Legislature(2025 - 2026)SENATE FINANCE 532
03/10/2025 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB113 | |
| SB80 | |
| Presentation: Three Year Budget Oulook Update, Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 113 | TELECONFERENCED | |
| += | SB 80 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
March 10, 2025
9:00 a.m.
9:00:51 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:00 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Mike Cronk
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
ALSO PRESENT
Senator Bill Wielechowski, Sponsor; David Dunsmore, Staff,
Senator Wielechowski; Savaya Bieber, Staff, Senator Jesse
Bjorkman; Alexei Painter, Director, Legislative Finance
Division; Senator Cathy Giessel.
SUMMARY
SB 80 EXTEND BOARDS
CSSB 80(FIN) was REPORTED out of committee with
five "do pass" recommendations and with one new
fiscal note from the Department of Health, and
two previously published fiscal notes: FY 1(CED)
and FY 2(CED).
SB 113 APPORTION TAXABLE INCOME; DIGITAL BUSINESS
SB 113 was HEARD and HELD in committee for
further consideration.
PRESENTATION: THREE YEAR BUDGET OULOOK UPDATE, LEGISLATIVE
FINANCE DIVISION
SENATE BILL NO. 113
"An Act relating to the Multistate Tax Compact;
relating to apportionment of income to the state;
relating to highly digitized businesses subject to the
Alaska Net Income Tax Act; and providing for an
effective date."
9:02:31 AM
SENATOR BILL WIELECHOWSKI, SPONSOR, presented the bill. He
said that the bill made two reforms to Alaskas tax
apportionment system. The bill adopts market-based sourcing
for calculation the portion of a taxpayers sales that are
subject to Alaskas corporate income tax and adopts a
single sales factor for calculation the taxable income of
highly digitized businesses. He noted that the reforms
would raise funds for the state and would not change the
states corporate income tax rates. He stressed that the
bill would not tax Alaskan businesses or consumers.
9:05:50 AM
DAVID DUNSMORE, STAFF, SENATOR WIELECHOWSKI, discussed a
presentation entitled "SB 113 - Corporate Income Tax
Modernization" (copy on file). He looked at slide 2, " SB
113 makes two reforms to bring Alaska's tax apportionment
system into the 21st century":
Market-based sourcing to ensure Alaskan sales are
properly apportioned to the state
Single sales factor for highly digitized businesses
SB 113 makes no changes to corporate income tax rates
or brackets.
Mr. Dunsmore showed slide 3, "What is tax apportionment?"
Mr. Dunsmore referenced slide 4:
Under the Commerce Clause of the U.S. Constitution,
states may only tax activity that is reasonably
attributable to that state.
For taxpayers who operate in multiple states, it is
necessary to determine what portion of their income
can be taxed by each state.
To avoid taxpayers having to do separate accounting in
each state, states have adopted mathematical formulas
to determine tax apportionment.
Mr. Dunsmore turned to slide 5:
The U.S. Supreme Court has ruled that states must use
"fair apportionment" to determine what is taxable by
their state, requiring the system be internally and
externally consistent.
Internal consistency: If all states used the same
system, there would be no double taxation.
External consistency: That the value taxed is "fairly
attributable" to the state.
Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S.
175 (1995)
Mr. Dunsmore considered slide 6, "Traditionally states have
used an equally weighted three-factor formula for tax
apportionment":
Sales Factor
The percentage of a taxpayer's sales that are made in
the state
Property Factor
The percentage of a taxpayer's property that is
located in the state
Payroll Factor
The percentage of a taxpayer's payroll that is made in
the state
Mr. Dunsmore displayed slide 7, "The Traditional Three-
Factor Corporate Tax Apportionment Formula."
Mr. Dunsmore highlighted slide 8, "Alaska is a member of
the Multistate Tax Compact":
This is an advisory compact with 14 other states and
the District of Columbia that promotes uniformity in
tax apportionment and filing procedures.
The Commissioner of Revenue represents Alaska on the
commission that governs the compact.
The 6th Alaska State Legislature codified the compact
in Alaska Statutes in 1970 as AS 43.19.010 which
establishes Alaska's tax apportionment laws.
The Legislature has not made any amendments to this
statutory language since then.
Mr. Dunsmore looked at slide 9, "The current apportionment
formula was designed for a brick-and-mortar world":
In the modern digital economy a corporation can target
advertising to Alaska, sell a product through Alaska's
broadband infrastructure, and ship it through Alaska's
roads, ports and airports without having any property
or payroll in Alaska.
SB 113 makes common sense reforms to ensure these
sales are properly apportioned to Alaska.
9:08:44 AM
Co-Chair Hoffman queried the significance of the photo on
slide 9.
9:08:47 AM
Mr. Dunsmore replied that hed simply sought a good visual
aide.
9:08:57 AM
Mr. Dunsmore displayed slide 10, "Market-Based Sourcing."
Mr. Dunsmore advanced to slide 11, "Currently Alaska uses a
methodology called "cost of performance" to determine
whether sales happened in Alaska":
• Under cost of performance, a sale is considered to
happen in Alaska when "the income producing activity
is performed in this state."
• This means that out-of-state corporations can argue
that online sales to Alaskans do not take place in
Alaska.
SB 122 replaces cost of performance with a "market-
based" methodology where sales will be considered to
happen in Alaska when the market for the sales is in
Alaska.
Mr. Dunsmore looked at slide 12, "Under market-based
sourcing a sale occurs in Alaska when":
• For sales of real property, when the property is
located in the state
• For tangible personal property, when the property is
located in the state
• For services, when the service is delivered in the
state
• For intangible property, when it is used in the
state
Mr. Dunsmore showed slide 13, "At least 36 other states
already use some form of market-based sourcing."
Mr. Dunsmore showed slide 14, "Single Sales Factor for
Highly Digitized Businesses."
Mr. Dunsmore turned to slide 15, "For highly digitized
businesses only, the sales factor would be the only factor
used for tax apportionment."
Mr. Dunsmore considered slide 16, "A business would be
considered highly digitized if 50 percent or more of its
Alaska sales are of":
• Intangible property delivered electronically
• Services delivered electronically
• Services related to computers, electronic
transmission, or internet technology
• Tangible property purchased through the internet
Mr. Dunsmore displayed slide 17, "The three-factor formula
will still be used for brick-and-mortar businesses."
Mr. Dunsmore highlighted slide 18:
Alaska has previously adopted a different
apportionment formula for the oil and gas industry,
because the Legislature found that the traditional
formula did not fairly reflect their Alaska income.
Similarly, it is appropriate to use a different
formula for highly digitized businesses, because the
current formula does not fairly reflect Alaska sales.
Mr. Dunsmore looked at slide 19:
The current three-factor formula is a disincentive to
high-tech businesses opening Alaska facilities
Having payroll and property in Alaska can
significantly increase an online business' Alaska
taxes.
Adopting a single sales factor for this industry will
remove this disincentive and level the playing field
between out-of-state and Alaska businesses.
Mr. Dunsmore addressed slide 20, "At least 37 other states
already use a single sales factor for at least some
industries."
Mr. Dunsmore advanced to slide 21, "These reforms would
have little or no impact on Alaskan consumers":
Online businesses generally set their prices at the
national or global level
Both market-based sourcing and single sales factor are
common features of tax apportionment systems across
the country
This bill does not change the tax rates or brackets at
all, merely the formula for determining what income is
taxable in Alaska.
9:12:17 AM
Co-Chair Hoffman asked about the effective date of January
1, 2026. He wondered why the effective date was not July 1,
2025 the beginning of the fiscal year.
9:12:35 AM
Mr. Dunsmore replied that it was recommended that it began
at the calendar year, because most corporations used a
st
calendar year beginning January 1.
9:13:04 AM
Senator Kaufman asked what was to prevent businesses for
adding service charges for sales in Alaska.
9:13:40 AM
Mr. Dunsmore replied that there had been no evidence of
businesses using tax apportionment to set prices in the
state.
9:14:13 AM
Senator Kaufman thought it would be easy for businesses to
set prices using tax apportionment.
9:14:38 AM
Senator Kiehl looked at slide 16. He asked how the total of
Alaska sales would be reached.
9:15:13 AM
Mr. Dunsmore replied that the number would be 50 percent
aggregate of all the listed criteria.
9:16:20 AM
Co-Chair Hoffman OPENED and CLOSED public testimony.
SB 113 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 80
"An Act extending the termination date of the Big Game
Commercial Services Board; extending the termination
date of the Board of Massage Therapists; extending the
termination date of the Marijuana Control Board; and
providing for an effective date."
9:17:44 AM
SAVAYA BIEBER, STAFF, SENATOR JESSE BJORKMAN, summarized
the bill. She thanked the committee.
Co-Chair Hoffman shared the names of people available for
questions.
9:19:52 AM
Senator Kiehl reviewed the three fiscal notes: two from the
Department of Commerce, Community and Economic Development
and one from the Department of Health.
Senator Kiehl MOVED to REPORT CS SB 80(FIN) from committee
with individual recommendations and attached fiscal notes.
There being NO OBJECTION, it was so ordered.
CSSB 80(FIN) was REPORTED out of committee with five "do
pass" recommendations and with one new fiscal note from the
Department of Health, and two previously published fiscal
notes: FY 1(CED) and FY 2(CED).
9:22:26 AM
AT EASE
9:46:55 AM
RECONVENED
^PRESENTATION: THREE YEAR BUDGET OULOOK UPDATE, LEGISLATIVE
FINANCE DIVISION
9:47:27 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
(LFD) discussed, "Updated FY25 FY28 Fiscal Outlook" (copy
on file). He looked at slide 2, "Outline":
• Revenue Outlook
• Agency Operations Cost Drivers
Formula items (K-12, Medicaid, etc.)
Non-formula items
• Statewide Items
• Capital Budget
• FY25-FY28 Scenarios
Mr. Painter addressed slide 3, "GovAmend Fiscal Summary
He noted that the numbers included the amendments that had
been received through the statutory deadline. He shared
that further amendments from the governor were expected by
the end of the week. He relayed that before supplementals,
$an 81.5 million deficit was expected. He said that the
governor's supplemental budget was smaller than before pre-
amendment because he removed a $50 million dollar request
for AGDC, but then added other items to the total of $84.2
million. He said that the post-transfer deficit in the
governor's amended budget was $165.7 million for FY25.
9:49:42 AM
Co-Chair Hoffman understood that the deficit was for the
current fiscal year.
9:49:45 AM
Mr. Painter replied in the affirmative. He furthered that
in FY26, the governors budget added $30 million in agency
operations by amendment, and approximately $10 million to
the capital budget. He related that this raised the deficit
by $40 million, pre-amendment.
Senator Hoffman asked about the box on the lower right of
the slide.
Mr. Painter answered that the box reflected ending balances
for the Statutory Budget Reserve (SBR) and Constitutional
Budget Reserve (CBR) for FY25 and FY26. He noted that the
SBR had no balance in FY25 or FY26, and the CBR was
$2,972.2 in FY25, then down by half in FY26 to $1,547.9.
9:50:27 AM
Co-Chair Hoffman pointed to the drop in the CBR. He
announced that the committee did not intend to use CBR
funds to balance the budget.
Mr. Painter pointed to slide 4, "FY25-FY28 Revenue Outlook:
DOR 2024 Fall Forecast He stated that the forecasted
numbers were the same as his previous presentation and that
the Spring Revenue Forecast was expected by the end of the
week. He said that the forecasted numbers would vary
depending on the Brent NYMEX Futures numbers.
9:52:11 AM
Co-Chair Hoffman wondered about the difference in
projections versus the futures numbers swing.
9:52:22 AM
Mr. Painter replied that a three-dollar swing could result
in $110 million in forecasted dollars.
9:52:39 AM
Co-Chair Hoffman understood that dates were critical when
looking at projection numbers.
9:52:58 AM
Senator Kaufman wondered whether the forecasts had any
reliability factor that could be included when looking into
high-risk periods of time. He asked what a friendship with
Russia might do for the forecast.
9:53:32 AM
Mr. Painter replied that when the forecast was prepared the
futures marked was applied and analysis did not account for
a friendship. He said there was more upside with higher
prices than downside with lower prices. He believed that
there was a high degree of variability in oil price right
now.
Mr. Painter looked at slide 5, "Sources of Revenue
Uncertainty":
• Oil prices: at current prices, each dollar change in
the price of oil is about $35-40 million in revenue.
• Oil production and expenses: while not as volatile
as prices, both oil production and producer costs can
change from year to year and impact revenue.
• Investment returns: if the Permanent Fund
underperforms its projection by 1 percent in FY25,
FY27 revenue is reduced by about $8 million and FY28
revenue is reduced by about $16 million.
• Federal revenue: reductions in federal funds to
programs like Medicaid could greatly impact the
State's overall revenue. In the FY25 budget, federal
funds exceeded general funds, and in FY26 they total
$6.1 billion.
Mr. Painter spoke to slide 6, "Significant One-Time Items
in FY25 Budget
• Of the items above, the only one repeated in the
Governor's FY26 budget is $5 million for the
University of Alaska's R1 research.
• The Governor's budget includes $6.1 million for
child care assistance grants related to SB 189, which
expanded eligibility for the needs-based child care
grant program. The $7.5 million one-time item in the
FY25 budget was directed to providers.
9:59:10 AM
Mr. Painter discussed slide 7, "Agency Operations: Formula
Programs
• Formula programs comprise nearly half of the UGF
budget. This includes K-12 funding above the statutory
formula that is distributed according to the formula.
• Other UGF formula programs include the Alaska
Pioneer Home Payment Assistance, Office of Children's
Services Foster Care and Adoption/Guardians programs,
Adult Public Assistance, Child Care Benefits, Tribal
Assistance, and Senior Benefits.
• Formula programs are dictated by statute and by
rates set out by the departments, often in
coordination with the federal government. There is
less control of the amounts through the appropriation
process than for non-formula programs.
10:00:54 AM
Mr. Painter addressed slide 8, "K-12 Funding Legislation
and Trends
• The FY25 budget included $174.7 million in funding
above the Foundation Formula (equivalent to $680 in
the Base Student Allocation) and $7.3 million above
the Pupil Transportation formula ($182.0 million
total).
• The Governor proposed two major K-12 bills this
year: SB 66 (Tribal Compacting) and SB 82 (Education
Omnibus). In the House, the Rules Committee CS for HB
69 would increase the BSA by $1,000 and add reading
incentive grants that were proposed in the Governor's
bill.
• In FY26, the projected K-12 formula amount went down
by $28.7 million UGF, primarily due to a lower student
count. Based on the Department of Labor's demographic
projections, this may continue over the next several
years.
10:02:23 AM
Co-Chair Hoffman stated that there was a $100 million
difference between the house and senate proposals due to
the increase difference of the base student allocation
(BSA).
10:02:43 AM
Mr. Painter agreed.
10:03:09 AM
Mr. Painter addressed slide 9, "Student Count (ADM), FY11-
26 The slide offered background on the K-12 formula,
particularly how the student count had changed overtime. He
noted that the blue reflected the non-correspondence daily
count, and the red showed the correspondence daily count.
He noted that in FY17, there were 5,600 more students
overall, but the correspondence count had risen by over
10,000 students. He stated that the non-correspondence
daily count was down 16,000 from FY17. He relayed that 18
districts were under the hod harmless provision that
allowed them to retain funding, but it only applied to non-
correspondence students. He said that the correspondence
students received less money from the state and cost less
to districts, which resulted in less money to the district
because of less per student expenses but noted that there
were legacy expenses. Overall, the loss of brick-and-mortar
students cost districts funding.
10:05:17 AM
Mr. Painter pointed to slide 10, "K-12: Impact of Factors
per Non-Correspondence ADM, FY11-26." He shared that the
BSA often received a lot of attention but that the BSA was
multiplied by the adjusted average daily membership, which
considered many factors. He explained that the factors had
not changed since FY15, but the multiplier had due to the
growth of students classified as special education
intensive (33.7 percent). Those students were funded at 13
times the BSA because serving those students had
significant cost to districts. He stressed that looking at
the BSA, or total funding, left out the nuance of the
actual district financial picture.
10:06:37 AM
Mr. Painter discussed slide 11, "Medicaid UGF Funding
• From FY15 to, Medicaid spending declined primarily
due to Medicaid reform efforts.
• Due to a temporarily higher FMAP and reduced
utilization during the COVID-19 pandemic, spending
dropped even further in FY20 and FY21.
• As the enhanced FMAP has gone away and utilization
has returned to normal, spending has increased. Based
on DOH's 12/15/25 projection, the FY26 need is $134.2
million (21.9 percent) higher than FY23.
Mr. Painter relayed that the state had been successful at
holding down Medicaid spending over the last decade. He
lamented that significant growth had occurred in FY25.
10:07:48 AM
Mr. Painter pointed to slide 12, "Medicaid Projection
• According to the Long-Term Medicaid Forecast by
Evergreen Economics, the UGF cost of Medicaid is
expected to grow by 4.5 percent per year.
• The table below illustrates the effect of 4.5
percent growth in Medicaid in FY27 and FY28 compared
to growth with inflation (2.5 percent).
• At 2.5 percent annual growth, Medicaid UGF would
increase by $37.8 million from FY26 to FY28. At 4.5
percent growth, it would increase by $68.7 million.
Mr. Painter reflected on the significant increase in
Medicaid.
10:08:59 AM
Co-Chair Hoffman noted that the Long-Term Forecast of
Medicaid Enrollment and Spending in Alaska (MESA) report
had shown that the increase in Medicaid was expected to
last for the next 20 years.
10:09:06 AM
Mr. Painter replied in the affirmative.
10:09:16 AM
Mr. Painter discussed slide 13, "Non-formula Agency
Operations
• Non-formula agency operations were relatively flat
from FY17 through FY22, after significant reductions.
Since FY22, they have increased by $498.6 million
(25.8 percent), an average annual growth rate of 5.9
percent. Inflation over that period was a cumulative
18.0 percent.
• Cost drivers include health insurance costs,
employee pay, inflationary impacts on commodities and
services costs, and program expansion. In addition,
temporary COVID funds offset some general fund
expenditures from FY21-23.
10:11:45 AM
Co-Chair Hoffman referred to slide 12 and noted the FY28
projection of $31 million. He believed the increase meant
reductions in spending or increased revenue. He noted that
the CBR would not bail the state out of the projected
increase.
10:12:32 AM
Mr. Painter remarked that the MESA projection included
current policy from the federal government; significant
changes would increase state costs significantly.
10:13:12 AM
Co-Chair Hoffman stressed that Medicaid expansion could
help but would take time and put pressure upon the
reduction of services. He lamented that the alternatives
were not great.
10:13:26 AM
Senator Kiehl asked when the state might see the policy
changes being considered on the federal level.
10:13:40 AM
Mr. Painter replied that it was unclear. He said that
congress was working on a resolution to avoid a government
shut down. He said that a temporary shut down aversion deal
could be made, which would push the question down the line.
10:14:20 AM
Senator Kiehl expressed concern that the CBR could be
depleted because of federal decisions.
10:14:48 AM
Mr. Painter finished discussing slide 13:
• The impact of the statewide salary survey are
unknown. UGF funding for executive branch salaries are
about $661 million in FY25, so each 1 percent of
across-the-board salary increases costs about $6.6
million. This excludes the University, Legislature,
Judiciary, and Alaska Marine Highway System; it is
unclear whether these agencies would be affected by
the survey.
10:15:48 AM
Mr. Painter pointed to slide 14, "Statewide Items":
• State Assistance to Retirement (PERS and TRS) is
projected to increase from $220.0 million in FY26 to
$284.4 million in FY27 based on the June 30, 2023,
valuation.
The draft June 30, 2024, valuation indicates that
the actual rate may go down based on positive
investment performance in FY24, so the true
increase will likely be less than that.
• State debt payments are expected to stay flat, but
school debt reimbursement is projected to go down
based on established school debt.
The moratorium on new debt is scheduled to end on
July 1, 2025. The fiscal impact of this is
unknown, but it would likely impact debt
reimbursement amounts starting in FY27 and REAA
fund capitalization amounts in FY28.
LFD fiscal modeling typically assumes $7.8
million per year of new debt based on historical
averages. However, the true amount could be
higher due to pent-up demand or could be lower
due to the State's history of not always making
full payments.
Mr. Painter shared that the state had a history of not
making full payments, which could cause voters to fear that
they will be responsible for school debt reimbursement.
10:18:19 AM
Co-Chair Hoffman understood that the extension on the
school debt moratorium was expected to last the next 5
years.
10:18:23 AM
Mr. Painter agreed.
10:18:27 AM
Senator Kiehl spoke of lease purchases that were expected
to fall off the debt schedule within the next few years,
specifically Goose Creek Correctional Facility.
10:18:43 AM
Mr. Painter replied that Goose Creek Correctional Facility
was on through FY33, but the Lenny Pacillo Parking Garage
and a medical center would be off by FY28 and FY29.
10:19:06 AM
Mr. Painter looked at slide 15, "Deferred Maintenance":
• In FY25 the State had a $2.4 billion deferred
maintenance (DM) backlog.
• The University of Alaska accounted for over $1.5
billion (63 percent) of that, in part due to more
rigorous standards for tracking maintenance issues
than the rest of the executive branch.
• Based on an estimated $9 billion asset value (as of
2022, excluding the University) if Alaska spent 2
percent of that on the backlog, we would need to spend
$180.0 million on deferred maintenance. The Governor's
FY26 budget has $20.0 million in the statewide
deferred maintenance appropriation and $6.0 million
for Public Building Fund deferred maintenance.
This does not account for the eventual need to
replace aging specialized facilities, such as
Pioneer Homes and prisons. These large projects
could potentially be handled through bonding.
It also does not account for line-of-business
technology systems, which need to be replaced as
technology changes. The Governor's FY26 budget
includes $19.5 million for IT projects.
It also does not account for school construction
and major maintenance.
10:23:37 AM
Senator Kaufman looked ahead at page 16. He queried the
public building fund and wondered what kind of buildings
were not covered by that fund.
10:24:09 AM
Mr. Painter displayed slide 16, "FY25 Deferred Maintenance
by Agency He explained that DOT, which managed public
facilities, would manage office buildings and non-
specialized facilities, but DNR managed deferred
maintenance on park facilities. He said that DOC owned its
prisons, and DOT participated in projects, but the
buildings fell under DOC. He furthered that Family and
Community Services managed Juvenile Justice Centers and
Pioneer homes. He said that there was a considerable number
of parks deferred maintenance, which received federal
funding but not enough to get through the entire backlog.
10:25:41 AM
Mr. Painter pointed to slide 17, "Operating Budget Federal
Funding Outlook":
• The federal funding outlook is uncertain for
programs like Medicaid due to proposed budgetary
changes by Congress. The House reconciliation budget
includes up to $880 billion of cuts to Medicaid and
SNAP over the next decade. Many of the proposed
changes are difficult to quantify. One discussed
change is reducing the FMAP for the Medicaid expansion
population to the regular Medicaid rate. We estimate
that would cost Alaska around $250 million.
• The Alaska Marine Highway System's (AMHS) operating
budget in FY26 includes $76.5 million of federal
authority for the fourth of five years of federal
grants under the Infrastructure Investment and Jobs
Act (IIJA).
The actual amount of the federal grant for FY26
is not yet known, and will likely not be known
until after the legislative session.
In FY28, if that federal funding is not extended,
general funds would have to supplant those
federal funds to avoid a service reduction.
10:29:34 AM
Mr. Painter addressed slide 18, "Capital Budget Federal
Funding Outlook":
• AEA's Grid Resilience and Innovation Partnership
(GRIP 1) project requires $143.0 million of State
match from FY27-32. In FY26, the Governor's budget
requests $1.5 million. If spread evenly, this
remaining cost would amount to $23.8 million per year
in the future.
In the previous version of this presentation, we
noted that GRIP funding had been frozen. As of
March 6, AEA reports that GRIP is moving forward
again.
• IIJA increased capital funds available for DOT's
highways and aviation, AEA's renewable energy projects
(although these funds have been frozen), and DEC's
Village Safe Water program. When IIJA expires in FY27,
it is unclear whether the higher funding levels will
continue.
10:31:50 AM
Mr. Painter pointed to slide 19, "Long-Term State Needs
The needs included:
Deferred Maintenance
Total Need - $2,370.0
FY26 Gov Funding - $26.0
School Major Maintenance
Total Need - $261.5
FY26 Gov Funding - $0
School Construction
Total Need - $363.1
FY26 Gov Funding - $0
Harbor Matching Grant
Total Need - $7.1
FY26 Gov Funding - $0
Renewable Energy Fund
Total Need - $21.2
FY26 Gov Funding - $6.3
Bulk Fuel (top 25)
Total Need - $275.0
FY26 Gov Funding - $4.0
Rural Power System Upgrades (top 25)
Total Need - $175.0
FY26 Gov Funding - $5.0
Pension Past Service Liability
Total Need - $7,428.5
FY26 Gov Funding - $218.8
Total
Need - $10,901.4
FY26 Gov Funding - $260.1
10:33:04 AM
Senator Kiehl queried the total need column. He noted
that the school major maintenance and construction numbers
reflected what districts had requested for FY25. He
wondered whether a total cost of deferred maintenance could
be spitballed.
10:33:40 AM
Mr. Painter replied that the districts had approximately
$10 billion of asset value and a complete deferred
maintenance list was not included in the full report. The
department provided the capital improvement plans for
districts but that did not give a total of every project.
10:34:27 AM
Senator Kiehl commented that the numbers were a one year
look at the total need of approximately $10 billion of
total building value. He suggested that the total need
column should more closely reflect the actual need.
10:34:46 AM
Mr. Painter addressed slide 20, "FY25 Supplemental Budget":
• Before supplementals, there is an $81.5 million
deficit in FY25 based on the Fall 2024 Revenue
Forecast.
• The Governor's UGF supplementals so far total $84.2
million.
• There may be some additional supplemental amendments
(judgments and settlements often come in late, for
example).
• The legislature did not enact any deficit-filling
language for FY25 last session. The Governor proposes
filling the deficit from the CBR.
10:36:18 AM
Mr. Painter pointed to slide 21, "Senate Finance FY26
Budget Scenario":
• The Senate Finance co-chairs requested a scenario to
envision what the final FY26 budget could look like.
This does not reflect final decisions and is
illustrative only.
• Since the February 19 presentation, the budget
baseline has been changed to the Governor's amended
budget
The placeholder for new contracts has been
increased from $29.6 million last month to $40.0
million now, primarily based on the ACOA contract
coming in with an 11 percent increase.
Mr. Painter noted that there had not been an increase in
the previous year for ACOA contracts. The supervisory unit
contracts had increased. He said that it was hard to judge
the final dollar amount for the three Alaska Marine Highway
units. He stated that those contracts had complicated
bargaining unit contract negotiations, and the number could
increase.
10:38:14 AM
Co-Chair Hoffman stated that he did not anticipate that the
number would decrease.
10:38:35 AM
Mr. Painter displayed slide 22, "Senate Finance FY26 Budget
Scenario. (illustration only, millions):
1. UGF Revenue Forecast - $6,198.8
2. GovAmend Operating Budget/Fund Transfers - $4,971.5
3. Surplus Remaining - $1,227.3
4. Placeholder for New Contracts - $40.0
Increased from previous estimate du to ACOA 11 percent
5. Foundation Formula Increase - $172.7
$680 BSA increase
6. Pupil Transportation Increase - $7.3
Matches FY25
7. Community Assistance - $6.7
For $30m total FY26 distribution
8. Child Care - $10.0
FY25= $7.5 million
9. Fire Suppression (above Gov) - $27.7
Average year is $27.7 million above Gov
10. Disaster Relief Fund (above Gov) - $3.8
Average year is $3.8 million above Gov
11. AMHS Backstop - $10.0
Matches FY25, FY28 increase to $76.5
12. Capital Budget - $300.0
GoveAmend = $294.0
13. Legislative Capital Budget Additions - -
14. DM, School Construction/Maintenance, UA DM -
$50.0
15. Fiscal Notes - -
16. Other Changes - $20.0
Subcommittee and other additions
17. 75.25 PFD - $949.7
$1,420 per recipient
18. Total Additions - $1,590.6
19. Deficit ($363.3)
+50 million placeholder for future supps: ($413.3)
10:41:56 AM
Co-Chair Hoffman asked about line 5. He said if the BSA
increase were to pass at $680, it would be reflected on
line 15, Fiscal Notes.
10:42:38 AM
Mr. Painter addressed slide 23, "House Finance Co-
Chairman's FY26 Budget Scenarios":
• A House Finance Co-Chairman did a similar exercise
in a March 5, 2025 meeting, but included several PFD
scenarios:
1. 75/25 PFD
2. $1,000 PFD
3. $2,000 PFD
4. Statutory PFD
5. "Balanced Budget" PFD
• The Senate Finance Co-Chairs asked to show Scenario
5 in this presentation. The remaining scenarios are
part of the meeting documents for the March 5 House
Finance Committee meeting.
• The House three-year scenarios grow with inflation
for all items rather than having Medicaid grow at 4.5
percent like the Senate scenario does.
10:43:37 AM
Co-Chair Hoffman noted that there were two items that the
house had not considered: additional funding of $22.7
million for K-12 and $31 million for Medicaid. He wondered
how much those items would add to the house numbers.
Mr. Painter replied that line 5 of the next slide reflected
a $1,000 increase to the BSA, which was added before the
items Senator Hoffman had mentioned. He said that once
those numbers were added the PFD would be approximately
$700.
10:44:24 AM
Mr. Painter highlighted slide 24, "HFIN Co-Chair FY26
Budget Scenario 5. (illustration only, millions). He
stated that the numbers were like the senate numbers except
for the PFD.
10:46:05 AM
Co-Chair Hoffman said that he had not considered lines 1
through 4 of the house budget scenario. He lamented that
the house had not reduced the budget or considered new
revenue sources. He requested and update on line 5 or slide
24, incorporating the two items (K-12 funding and Medicaid)
previously mentioned.
10:47:50 AM
Mr. Painter agreed to provide that information.
10:48:00 AM
Senator Kaufman requested modeling of revenue uncertainty.
10:48:21 AM
Mr. Painter pointed to slide 25, "FY26-28 Senate Finance
Scenario":
• Assumes existing schedules for statewide items, adds
$7.8m placeholder for new school bond debt starting in
FY27.
• Agency operations and the capital budget grow with
inflation (2.5 percent) over FY26 levels (from
scenario on previous page), except Medicaid is shown
with a 4.5 percent growth rate.
• $50.0 million supplemental budget placeholder in
FY26 and beyond.
Mr. Painter discussed slide 26, "Senate Finance FY25-28
Scenario The slide reflected a FY25-26 deficit total of
$579.0 million. The said that the number would increase
overtime with inflation and healthcare costs.
10:49:44 AM
Co-Chair Hoffman noted that the $628.5 million deficit
projected in FY28 did not include the $53.7 million for
Medicaid and K-12 funding.
10:50:08 AM
Mr. Painter displayed slide 27, "House Finance Co-
Chairman's FY25-28 Scenario 5 The slide reflected a
$215.8 million deficit total in FY25-26. He noted that the
numbers did not include growth to Medicaid or K-12 funding.
10:50:45 AM
Co-Chair Hoffman requested an update of slide 27 that
included the Medicaid and K-12 funding. He asked whether
the addition of those numbers would lower the PFD below
$500.
10:51:17 AM
Mr. Painter agreed to provide the information.
10:51:30 AM
Senator Kiehl thought that modeling revenue certainly could
be helpful.
10:51:51 AM
Mr. Painter thanked the committee.
Co-Chair Hoffman commented on the state's deficit. He
stressed that the committee was facing a mountain of work.
ADJOURNMENT
10:52:35 AM
The meeting was adjourned at 10:52 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 113 Research Tax Division 2024 Annual Report excerpt.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Research - CCH AnswersConnect - Apportionment Formulas.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Sponsor's Powerpoint version A 2.26.25.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM |
SB 113 |
| SB 113 Sectional Analysis version A 2.26.25.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Sponsor Statement version A 2.26.25.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Research - CCH AnswersConnect - Market Based Sourcing.pdf |
SFIN 3/6/2025 9:00:00 AM SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| SB 113 Public Testimony Allmeroth.pdf |
SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |
| 031025 SFIN FY26-28 Fiscal Outlook 3-10-25.pdf |
SFIN 3/10/2025 9:00:00 AM |
|
| SB 113 Banuelos Testimony.pdf |
SFIN 3/10/2025 9:00:00 AM SFIN 4/9/2025 9:00:00 AM |
SB 113 |