Legislature(2021 - 2022)SENATE FINANCE 532
01/21/2022 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Governor's Fy23 Budget Proposal | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
January 21, 2022
9:01 a.m.
9:01:02 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Donny Olson (via teleconference)
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
Senator Lyman Hoffman (via teleconference)
MEMBERS ABSENT
None
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor.
SUMMARY
^PRESENTATION: GOVERNOR'S FY23 BUDGET PROPOSAL
9:01:56 AM
AT EASE
9:03:22 AM
RECONVENED
9:04:32 AM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, discussed the presentation, "State
of Alaska; Office of Management and Budget; FY2023
Governor's Budget; Senate Finance Committee; January 21,
2022" (copy on file). He looked at slide 2, "Budget
Lookback." He explained the changes in percentage from FY
19 to FY 23. He pointed out that in FY 19, there was nearly
a one-half billion deficit.
Co-Chair Stedman asked about the revenue difference.
Mr. Steininger replied that the revenue difference was
related to other adjustments.
Co-Chair Stedman wondered what would be expected when there
would be an examination of the federal funds.
Mr. Steininger replied that in FY 23 there would be $375
million used as UGF revenue in the operating budget. He
noted that there were other uses for both one-time and
ongoing federal dollars that had come through various
federal appropriation packages.
Co-Chair Stedman remarked that there was an expectation of
presentations on that issue.
Senator von Imhof noted the line for FY 23 Agency
Operations, and wondered whether there was a stress test
for other inflation rates.
Mr. Steininger replied that there was a later slide that
might address that question.
9:10:32 AM
Senator von Imhof wondered whether the various costs were
imbedded in each agency for employee labor costs.
Mr. Steininger replied that it would live within the
agency's budget.
Senator von Imhof surmised that there would be greater
reductions to offset the significant increase potential for
insurance, health care, and cost of living. She felt that
there needed to be ongoing adjustments within the agencies.
Mr. Steininger addressed slide 3, "Budget Objectives":
? 50/50 PFD with Constitutional Amendment
? FY2023 operating budget to address baseline needs
and priorities
? Ensure a safe environment for individuals and
businesses
? Public protection, permitting, and
resource development
? Continue efforts towards efficiency and operational
change
? Use FY2022 surplus and bonding to support a robust
capital investment
? Avoid a FY2023 deficit or draws from savings
accounts
Senator Wilson requested the definition of a "robust
capital investment.
Mr. Steininger replied that there was approximately $700
million in state funds directed in the capital budget,
which was a larger investment than seen in prior years.
9:15:21 AM
Senator von Imhof stressed that having a bond for capital
the state would incur more debt.
Mr. Steininger stated that OMBs ten-year plan included the
cost of debt service.
Senator von Imhof wondered how the administration proposed
to pay the gap of the several years until it would close.
Mr. Steininger replied that the CBR would be used to fill
that gap.
Co-Chair Stedman surmised that the CBR would be around $1
billion, which included the Education Fund. He wondered
whether that fund would see liquidation. He stressed that
there was concern about the state's liquid savings. He
encouraged the committee to not draw conclusions until the
discussions took place. He felt that it was highly unlikely
that the legislature would pass the current bond package
proposal.
Senator von Imhof wondered whether the administration was
intentionally advocating for a deficit spending plan in FY
24.
9:20:01 AM
Mr. Steininger replied that the administration was not
advocating a deficit spending plan. He explained that there
would probably be deficit spending, but would be filled
with a plan.
Co-Chair Stedman remarked that the legislature would
examine the impact of a statutory Permanent Fund Dividend
(PFD). He stressed that there needed to be a fix of the
structured deficit.
Mr. Steininger pointed to slide 4, "FY22 and FY23 Revenue."
He remarked that "carryforward" were appropriations from
prior years that could be used in future years. He stated
that the $1.25 billion was the COVID relief money.
9:25:05 AM
Mr. Steininger addressed slide 5, "FY22 and FY23
Expenditures." He noted that the operating budget was up
approximately 2 percent from FY 22 to FY 23, which was
mostly related to oil and gas tax credits. He also noted
the Debt Service line, which was for the State Bond Debt
Reimbursement Program.
Co-Chair Stedman requested an explanation of the revenue
update concept, and how the legislature would stay in
agreement with the revenue numbers and timeline.
Mr. Steininger replied that the Department of Revenue (DOR)
based the current change considerable change in oil price.
He stressed that the budget, however, was based on the Fall
2021 Forecast. He stressed that there would be more
information in the Spring 2022 Forecast.
Co-Chair Stedman stressed that the forecast was about the
summer, and stressed that there was significant inaccuracy
in the forecast. He did not feel concern with the
administration updating the oil price scenario. He stressed
that it was an agreed upon process to initially use the
Fall Forecast, and then after the Spring Forecast is
released then the budget would be adopted in order for the
budget to flow through the entire fiscal year. He remarked
that there was a risk of the other body using other numbers
than either the administration or Senate. He stressed that
there needed to be rectification of all bodies using the
same numerics. He remarked that there had been great effort
to agreed-upon processes and numbers. He noted that there
may be a difference of opinion on the use, but there was
not an argument of oil price or volume sent by DOR. He felt
that the administration was not using those numbers, which
resulted in some new legislators' confusion and slow
learning. He asked for explanation of why there was a
moving away from using the agreed upon structure.
Mr. Steininger replied that the reason for the change was
because of how significant the change to the forecast.
9:35:53 AM
Co-Chair Stedman interrupted, and stated that there was a
significant change in the end of the cycle method.
Mr. Steininger deferred to the Department of Revenue (DOR).
Co-Chair Stedman stressed that there must be an agreement
on oil production and price between the Senate, House, and
OMB. He felt that there needed to be an agreement early on
in determining which revenue numbers would be utilized in
the budget. He recalled that the issue had been seen
decades prior, and it was a "mess."
Senator von Imhof felt that Commissioner Mahoney could
address the committee on DOR's plan. She wondered whether
there was a plan to put money into savings if the
department predicted a spending deficit and change in oil
price that increased revenue.
Mr. Steininger replied that the plan would put
approximately $170 million into the CBR at the end of the
fiscal year. He felt that, based on the revenue forecast
increase, there would be more money put into the savings
account. He stressed that the surplus could be moved into
savings.
9:41:55 AM
Senator von Imhof stated that the inflationary costs might
"eat those costs." She felt that it was a moving target.
Mr. Steininger stated that the budget numbers included the
inflationary salary adjustments.
Senator von Imhof felt that the budget underfunded
retirement by $100 million.
Co-Chair Stedman stated that there were some historic
mistakes by underfunding retirement by the billions of
dollars. He stated that there was school bond debt
reimbursement within the budget, and appreciated that
inclusion, particularly the rural school component. He
wondered whether the reimbursement would return to 50
percent.
Mr. Steininger replied in the affirmative.
9:45:17 AM
Co-Chair Stedman felt that the rural schools had born the
weight because of the lack of full reimbursement based on
political decisions. He stressed that the conversation
would be ongoing in the committee, as part of the component
part of the budget. He stressed that he did not know the
exact number.
Co-Chair Stedman remarked that there were some rural
schools that had dealt with major financial stress because
of the lack of reimbursement. He wondered about the revenue
sharing and its nuances.
Mr. Steininger replied that the community assistance
program was funded with a $30 million deposit, which was a
deposit from the Power Cost Equalization (PCE) fund
waterfall. The earnings in the PCE were strong enough to
support the entire waterfall.
Co-Chair Stedman stated that there would be an examination
of the cost shifting and statutory budget reserve (SBR).
Mr. Steininger looked at slide 6, "Fiscal Summary Savings
Balances":
? FY2022 CBR beginning balance reflects an estimated
$490.4m swept to the CBR under Alaska Constitution
Art. IX Sec. 17(d). Audited amounts will be reported
in the FY2022 Annual Comprehensive Financial Report.
? FY2023 budget includes $33.6m in UGF to replace fund
sources impacted by the CBR sweep. Fully supports all
associated programs.
9:50:36 AM
Senator Wilson queried the administration's position on the
CBR sweep, and where there would be resolution on the
issue.
Mr. Steininger replied that the budget was built around
ensuring that the programs were funded, and there was not a
focus on the sweep. He remarked that, based on the actions
of the previous year's budget, there could be a robust
conversation about the funds and whether there was a needed
offset. He remarked that whether a reverse sweep occurred
was at the legislature's discretion.
Senator Wilson wondered whether the administration wanted
to see the reverse sweep in the future.
Mr. Steininger replied that as funds were swept through the
CBR, there were different investment outcomes. He stated
that there was $33.6 million would have otherwise come from
undesignated funds.
Co-Chair Stedman felt that there was an opportunity cost
which was a significant amount of unused money.
9:54:23 AM
Senator von Imhof remarked that there was a lawsuit
challenging whether the Higher Education Fund could be
sweepable, similar to the Power Cost Equalization Fund. She
queried the administrations plan if the lawsuit were to
prevail and return the money to its designated fund.
Mr. Steininger replied that it would be roughly $25 million
that would be moved to the general fund. He could not
comment on the pending litigation.
Co-Chair Stedman queried the minimum account balance in the
CBR.
Mr. Steininger replied that the state needed roughly $500
million for cash flow needs, but really needed $1 billion.
9:56:11 AM
Co-Chair Stedman stressed that if the Higher Education Fund
was not sweepable there would be no cushion with downward
motion of oil prices. He pointed out that there were
conversations about the sweep, and would be addressed
further after the audit. HE remarked that there would be
conversations about rectification, which he felt would take
place in the court. He spoke of the CBR and applying a
stress test.
Co-Chair Stedman continued with his comments. He noted that
the objective should be to minimize discrepancies and
expressed concern with the handling of the account balance
of the CBR.
10:01:20 AM
Mr. Steininger pointed to slide 7, "Capital Budget":
Baseline traditional FY23 capital budget
? $157.4m UGF; $1.4b Fed
? Minimum level capital budget for federal match
and core state functions
Use FY22 surplus for additional capital projects
? $93m UGF
? Projects that benefit from expedited
construction
GO Bond financing for community projects
? $325.2m bond issuance
? Investment in key infrastructure to maximize
public benefit around the state
? Approved by voters in Fall 2022 general
election
Mr. Steininger relayed that the slides would provide a
limited overview of the Capital Budget. He spoke of getting
projects out earlier in order to acquire capital
commitments. He said the goal was to prepare the state for
incoming federal capital dollars.
Co-Chair Bishop understood that the state was waiting for
guidance on the federal infrastructure dollars.
Mr. Steininger said that the guidance would take some time.
Co-Chair Bishop spoke of the $92 million if UGF and
understood those were supplemental dollars.
Mr. Steininger replied in the affirmative. He said that
supplementally funded projects had been included in the
proposal.
Co-Chair Bishop said that the bond package was a starting
point with $195 million in South Central, which seemed
high. He noted that GO fund bonding had to be approved by
voters and advocated for GF spending for the projects.
10:06:54 AM
Senator Wielechowski noted the governor's proposal omitted
the Port of Alaska, which provided 90 percent of the goods
in the state. He wondered why no funding had been added for
the port.
Mr. Steininger said that the port was combined port
infrastructure between Mat-Su and Anchorage.
Senator Wielechowski said that the budget specifically
stated for Mat-Su. He asked about Mr. George bond
financing. He understood that the federal dollars would
stretch the state.
Co-Chair Stedman Co-Chair Bishop asked about the back up as
related to the port.
10:09:36 AM
Co-Chair Stedman said that one of the components that
needed to be discussed was workforce development. He said
that Alaskans should have the opportunity to develop skill
sets for jobs in state.
Senator Wilson asked about the plan to fund deferred
maintenance.
Mr. Steininger said the Alaska capital income fund would be
used for deferred maintenance.
10:11:45 AM
Mr. Steininger replied that federal opportunities would be
leverages to address maintenance needs.
Co-Chair Bishop said that the 1 percent replacement should
be honored.
Co-Chair Stedman stated that a geographical representation
of the deferred maintenance in the state would be helpful.
Senator von Imhof asked about capital electronic upgrades
for personnel and security. She spoke of the transition
Mr. Steininger said that the issue was being looked into
and noted that there was money to digitize medical records.
He said that there were several proposals for technological
upgrades of systems.
10:15:22 AM
Senator von Imhof remarked that there should be a focus on
efficiency in processing all applications in the state.
Mr. Steininger agreed.
Mr. Steininger addressed slide 8, "FY2023 Operating UGF."
He stated that it showed the relative sizes of state
departments.
Senator von Imhof thanked Mr. Steininger for including the
Permanent Fund Dividend (PFD) in the graph.
Co-Chair Stedman noted that there were recent extreme
weather events in the state. He remarked that there should
be an examination of the UGF spending for Department of
Transportation and Public Facilities (DOT) and Department
of Public Safety (DPS). He felt that the state was behind
for maintenance and operations.
Co-Chair Stedman noted that there had been recent forward
funding of education and felt that there needed to be a
similar discussion to do that effort again.
10:20:43 AM
Mr. Steininger looked at slide 9, "FY23 Agency Operating
Budget Changes." He noted the cost drivers of the increase.
Co-Chair Stedman stated that there would be a larger
discussion on the current slide.
10:25:10 AM
AT EASE
10:25:05 AM
RECONVENED
10:25:09 AM
Co-Chair Stedman discussed the following Monday's meeting.
ADJOURNMENT
10:25:29 AM
The meeting was adjourned at 10:25 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012122 OMB FY23 Budget Overview SFIN.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 7 - SB55 Department Summary FY22 FY23.pdf |
SFIN 1/21/2022 9:00:00 AM |
SB 55 |
| 012122 Attachment 6 - Statewide Item Transaction Compare.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 5 - (S)FIN ADFG Response 2.1.22 Statewide Chinook Project Summary.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 4 - LAW Current MYA Case List 2.2.2022.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 3b - DOT Project Status Update - PCC.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 3a - DOC Project Status Update - PCC.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 2 - Trooper and Support Position Locations Added in FY2023 DPS.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 Attachment 1 - GF Group List by Sweepable and Non-Sweepable 2.1.22.pdf |
SFIN 1/21/2022 9:00:00 AM |
|
| 012122 OMB Response to 01.21.22 01.24.22 SFIN Questions.pdf |
SFIN 1/21/2022 9:00:00 AM |