. Painter highlighted slide 9, "Reverse Sweep Impacts":
? Example 1: Alaska Higher Education Fund
This fund is used for the Alaska Performance
scholarship, Alaska Education Grants, and WWAMI
Its balance at the end of FY20 is estimated to
be $346 million. Scholarships are paid using
earnings on that balance. The Governor's budget
appropriates $22.5 million from this fund
Sweeping the balance would leave no funding for
those scholarships
Mr. Painter addressed slide 10, "Reverse Sweep Impacts
(cont.)":
? Example 2: Alcohol and Other Drug Abuse Treatment
and Prevention Fund
This fund is used to support alcohol and drug
abuse programs
Its balance at the end of FY20 is estimated to
be $2.9 million. Revenue collections to the fund
are estimated to be $21.0 million, but the
Governor's FY21 budget spends $21.6 million from
the fund
Sweeping the balance would leave a shortfall of
$642.5 for those programs
10:11:11 AM
Co-Chair Stedman remarked that creating a cash flow
constraint, also caused a problem with the audits. He noted
that there were no gains on the oversight in the finances,
because there was a larger amount needed in the Department
of Administration (DOA). He felt that there was an
inability for DOA to respond to a significant accounting
quagmire.
10:14:01 AM
Senator Hoffman felt the unintended consequences of audit
exemptions would result in a substantially messy audit,
which may have impact on the state's bond rating.
CS FOR HOUSE BILL NO. 234(FIN)
"An Act making supplemental appropriations,
reappropriations, and other appropriations; amending
appropriations; capitalizing funds; 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."
10:17:52 AM
PETE ECKLUND, STAFF, SENATOR BERT STEDMAN, noted a
spreadsheet titled, "Supplemental (HB234) as passed by the
House" (copy on file).
Co-Chair Stedman wanted to address the larger items on the
spreadsheet.
Mr. Ecklund noted that the UGF total was a little over $298
million for the supplemental bill for FY 20. He noted the
$12.8 million in DGF, $7.5 million in other funds, and $207
in federal funds. The total was just over $526 million.
10:20:40 AM
Co-Chair von Imhof stressed that the committee had worked
closely with the administration in the year prior to seek
reductions in Department of Health and Social Services
(DHSS), and remarked that there was a significant request
in that department. She explained that it was largely due
to the difficulty in maintaining the reductions.
Co-Chair Stedman noted that there was a supplemental
request that was originally vetoed in the operating budget
from the year prior.
Co-Chair von Imhof agreed.
Co-Chair Stedman recalled that there were assurances the
year prior that there would not be a supplemental budget,
but this was the largest supplemental budget in the history
of the state.
Mr. Ecklund remarked that the $120 million for Medicaid
services was currently evaluated to determine whether that
was enough to cover the costs in the current year.
Co-Chair Stedman explained that there could be an
adjustment to that number.
Senator Hoffman wondered how the $250 million in DEED would
be addressed.
Mr. Ecklund explained that there was $150,000 of UGF and
$150,000 for receipt authority, which would help the
facility to stay open in the spring.
10:25:44 AM
Senator Hoffman heard that it might be impossible for the
school to receive funds.
Co-Chair Stedman explained that the project was in a list
of bond packages in the state.
Mr. Ecklund discussed the Department of Public Safety (DPS)
requests.
Co-Chair Stedman wanted to know the exact impact of the
strike.
Mr. Ecklund agreed to provide that information.
10:31:06 AM
Mr. Ecklund looked at page 2 of the spreadsheet.
Co-Chair Stedman stated that there was work on discussions
with the agency.
10:32:54 AM
Senator Olson did not see any requests for Village Public
Safety Officers (VPSOs).
Mr. Ecklund agreed.
10:33:25 AM
Senator Wielechowski felt that the biweekly payroll would
end up costing the state millions of dollars.
Mr. Ecklund noted the largest impacts to the state.
Co-Chair Stedman asked for description of the $24 million
request.
10:36:47 AM
CAROLINE SCHULTZ, STAFF, SENATOR NATASHA VON IMHOF,
explained that there was a late amendment for Covid-19 of
$4 million to the DHSS.
Co-Chair Stedman stated that there would be a joint meeting
with the House with Dr. Zink. He stated that there would be
ample resources to respond to the virus.
Senator Olson wondered whether the $4 million included a
quarantine facility.
Ms. Schultz replied that the money would be used to fund
the new positions, and not for infrastructure.
Senator Olson surmised that the money would not be used for
hospitals to prepare for a quarantine facility.
Ms. Schultz agreed to provide further information.
Senator Wilson looked at the first page of the spreadsheet.
He wanted more information about the Division of Motor
Vehicles (DMV) office location move from the current
location, and whether the building was owned by the state.
Ms. Schultz replied that the lease costs to the facility
had increased, so they were moving to a building that was
owned by the university, resulting in a cost savings to the
state.
10:40:14 AM
Senator Bishop wondered what the "fleet" referred to.
Ms. Shultz replied that DPS requested money for 32 new
trooper cars.
10:40:43 AM
Co-Chair Stedman explained that Senator Bishop was the
chair of the DPS subcommittee.
Mr. Ecklund clarified the money related to the strike.
Ms. Schultz stated that there was some funding for Covid-19
quarantine.
10:41:46 AM
Co-Chair Stedman OPENED public testimony.
10:42:17 AM
NILS ANDREASSEN, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL
LEAGUE, JUNEAU, felt that the supplemental budget presented
some issues important to local government. He supported the
increases to the Alaska Marine Highway System (AMHS). He
felt that many communities relied on those services. He
spoke in support of the state's response to fire
suppression. He spoke in support of Alaska Land Radio. He
highlighted the lack of response to recapitalizing
community assistance and not following up on fully
reimbursing municipalities for school bond debt. He noted
some unanticipated expenses related to the repeal of SB 91
for community and regional jails. He explained that those
levels were at 2002 funding levels. He expressed support
for providing reimbursement funding who have charter boats
to fill the gap of cancelled ferry service. He noted that
first responders would feel the impact of coronavirus, and
they were gearing up for the virus emergency.
10:46:49 AM
VIKKI JO KENNEDY, GRAMMA BRIGADE, JUNEAU, stated that her
home is Kodiak. She thanked the committee for their work in
the legislature. She expressed her appreciation for the
explanation of acronyms. She spoke in support of more
funding the AMHS. She was upset with what was going on in
the state. She wanted to see the legislative per diem be
reduced and a portion given back to the state. She remarked
that more people died of diseases that were already in
hospitals than the flu or other viruses. She spoke against
the adjustment to biweekly payroll. She testified in
support of funding for the Pioneer Home. She shared that
she had heard many stories from seniors in the state.
Co-Chair Stedman explained the definition of "BRENT."
Co-Chair Stedman CLOSED public testimony.
Co-Chair Stedman hoped to conclude the discussion on the
bill within the upcoming days.
Co-Chair von Imhof further explained the definition of
"BRENT."
CSHB 234(FIN) was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:53:16 AM
The meeting was adjourned at 10:53 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 234 HCS Summary Spreadsheet SFIN 3.4.20.pdf |
SFIN 3/4/2020 9:00:00 AM |
HB 234 |
| 030420 CBR Sweep Breakdown by Fund - LFD.pdf |
SFIN 3/4/2020 9:00:00 AM |
HB 243 |
| 030420 LFD Review of Governor's Amendments Presentation 3-4-20.pdf |
SFIN 3/4/2020 9:00:00 AM |
FY 21 Governor's Amendments HB 234 |