Legislature(2025 - 2026)ADAMS 519
02/06/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| Overview: Fy26 Department Budget | |
| Presentation: Agency Responses to Fy25 Intent Language |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 69 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 53 | TELECONFERENCED | |
| += | HB 55 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE BILL NO. 53
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
making reappropriations; 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."
HOUSE BILL NO. 55
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
^OVERVIEW: FY26 DEPARTMENT BUDGET
1:34:46 PM
KIM KOVOL, COMMISSIONER, DEPARTMENT OF FAMILY AND COMMUNITY
SERVICES, introduced herself and the PowerPoint
presentation "Department of Family and Community Services;
FY2026 Budget Overview," dated February 6, 2026 (copy on
file). She reminded members that Department of Family and
Community Services (DFCS) came into existence in 2022. She
continued to slide 2 and shared that the department had
seen positive results from the reorganization and was
continuing to progress its priorities. She noted that
department staff were present to answer questions.
Ms. Kovol continued to slide 3 and relayed that the
department's mission was to provide support, safety, and
ensure personal well-being for vulnerable Alaskans. The
department was divided into four primary divisions: Alaska
Pioneer Homes (APH), Alaska Psychiatric Institute (API),
Office of Children's Services (OCS), and the Division of
Juvenile Justice (DJJ). Additionally, there were
departmental support services included within the
department. The total budget for the department was just
under $500 million.
1:37:01 PM
MARIAN SWEET, ASSISTANT COMMISSIONER, DEPARTMENT OF FAMILY
AND COMMUNITY SERVICES, continued to slide 4 and provided a
financial overview of the department. The slide included
DFCS's FY 24 actuals, the FY 25 management plan, and the FY
26 governor's proposed budget. She explained that the
proposed budget for FY 26 represented a 1.4 percent
increase compared to the FY 25 management plan. The
increase was attributed to technical salary adjustments and
a few new budget items, which would be discussed further in
the following slides.
Ms. Sweet reported that in FY 24, the amount of unutilized
unrestricted general fund (UGF) authority that had lapsed
had been 1.8 percent of the total budget and amounted to
approximately $4.4 million. The majority of the lapse had
been found in the grant line and was primarily due to a
reduction in the number of foster families under OCS,
leading to fewer funds being distributed. The department
had been conducting a review of its restricted revenue
sources to assess any potential lapse balances. The review
had included evaluating historical lapse balances and any
anticipated lapses for the current fiscal year, which
allowed the department to make necessary adjustments in
future budget cycles.
Ms. Kovol continued to slide 5 and gave an overview of APH,
which provided a range of services to assist elderly
residents. The services included daily living assistance,
medical and nursing services, recreational and social
programs, dietary needs, and housekeeping. Notably, 61
percent of residents had been diagnosed with a dementia-
related disease, though the percentage varied from the high
40s to the low 70s depending on the specific home. The
division had employed over 400 staff members and had a
budget exceeding $112 million.
Representative Galvin relayed that she was concerned about
the growing elderly demographic need in Alaska. She asked
whether there had been an analysis of future demand for
services, particularly in relation to the state's growing
elderly population and the 506 bed capacity at APH. She was
particularly concerned about the Fairbanks facility.
Ms. Kovol replied that the 506 bed capacity could fluctuate
between 85 percent to 95 percent full, depending on the
home. For example, Juneau was at 100 percent capacity,
while Anchorage's capacity percentage had been in the mid-
80s due to renovations. She relayed that private entities
in the state had been operating independently and had not
been subject to the same regulations as the pioneer homes.
The private entities were typically better equipped to
serve residents with lower levels of care. However, there
had been a growing demand for higher levels of care, with
more elders requiring more care than the private entities
had been equipped to handle. As a result, many residents
with more severe needs had been seeking care at APH which
had contributed to the rising demand.
Representative Galvin thought it appeared that private
entities might have been taking in elders requiring lower
levels of care, while APH had increasingly served those
with higher needs.
Ms. Kovol responded in the affirmative. She explained that
while private entities might have accepted a few residents
that had high assisted living needs ranked at level three
and level four, the private entities generally preferred to
serve residents with levels one and two care needs.
Consequently, APH had become the primary option for
individuals requiring more intensive care.
Representative Galvin asked if APH was receiving additional
funding. She asked how the facilities were accommodating
the influx of residents with more intensive care needs. She
assumed that APH would need more staff support and possibly
a different type of environment for some kinds of patients.
Ms. Kovol responded that residents requiring level three to
five care often needed more mechanical supportive
equipment. She noted that the department was looking into
replicating its memory care units to accommodate higher
care needs. There were also safety considerations to
address, such as staffing ratios and facility design,
especially since APH and other aging facilities in the
state had been originally designed under different
regulations and for a different population. She suggested
Ms. Sweet elaborate on the funding aspects.
1:43:28 PM
Ms. Sweet added that there were distinct rate structures
for each level of care provided. The higher the care level,
the higher the charge, although the department also faced
challenges with the increased cost of care. She explained
that the legislature's payment assistance program came into
play because the additional funds could provide support to
ensure that all elders in all homes could be cared for
despite the financial challenges posed by higher care
levels.
Representative Galvin asked whether a resident who started
at a level one or two and later escalated to a level four
or five would be required to remain at APH, even if the
funding for higher care level was unavailable.
Ms. Sweet responded in the affirmative. She explained that
once a resident entered APH, it became their home and the
department would provide the necessary funding to support
them and ensure they were not displaced.
Representative Hannan asked to be provided with the number
of beds available at each APH location. She also requested
more information regarding wait lists.
Ms. Sweet responded with the details for each facility,
starting with the Anchorage Pioneer Home, which had a
capacity of 177 and a current census of 153. At the
Veterans' Pioneer Home, the capacity was 79, with a current
census of 69. The Fairbanks Pioneer Home had a capacity of
91 and a census of 58, but the reduction was intentional
due to remodeling work being done on the flooring. The
Juneau Pioneer Home had both a capacity and a census of 49.
The Ketchikan Pioneer Home had a capacity of 45, with a
census of 44. Finally, the Sitka Pioneer Home had a
capacity of 65, with a census of 61. She asked if
Representative Hannan also wanted the wait list numbers.
Representative Hannan responded in the affirmative.
Ms. Sweet responded with the active wait lists for each
facility, starting with the Anchorage Pioneer Home, which
had 124 individuals on its wait list. The Veterans' Pioneer
Home had a wait list of 94, while the Fairbanks Pioneer
Home had 157 individuals waiting for a bed. The Juneau
Pioneer Home had 126 individuals on its wait list, and the
Ketchikan Pioneer Home had 73. The Sitka Pioneer Home had
48 individuals on its wait list.
1:47:02 PM
Ms. Sweet continued to slide 6 and described the main
sources of funding for APH. She noted that the largest
portion came from the "other" category, which included
interagency receipts from Medicaid claims and APH's Payment
Assistance Program. Additionally, the division had a
reimbursable service agreement (RSA) with DJJ for pharmacy
services where APH supplied pharmacy services. In the other
category, statutory designated program receipts (SDPR) were
also significant, especially for revenue collected through
the pharmacy program. The primary source of funding for UGF
was the Payment Assistance Program, with the remaining $4.6
million UGF balance being used to help support the
operations of each of the homes. She noted that general
fund program receipts included revenue collected from
residents' private pay as well as private insurance.
Additionally, due to the classification of the Palmer
facility as a home for veterans, the department was able to
receive federal reimbursement through the federal Veterans'
Affairs (VA) for the Palmer home. The increase of 100
percent in the APH budget was strictly for salary
adjustments.
Ms. Koval continued to slide 7 and API's budget
information. She explained that API was the only state-run
hospital providing acute psychiatric care to individuals
experiencing mental health crises in Alaska. The institute
had a licensed capacity of 80 beds and it was the only
provider in the state offering competency restoration
treatment for individuals found by the court to be
incompetent to stand trial. The total FY 26 budget was
$62.5 million.
Ms. Sweet continued to slide 8 and explained that API's
proposed budget for FY 26 included an increase of $4.4
million to support a structural deficit within the facility
that was caused by rising operational costs coupled with
reductions in revenue collections. She shared that API
collected revenue through the other category, which
included interagency receipts as well as SDPR. The majority
of API's interagency receipt collections came from the
Disproportionate Share Hospital (DSH) program, followed by
Medicaid receipts and claims. She relayed that API also
collected revenue from private pay and private insurance.
In December of 2024, API received a notice that federal FY
26 DSH allotments would be reduced to just under $1
million, which would directly impact API's revenue. If the
department maintained its current rate of revenue
collections from Medicaid, private pay, and private
insurance, it anticipated a reduction of approximately $4.7
million in total revenue for FY 26.
1:50:52 PM
Representative Stapp asked whether there had been any
discussion at the federal level regarding further
reductions in DSH payments, as it seemed likely that such
reductions could continue. He asked how concerned the
department was about the impact on operations at API.
Ms. Sweet confirmed that the department had heard that
there would be incremental decreases over the next several
years. She explained that it was likely that similar
reductions would occur in FY 27 based on the expected
reduction of around $1 million in FY 26. The department was
focusing on how to mitigate the impact of the reductions
and increase revenues within API.
Representative Stapp asked if the department had any
replacement revenue sources planned, aside from general
funds.
Ms. Sweet responded that the department had developed a
plan to address the revenue shortfall. She explained that
the department had hired a contractor to review and assess
the coding and billing processes to improve the collection
of revenues and optimize the financial operations at API.
She hoped to see the results of the revenue increases as
early as the end of the current fiscal year, but the
department expected to see proven successes by FY 26.
Another aspect of the plan involved evaluating expenditures
to mitigate the reduction in revenues. The department had
already started trimming down expenditures where possible,
but cuts could not compromise the services provided to
patients. One area that the department was focusing on was
staffing, particularly overtime. She noted that API had
been relying on significant overtime due to lower staffing
levels and there was a strong push to hire more staff to
reduce overtime costs. Additionally, the use of locum
tenens [temporary providers brought in to support the
hospital] had been significantly reduced. The department
planned to reduce locum tenens even further once it was
able to hire more full-time psychiatrists and
psychologists. The department had seen success in hiring
staff through the Sexual Harassment/Assault Response and
Prevention (SHARP) program, which was why there was an
additional Alaska Mental Health Trust Authority (AMHTA)
recommendation for $200,000 for the program.
1:54:29 PM
Representative Galvin asked if there were transitional care
options for mental health patients in Alaska, similar to
the step-down care that patients from Providence Hospital
might receive. She asked what options existed for
individuals transitioning away from API.
Ms. Sweet responded that there were steps being taken by
partners at the Department of Health (DOH) to address the
need for transitional care. She noted that the proposed
legislation HB 73 and its companion bill SB 76 aimed to
create a complex care home residence license. The new
license would allow for the creation of step-down
facilities, which would serve as more home-like
environments for individuals transitioning out of
institutionalized settings. The facilities would provide
support similar to that of API but in a smaller, less
expensive setting, with a capacity of up to 15 beds. She
explained that the average length of stay could vary widely
due to the different types of patients the facility served.
Some patients were court-ordered, and the length of their
stay depended on the specific services they required. Some
patients remained at the facility longer than intended
because API was designed for short-term stays. There were
also youth patients, whose stays could vary based on their
comorbidities and diagnoses. The hospital was not designed
for long-term care.
1:56:58 PM
Co-Chair Josephson asked why there was no mention of the
reduction in DSH funds in the presentation.
Ms. Sweet replied that while the DSH funds were federal
dollars, the funds were awarded out of the coordinated
health and complex care component, which was where grant
programs were issued. The general fund match was supported
under the component, which was why it did not appear in the
federal revenue section. The funding was not part of API's
budget, but the institute did receive the funding through
interagency receipts.
Co-Chair Josephson noted that there had been reform
legislation in the past. He asked if the intended result to
require more people to be analyzed for commitment was
achieved.
Ms. Kovol asked if Co-Chair Josephson was referring to the
omnibus crime bill.
Co-Chair Josephson responded in the affirmative.
Ms. Kovol responded that the reform had been implemented on
January 1, 2025. She explained that the department had not
yet begun filing for extensions of the 180-day timeline but
anticipated that a backlog of patients would soon begin to
grow, resulting in a waitlist. She noted that the
department had already implemented competency restoration
services outside of API. She relayed that a community-based
location for the services had been established in
Anchorage. The program served individuals who had already
been court-ordered for release. In addition to the
community-based option, the department maintained ten
available spaces at the Anchorage Correctional Complex and
another ten at Hiland Mountain Correctional Center,
specifically for female court-ordered patients. She
confirmed there were already participants in the program,
but the census had not yet reached the full 30 slots. The
capacity had not been reached yet partially due to the
staggered timing of court orders, which led to participants
rotating in and out of the programs at different intervals.
Ms. Kovol emphasized that the department was continuing to
evaluate the eligibility criteria for services. Initially,
individuals with more serious felony charges had not been
accepted into the program. However, the department was now
considering including those cases and evaluating each case
individually and in coordination with the courts. The
department was proceeding cautiously due to limited
staffing.
Co-Chair Josephson asked if the legislation had gone into
effect recently.
Ms. Kovol confirmed that the effective date of the new
legislation had been recent.
2:00:03 PM
Ms. Kovol continued on slide 9 which introduced DJJ. She
explained that DJJ operated using a restorative justice
model to work with adjudicated youth. The division focused
on addressing delinquent behavior, promoting public safety,
supporting the restoration of victims and communities, and
assisting youth and their families in developing skills to
prevent future offenses. She relayed that DJJ operated six
secure facilities across the state, as well as thirteen
probation offices. She highlighted that the vast majority
of youth under DJJ's oversight were not in detention but
rather living in their communities, which she viewed as a
positive development. The division employed approximately
400 full-time staff and operated with a budget of nearly
$67 million.
Representative Hannan asked what the current census of
juveniles in state custody was.
Ms. Kovol responded that the current detention census was
152 and the capacity of the facility was 176. The six
facilities were located in Bethel, Fairbanks, Juneau,
Kenai, Mat-Su, and Anchorage.
Representative Hannan asked for the number of youth under
DJJ jurisdiction who were not in detention.
Ms. Kovol responded that there were approximately 530
youth.
Co-Chair Foster asked Ms. Kovol to repeat the locations.
Ms. Kovol repeated the six locations.
Co-Chair Foster relayed that there were some other
locations in the past in Nome and Ketchikan. He asked if
there was another location on the North Slope.
Ms. Kovol responded that "Barrow" [Utqiagvik] had a
probation office.
2:02:45 PM
Ms. Sweet continued on slide 10 and detailed the two key
items that contributed to the funding increase for DJJ in
FY 26. The first item was an expansion of the Successful
Youth Courts Grants Program. She explained that funding was
already being provided to the eight community partners that
operated the program. She noted that due to significant
interest from community partners in the Fairbanks area, the
department anticipated positive outcomes in reducing
recidivism rates among participating youth. The requested
increase for the item was $25,300 in UGF.
Ms. Sweet continued that the second item was funding
intended to support provider agreements for occupational
therapists serving within DJJ. She explained that
occupational therapy services played a critical role in
supporting youth who had experienced trauma and it helped
them develop coping mechanisms, self-regulation skills, and
ultimately contributed to reducing recidivism. The funding
request totaled $100,000 and was supported by AMHTA.
Representative Galvin asked how many occupational
therapists were currently employed under the program and
serving the approximately 530 youth within DJJ's
jurisdiction.
Ms. Sweet responded that the occupational therapists
primarily provided services in the detention facilities and
did not necessarily serve all youth in community
supervision. She acknowledged that McLaughlin Youth Center
in Anchorage had one occupational therapist, but she did
not know the complete statewide count. She confirmed that
the proposed funding would be used to add one more
occupational therapist to the existing group. She would
follow up with the details.
Ms. Sweet continued that remaining changes in the FY 26
budget for DJJ were due to technical salary adjustments
across staff positions.
Ms. Kovol continued to slide 11. She explained that OCS
served as the state's child welfare agency and was charged
with investigating reports of child abuse and neglect and
managing Alaska's foster care system. The division operated
across five regions with a network of 21 offices statewide,
employed 600 full-time staff members, and maintained a
total budget of $205.5 million.
Co-Chair Josephson asked whether there was still a
clinician employed to assist workers dealing with difficult
or traumatic work experiences.
Ms. Kovol confirmed that OCS continued to have a wellness
officer on staff.
Co-Chair Josephson recalled that there were lapsed funds of
a few million dollars within the foster care component. He
asked for an update on the current rates paid to foster
families and whether the rates had been assessed for
adequacy.
Ms. Kovol responded that a key challenge was the decrease
in licensed foster homes, which began around the time of
the COVID-19 pandemic. She noted that prior to the
pandemic, there had been more than 1,400 licensed non-
child-specific foster homes. By 2022, the number had
dropped to just over 1,100. As of the current date, the
count stood at 920 non-child-specific homes. She clarified
that the total number of licensed providers was still over
1,100, but non-child-specific homes had decreased to 920.
Ms. Kovol added that in the previous legislative session,
the legislature had approved an average base rate increase
of 30 percent for foster care payments, with actual
increases ranging from approximately 26 percent to 32
percent depending on the age and needs category of the
child. Since the rate increase took effect on July 1, 2024,
the department had received 348 new foster care license
applications. Some of the applicants had already been
approved and others were still moving through the approval
process. She was encouraged by the response and noted that
the number continued to rise. She suggested that Ms. Sweet
address the issue of lapsed funds.
2:07:31 PM
Ms. Sweet replied that the amount of funds that had lapsed
totaled $2.3 million and a significant portion had been
within OCS. She noted that there had been a reduction in
the number of children placed in out-of-home care, which
appeared to be the primary factor behind the decrease in
expenditures. The reduction was attributable to the
decreased number of children in such placements rather than
the licensing process.
Co-Chair Josephson acknowledged that the reasons for the
decline were complicated and it was difficult to determine
whether the reduction should be seen as a positive
development, especially considering the reasonable concerns
surrounding youth mental health, economic instability, and
domestic violence. He asked whether the decrease in out-of-
home placements should be viewed optimistically or if it
pointed to other underlying issues.
Ms. Kovol replied that the situation was multifaceted. She
wondered whether the current need truly centered on
increasing the number of foster homes, particularly in
light of the decrease in children in state care. She
suggested there was a possibility that what was actually
needed was a broader range of foster homes that could meet
diverse needs and serve specific population demographics,
including sibling groups. She noted that not every foster
parent was equipped to care for a young child, and not
every foster family was prepared to support a teenager. She
also identified challenges such as the availability of
child care, which many foster families required. The
department had established a dedicated search and foster
unit to support foster families. She added that a new
respite program had recently been launched following
requests from foster families for additional assistance and
support.
Ms. Kovol continued that there was a growing trend among
families who preferred to avoid state involvement, opting
instead for private relationships with foster children or
kinship placements. The department respected the choices,
but acknowledged that preferences might evolve over time.
The department still encouraged families to consider the
licensing process. She explained that when the department
underwent reorganization, there had been just under 3,000
children in out-of-home care, and the number had declined
to slightly more than 2,400 at present.
Ms. Kovol continued that there had been significant
progress made in terms of family reunification and
achieving permanency for children. However, she also
recognized that in Alaska, achieving permanency generally
took longer due to a range of factors. For example, many
Alaska Native tribes did not want OCS to move quickly into
terminations of parental rights (TPR) and instead wished to
consider guardianship. She relayed that the strategy was
frowned upon on the federal level but it was embraced in
Alaska as the more suitable option for certain families.
She acknowledged that guardianship was not considered a
form of legal permanency under federal standards, meaning
that such cases remained open for extended periods. The
department's perspective was that honoring the family's
wishes through guardianship was often the most appropriate
solution, even if it did not conform to federally defined
categories.
Co-Chair Josephson noted that further discussion regarding
audits would likely be necessary during the upcoming
finance subcommittee process.
2:11:17 PM
Representative Galvin expressed concern about the caseload
volume assigned to caseworkers. She stated that she had
received information suggesting that the number of children
assigned to each caseworker remained approximately three
times the national average. She asked if her understanding
was correct.
Ms. Sweet responded that discussions regarding caseloads
and case counts were ongoing. She relayed that a key point
of debate centered on whether a case should be counted by
family unit or by the individual number of children
involved. The differing interpretations of what constituted
a case continued to influence reported figures. Some
progress had been made in reducing caseloads, though
desired levels had not been reached. She affirmed that the
figures no longer reflected the double or triple multiples
previously seen.
Ms. Sweet continued that caseloads varied by region. In
certain areas, a small number of caseworkers served
multiple remote communities, resulting in caseloads that
differed significantly from those in urban settings. She
emphasized that it was not possible to equate one child to
another on a one-to-one basis. The needs of individual
children could differ dramatically; a child requiring a
lower level of care necessitated far less time and support
than one with high needs. She reiterated that cases varied
greatly.
Representative Galvin asked whether any audits had been
conducted in Alaska similar to those undertaken in other
areas of the U.S. in which standardized evaluations might
account for variables and allow for more accurate
comparisons. She stated that her primary concern was
whether the department had access to adequate assistance.
She noted that the budget appeared flat and that addressing
caseload issues could enhance both recruitment and
retention. She stressed that she wished to support the
department in any way possible.
Ms. Sweet responded that the department had strong
partnerships with tribal organizations, particularly those
participating in formal compacts. Of the 229 tribes in
Alaska, 170 were involved in compacts. The ongoing
discussions and investments had supported a collaborative
relationship with the tribes. She noted that the tribes
worked closely with the department and possessed the right
of first refusal in cases concerning child welfare. When a
tribe declined to assume responsibility for a case, the
department stepped in to offer support. She emphasized that
each case required a tailored approach and the department
worked diligently to respect tribal decisions on whether to
intervene. She described the dynamic as a unique and case-
specific partnership.
2:15:07 PM
Ms. Sweet continued to slide 12. She stated that UGF
authority within OCS was composed of the general fund,
general fund mental health dollars, and the general fund
match sources. She explained that the match supported
several federal grant programs, the largest of which was
Title IV-E [of the Social Security Act]. Other grants
included the Social Services Block Grant, the Promoting
Safe and Stable Families grant, and the Independent Living
grant.
Ms. Sweet clarified that additional funding sources
categorized as "other" were secured through reimbursable
service agreements (RSA). She explained that the department
maintained several RSAs with DOH, which included RSAs that
funded support for foster care providers and the Facility
Attuned Training program, which aimed to improve
relationships between OCS staff and caregivers. She also
noted that there was an RSA with the court system
supporting the Palmer Families and Infants and Toddlers
Court. There were no additional increases in the FY 26
budget outside of technical salary adjustments.
Co-Chair Josephson asked for more information about the
Title IV-E portion.
Ms. Sweet responded that Title IV-E referred to funding for
foster care, guardianship, and adoption programs. She noted
that the term "Title IV-E" functioned much like the name of
a grant program, similar in structure to Medicaid.
Ms. Sweet continued to slide 13. She reported that for FY
26, the department projected a budget of $41.6 million and
a total of 94 full-time positions. She shared that the
talent acquisition team had been operational since the
previous year and had been successful. She relayed that the
department had posted 83 job requisitions, many of which
were ongoing recruitment postings. The department had
reviewed 539 applications, conducted interviews with 425
candidates, and successfully hired 73 new staff members.
The hiring efforts included Protective Service Specialists
and various social service associates within OCS. She
explained that prior to the implementation of the program,
the vacancy rate for these job classes had been 34 percent,
while the current vacancy rate had decreased to 27 percent.
Ms. Sweet relayed that the department was committed to
using data to inform decisions and it remained committed to
the development of "data lakes" to enable analytics-based
decision-making. She explained that the department was
partnering with ImageSource on several programs, including
an automated process designed to improve efficiency in the
talent acquisition system. She also reported ongoing
collaboration with Smartsheet to develop a strategic
project management and spending plan. In addition, the
department was working with the Department of
Transportation and Public Facilities (DOT) to integrate its
facility maintenance needs into the existing FacilityForce
platform. The department had also successfully implemented
an electronic health record system for APH and was
continuing work on a similar system for API. In FY 25, the
department had undergone an internal administrative
consolidation which realigned lead administrative staff in
each division under the Departmental Support Services (DSS)
unit. The shift was intended to improve organizational
alignment, create standard procedures, and streamline
administrative processes across the agency.
Ms. Sweet continued to slide 14. She stated that the
funding authority within DSS remained unchanged, apart from
technical salary adjustments. She explained that the
department utilized both a direct and an allocated
chargeback model for the services provided across
divisions. Additionally, she noted that the department
received AMHTA funding under the Coordinated Health and
Complex Care component, which were the two categories
included in the "other" fund source designation. The
department also employed a public assistance cost
allocation plan through which it allocated costs to both
federal and general fund sources.
Co-Chair Josephson thanked the presenters and looked
forward to a more detailed discussion in the finance
subcommittee.
2:20:33 PM
AT EASE
2:22:17 PM
RECONVENED
Co-Chair Josephson introduced the presentation.
^PRESENTATION: AGENCY RESPONSES TO FY25 INTENT LANGUAGE
2:22:43 PM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
introduced the PowerPoint presentation "Agency Responses to
FY25 Legislative Intent Language" dated February 6, 2025
(copy on file). He began on slide 2 and explained that he
would focus on a selection of significant intent responses,
rather than reviewing each one in detail. He noted that the
memo regarding legislative intent had been distributed to
legislators at the beginning of the session and included a
comprehensive list for those who wished to explore
additional items.
Mr. Painter continued to slide 3, which included language
from Ms. Megan Wallace of Legislative Legal Services (LLS)
and was originally used during a training session on budget
amendments. He explained that the legislature frequently
included intent language in appropriation bills to provide
guidance to state agencies. However, such language was
constrained by the confinement clause of the Alaska State
Constitution. The Alaska Supreme Court set the limits in
Alaska Legislative Council v. Knowles. He read a key
passage from the ruling, which was included on the slide
(copy on file):
The qualifying language must be the minimum necessary
to explain the Legislature's intent regarding how the
money appropriated is to be spent. It must not enact
law or amend existing law. It must not extend beyond
the life of the appropriation. Finally, the language
must be germane, that is appropriate, to an
appropriation bill.
Mr. Painter stressed that legislative intent did not carry
the force of law and could be unconstitutional if it failed
to meet these standards. Each year, the legislature passed
a number of intent items that did not meet constitutional
requirements. In such cases, the administration was under
no legal obligation to comply. He clarified that the memo
and intent language served primarily as guidance or
requests to departments, which retained the discretion to
respond or not. Nevertheless, agencies often chose to
comply given the cooperative nature of the budget process.
2:25:04 PM
Co-Chair Josephson asking whether the core legal concern
stemmed from an encroachment upon executive privilege and
jurisdiction, as defined in the traditional model of
separation of powers.
Mr. Painter responded that it was indeed one of the primary
concerns. He added that another major issue involved the
constitutional requirement that appropriation bills be
confined strictly to appropriations. If an intent item
contradicted an existing statute or attempted to impose new
legal requirements, it could violate the confinement
clause. He emphasized that if the legislature sought to
enact such changes, it should do so through formal
legislation.
Mr. Painter continued to slide 4 and explained that many
legislative intent items included a request or requirement
for follow-up from state agencies. Often, agencies were
asked to complete a task and submit a report detailing the
outcome. To simplify tracking and review, the Legislative
Finance Division (LFD) had established December 20 as the
annual due date for the submissions. He explained that
December 20 was chosen because it followed the release of
the governor's budget and allowed agencies to avoid
revealing budget details prematurely. The deadline also
gave the Office of Management and Budget (OMB) a few
additional days to complete its own responsibilities during
an already demanding period. He noted that OMB compiled and
submitted agency responses for each intent item to LFD,
which then assessed whether agencies had complied with the
legislative intent, then LFD prepared a comprehensive memo
that included all responses along with the division's
analysis. In cases where agencies submitted longer reports,
the reports were attached to the memo as appendices. He
noted that the complete memo had currently reached
approximately 100 pages, due in part to several extensive
reports.
Mr. Painter relayed that final memo had been sent to the
co-chairs of the House Finance Committee early in the
legislative session. There was one final item that had been
due on the first day of session and the division had to
wait to receive it before completing the document. The FY
25 memo included 50 intent items from the current fiscal
year, as well as five items carried over from previous
years. He clarified that while state constitution
prohibited intent language from extending beyond the life
of the appropriation, some items were addressed after the
original deadlines for logistical reasons. For example, the
legislature had included language permitting DOH to
transfer funds between appropriations with the
understanding that a report would be submitted at the close
of the fiscal year detailing the transfers. There was
uncertainty as to whether a report would be submitted since
FY 25 had not yet concluded; however, DOH had submitted a
report for FY 24 which had been included in the current
year's analysis. There was often a one-year delay between
the directive and the resulting evaluation due to timing
issues.
2:28:02 PM
Mr. Painter continued on slide 5, which detailed LFD's
determinations of agencies' compliance in the FY 25 intent
memo. He reported that of the 55 responses spanning FY 24
and FY 25, 33 had been deemed compliant. He stated that six
responses were considered non-compliant due to vetoes by
the governor, which would be addressed on the following
slide. He stated that four responses were classified as
partially compliant, meaning that agencies had either
attempted to comply but had fallen short, or had fulfilled
only part of a multi-part directive. There were four items
that could not yet be evaluated due to pending outcomes or
delays in reporting and would require future assessment. He
reported that eight items had been determined non-compliant
for other reasons and all of which would be discussed as he
continued through the presentation.
Co-Chair Josephson commented that non-compliance was a
privilege enjoyed by the agencies.
Mr. Painter responded in the affirmative.
Mr. Painter advanced to slide 6, which detailed six
legislative intent items that had been rendered non-
compliant due to vetoes. He clarified that while the
governor could not directly veto legislative intent as it
represented the will of the legislature, the governor could
veto the associated appropriation item. In such instances,
agencies were unable to comply because the necessary
funding had been eliminated, which was a decision that was
beyond the agencies' control. He offered an example
involving intent language related to public radio stations
in which the funding was vetoed, leaving no basis for
compliance. There was a similar situation with UGF
designated for the Alaska Seafood Marketing Institute
(ASMI), which was also vetoed and ASMI was unable to act on
the legislative directive. There had also been a partial
veto of funding intended to increase general relief
temporary assisted living rates. Despite the reduced
funding, the rates were increased to the extent possible,
though not to the level originally specified by the
legislature.
Mr. Painter explained that another example within DOH
concerned the reimbursement of pharmacies for dispensing
specific medications in locking bottles. The funding was
vetoed, and the department did not comply. He relayed that
there were two further items from DOT: one involving hiring
incentives for certain positions, and another regarding the
collection of fees from the Manh Cho Mining Project for
highway maintenance. In both cases, the related funding had
been vetoed. He explained that all six examples on the
slides were instances of non-compliance, but were all due
to funding that had been vetoed by the governor.
Co-Chair Josephson commented that the last two items on
slide 6 appeared substantively different from the others.
Specifically, the item concerning the collection of fees
from the Manh Cho Mining Project seemed to fall outside the
proper scope of legislative intent. He noted that
establishing such a fee would likely require statutory
authority and corresponding administrative regulation,
rather than a mere request via budget language.
Mr. Painter responded that the legislature had appropriated
$8 million in receipt authority and had requested that the
department enter into an agreement with the project
operator. He explained that the receipts in question were
designated program receipts, not general fund program
receipts, and therefore required a contractual agreement
rather than unilateral action. The legislative intent was
for the department to negotiate a fee structure with the
operator; however, since the $8 million in program receipts
had been vetoed, the department did not pursue the
agreement.
Co-Chair Josephson agreed that there was a clear linkage
between the vetoed funding and the department's inability
to act.
2:31:53 PM
Mr. Painter continued on slide 7 and stated that the
remainder of the presentation would focus on a selection of
the most significant legislative intent items. He began
with an item related to the Alaska Gasline Development
Corporation (AGDC). He explained that the legislature had
included language in the prior year's budget directing AGDC
to complete an independent, third-party review of a project
proposal and to present the findings to the legislature. He
relayed that AGDC contracted with the firm Wood Mackenzie
and submitted the completed report in November of 2024. He
added that AGDC and Wood Mackenzie subsequently presented
their findings to the House Resources Committee on November
19, 2024, just one week after the report's submission.
Mr. Painter elaborated that the analysis conducted by Wood
Mackenzie included four demand scenarios, ranging from
current in-state demand to a full liquefied natural gas
(LNG) facility designed to export gas internationally. The
report also examined the impact of various pricing
variables, such as a federal loan guarantee and differing
property tax structures. He stated that the analysis was
included in the legislative intent memo. Given the
submission and presentation of the report, the item was
deemed compliant.
Representative Stapp asked whether appropriations
functioned differently for state-owned enterprises and
executive departments. He recalled that there was a
reduction in AGDC's salary line appropriation and noted
that the corporation had chosen to apply the reduction to
its commodities line instead. He whether such budget
flexibility was unique to state-owned enterprises.
Mr. Painter responded that under the Executive Budget Act,
specific line items were designated to the executive
branch. He explained that when data was transmitted from
the legislature to OMB, the funding that belonged within
each line item was clearly delineated. He noted that 50
years ago, line items were included directly in the budget
bills and were binding. Since that time, line item data
served primarily as a signal of legislative intent rather
than a legally binding requirement. Therefore, departments
were legally permitted to adjust funding across line items.
Co-Chair Josephson asked whether "line items" referred to
allocations.
Mr. Painter clarified that he was referring to categories
such as personal services, travel, and commodities. He
explained that departments were constitutionally prohibited
from moving funds between appropriations, but departments
could move funds between allocations within a single
appropriation or across line items within each allocation.
2:35:27 PM
Representative Stapp asked if the legislature appropriated
funds specifically for employee bonuses, could the
department reallocate the funding to travel or commodities
instead.
Mr. Painter responded in the affirmative. He commented that
the budget was an iterative process that was built upon
every year. Although the executive branch had considerable
power, it was ultimately required to return to the
legislature for appropriations in future years. The
recurring process served as the legislature's strongest
enforcement mechanism for ensuring its funding priorities
were respected.
Co-Chair Josephson relayed that he had a bonus-related
provision that had been paired with HB 226 [passed by the
thirty-second legislature in 2022], which aimed to overhaul
compensation structures for exempt and partially exempt
employees. He asked whether there was an effective method
for the legislature to include bonuses in the budget in a
way that would ensure they were honored.
Mr. Painter responded that the issue was a complex one. He
explained that the legislature could not directly interfere
with collective bargaining agreements, and any directive
requiring the executive branch to negotiate bonuses with
unionized employees could potentially result in unfair
labor practice complaints. However, he thought that HB 226
would be an effective way to ensure that bonuses were
honored for exempt employees. He emphasized that bonuses or
any other pay-related provisions could not necessarily be
implemented through the budget process. If the compensation
structure was governed by statute or included in a
collective bargaining agreement, it was outside the
legislature's authority to alter it through appropriations.
He explained that bonuses could potentially be added
through a letter of agreement if the bonuses were not
already part of a union contract, which was a mechanism to
amend the existing contract with a special provision.
Representative Hannan remarked that AGDC existed in a
unique statutory position. She asked whether setting of
salaries and wages within the corporation was entirely the
responsibility of the board of directors or if it was
governed by statute, as in the case of commissioners. She
recalled that there was a past situation in which API had
obtained a waiver to offer supplemental compensation
because it was unable to recruit psychiatrists under
standard pay schedules. She noted that the executive
position within AGDC was a singular role and had
consistently been the highest paid state position. She
asked who had the authority to set the salary and how it
was determined.
2:38:55 PM
Mr. Painter responded that the AGDC board was responsible
for setting the salary. He added that the process was
consistent with the structure used by other state
corporations. He shared that Alaska Industrial Development
and Export Authority (AIDEA) and the Alaska Housing Finance
Corporation (AHFC) both chose to adopt the same increases
for their employees. He explained that the boards were
required to take formal action to apply such increases and
that these adjustments were not automatically implemented.
He relayed that AHFC had few employees and the salaries
were set by the board.
Representative Hannan asked if the board would have had to
formally approve a reallocation of funds in the case of a
legislative reduction to AGDC's personal services budget,
or whether the corporation was authorized to make the
adjustments independently. She questioned whether the
movement of funds had occurred in defiance of legislative
intent.
Mr. Painter responded that there was no intent language
regarding where the reduction was located, but the personal
services line item had been reduced. He explained that
agencies were allowed to reallocate reductions or increases
across different budget categories. He noted that it was
common for agencies to redistribute legislative additions
and reductions among line items. He was not fully familiar
with the internal procedures of AGDC and was unsure whether
such reallocations were executed solely at the discretion
of the board or also by the chief executive. He remarked
that LFD had defined statutory authority over similar
matters and suggested that AGDC likely operated under a
comparable framework. However, he acknowledged that AGDC
might have specific statutory provisions that governed such
processes, and he did not feel confident offering a
definitive explanation without further examination.
Co-Chair Josephson thought that the reduction to AGDC's
personal services budget, as written by the legislature,
appeared ambiguous. He suggested that the action may have
been motivated by a lack of confidence in the agency, but
the reduction did not include specific language addressing
salary schedules.
Mr. Painter responded that legislature had clearly intended
to reduce personal services funding, but AGDC was not
legally required to adhere to the direction.
Representative Stapp understood that the legislature
effectively provided a lump sum of money to entities such
as AGDC or AHFC and the funds were handed off with little
legislative control unless otherwise restricted in statute.
He described the process as "tossing the money over a
fence."
Mr. Painter responded that Representative Stapp's
characterization was broadly accurate. He explained that
when the legislature appropriated funding to an agency,
whether a department or a state-owned enterprise, the
agency could expend the funds within the boundaries of its
statutory authority and for the purposes described in the
name of the appropriation. For example, if the name of the
appropriation was AGDC, the funds could be spent for
purposes that fell within the scope of AGDC's statutory
authority. He explained that the legislature could convey
additional expectations through the titles of transactions
and specific line items, and that agencies generally
attempted to comply with expectations. However, compliance
was not mandatory beyond the actual language contained in
the appropriations bill.
2:43:01 PM
Mr. Painter moved to slide 8 which addressed three nearly
identical legislative intent items, each pertaining to a
different group of employees but sharing the common
objective of addressing the criminal case backlog. He
stated that the backlog had received significant public
attention and he would not delve deeply into background
details. He explained that the intent language had been
included in three areas of the FY 25 budget. The first was
under Legal and Advocacy Services within the Department of
Administration (DOA), which encompassed the Public Defender
Agency (PDA) and the Office of Public Advocacy (OPA). The
second was within the Department of Law's (DOL) Criminal
Division, and the third was in the Trial Courts component
under the Judicial branch.
Mr. Painter relayed that PDA had outlined several efforts
in response to the directive, including enhanced training
and mentorship programs that emphasized the importance of
resolving cases in a timely manner. The agency had also
prioritized recruitment efforts, recognizing that turnover
among defense attorneys often caused delays as new
attorneys needed time to reacquaint themselves with
existing cases. Retaining a more stable workforce was
viewed as a critical step in managing the backlog.
Mr. Painter explained that the Judiciary's Trial Courts had
provided a detailed response highlighting specific
procedural reforms, including a "trailing calendar"
approach. The scheduling strategy involved setting multiple
trials to begin on the same day, with the understanding
that delays often occurred at the start of trials. By
planning for multiple trials on the same day, the
likelihood that at least one would proceed was increased
and court time would be minimized. There had also been
efforts to reduce unnecessary status hearings and had
issued directives limiting both the duration and frequency
of continuances granted in criminal cases. He noted that
DOL had acknowledged ongoing efforts to address the backlog
but it had not provided the same level of detail as PDA in
describing the improvement activities.
Mr. Painter continued to slide 9 and detailed Medicaid and
fire suppression projections. He explained that the effort
to enhance Medicaid forecasting accuracy had been underway
for nearly a decade and was aimed at increasing legislative
understanding of projected costs and improving
communication between branches of government. He relayed
that DOH utilized a highly complex spreadsheet model to
generate Medicaid projections. While the model itself was
robust, the length and intricacy of the spreadsheet made it
difficult to interpret and communicate to legislators. He
shared that two years ago, LFD had collaborated with DOH
and OMB to develop a more transparent and comprehensible
projection method. The projection model was built from
actual claims and adjusted for policy changes and other
expected costs like rate changes. The model distinguished
between policy-driven decisions and external factors beyond
the state's control, such as federal mandates.
Mr. Painter relayed the most recent projection had been
received on December 15, 2024. Due to the timing, the
results of the model had not been incorporated into the
governor's budget on December 15, but it was incorporated
into the governor's amended budget on the thirtieth
legislative day. The most recent projection indicated that
a supplemental appropriation would be required for FY 25
and that additional UGF funding and federal funding would
likely be necessary for FY 26. The day after DOH completed
its Medicaid projection model, the department informed LFD
that it received an additional rate increase from the
federal government. He noted that the federal government
controlled the Indian Health Service (IHS) rates that were
charged for tribal health facilities. The new increase had
been in the double digits and came too late to be included
in the December 15 budget. As a result, the governor's
supplemental budget was based on data that did not account
for the updated IHS rates. He stated that further
adjustments would likely be necessary to reflect the rate
change accurately.
Mr. Painter noted that according to the December 15
projections, the total additional UGF cost would be $14
million for FY 25 and $19 million for FY 26. The state
still needed over $200 million more in federal funds for
both FY 25 and FY 26 even with the $300 million increase in
federal authority for Medicaid enacted the previous year.
He attributed the increase primarily to the rising IHS
rates charged by tribal providers. There were general fund
increases because IHS could also serve non-Alaska Native
populations. When non-tribal residents accessed care at
tribal health facilities, the state paid a share of the
cost using the same IHS rates. The accessibility
contributed to the need for additional general funds, since
Medicaid-covered services for non-tribal residents did not
qualify for the 100 percent federal match for services
provided to tribal members.
2:49:35 PM
Co-Chair Josephson understood that there was a clinic in
downtown Juneau that was operated by a tribal health
organization. He asked for clarification about whether the
state received a more favorable federal match when a non-
Indigenous, Medicaid-eligible resident visited that clinic.
Mr. Painter responded that the match percentage did not
change, but the rate structure would change. If the patient
was a tribal member, the visit would be fully funded by the
federal government under the IHS rate. However, if the
patient was a Medicaid recipient who was not a tribal
member, the federal-state match would remain at the
standard percentage, which was typically between 50 percent
and 90 percent. He explained that the IHS rate would still
apply and the total cost would potentially increase.
Representative Stapp remarked that the situation seemed
like a "runaway time bomb" for the state's Medicaid
liability. He understood that rates could be increased
externally by tribal providers without the state's input
and still required a state match for non-tribal Medicaid
recipients. He asked how predictable the cost increases
were and what portion of the state's overall Medicaid
spending was currently impacted.
Mr. Painter replied that he did not have the information on
hand but would provide it to the committee in a follow up.
Mr. Painter continued on slide 9. He stated that in
addition to the efforts around Medicaid, there had also
been similar work related to fire suppression budgets. The
goal in both cases was to improve visibility of the
projections to increase understanding while avoiding
unpredictable supplemental budget requests. He reiterated
that fire suppression budgeting was aimed at avoiding
supplementals and improving not only the legislature's
understanding but also OMB's insight into future needs. In
the prior year, a different strategy had been employed to
portray the projections. The latest projection had been
received on January 19, 2025, and it had not been
incorporated into the governor's supplemental budget
received earlier in the week. He explained that a
supplemental would likely be needed based on the new
projection, but OMB was not yet fully confident in the
data. He added that LFD also had questions about the
projection. The work was still in progress as the model was
only in its second year of development. He noted that OMB
indicated a future amendment would likely be needed to
incorporate updated projections.
Co-Chair Foster asked whether the expected supplemental
would be requesting a large dollar amount or just a few
million dollars more.
Mr. Painter responded that the amount would likely be under
$10 million. He emphasized that the goal was to improve
accuracy, especially for the spring fire season, and
reimbursements from the federal government were always a
point-in-time estimate. There was a new structural change
that placed appropriations directly into the fire
suppression fund. He explained that the change meant
unspent balances would remain in the fund and could be used
to offset future supplementals. The change reduced the
consequences of overestimating as any surplus would not
lapse to the general fund but would instead remain
available. The newer structure helped mitigate a bit of
risk by adding a supplemental and then lapsing it, but the
amount should be relatively small based on a relatively
light fire season the previous year.
2:54:41 PM
Co-Chair Josephson thought that a low snowpack across the
state could predict a high fire season. He asked how fire
suppression efforts would be funded if the fire season was
high and fire suppression was underfunded.
Mr. Painter responded that in such a situation, the
governor had statutory authority to issue a disaster
declaration and allow the state to continue funding fire
suppression efforts. The request for reimbursement would be
submitted to the legislature afterward.
Co-Chair Josephson asked where the funds would come from.
Mr. Painter replied that the source of the funds would
depend on legislative approval. If the current fiscal
year's appropriation was insufficient and the fiscal year
closed before the legislature reconvened, a ratification
would be required. If there was a deficit, the ratification
would need to be funded from the Constitutional Budget
Reserve (CBR). If there was a surplus, the funds could come
from the general fund. He noted that the legislature might
see a ratification request for FY 24 as the amount
appropriated appeared to be a few million dollars short of
what was actually spent.
Co-Chair Josephson asked whether such a ratification would
be done through a bill.
Mr. Painter responded that it would typically be included
in the supplemental or operating budget bill.
2:56:27 PM
Mr. Painter moved to slide 10 which detailed eight intent
items for the Department of Corrections (DOC), which was
the most of any agency. The first intent item directed the
department to work with OMB and LFD to develop a budgetary
projection model. The goal was to improve projection
accuracy and avoid routine supplementals. The second intent
item required the department to prepare a report examining
potential cost savings that would come from closing
institutions. He understood prisoner capacity was around 84
percent, which suggested possible excess capacity in
savings from closing institutions. He noted that the
department's response to the capacity item would be
addressed on the following slide.
Mr. Painter continued that the third item involved creating
a plan to increase institutional efficiency and the fourth
required the department to begin monthly reporting on
spending related to overtime and premium pay. He noted that
while DOC had complied with the reporting requirement, the
data presented did not align with the kind of forward-
looking projection models used by Medicaid and fire
suppression programs. Instead of incorporating actual
expenditures to date and adjusting for known changes, DOC's
model simply highlighted budget variances without offering
improved forecasting. He acknowledged that DOC had
experienced staffing challenges for administrative services
positions, which might have limited its capacity to develop
more sophisticated models for financial analysis. He
suggested that progress might be possible in future years
with recent hires.
Mr. Painter noted that DOC had shared that a significant
portion of facility beds remained unusable due to deferred
maintenance. As a result, usable capacity was much lower
than the reported 84 percent, making consolidation less
straightforward than it appeared. He relayed that DOC did
not provide the necessary data or analysis. The next item
addressed billing issues with the U.S. Marshals, which had
previously covered costs for more inmates. He explained
that DOC had met with the Marshals but had not yet reached
an agreement. The governor's current supplemental budget
did not include a funding request for the billing issue,
though it was likely a request would be submitted later
once the necessary analysis was completed.
Mr. Painter continued to the next intent item encouraging
the department to expand alternatives to community
residential centers (CRCs), sometimes referred to as
halfway houses. He explained that DOC appeared to be
complying with the directive.
3:01:00 PM
Mr. Painter continued on slide 11. There was a pilot
furlough program in Mat-Su for residential substance use
disorder treatment as a potential substitute for CRC-based
programming, which could lower costs. Additionally, DOC was
exploring transitional housing options in Juneau to
potentially reduce the number of individuals housed in the
local CRC.
Co-Chair Josephson asked about item 15 on slide 10 which
involved notifying the court system about lengthy periods
of electronic monitoring. He asked what the intended
outcome of the notifications would be.
Mr. Painter responded that the goal was to prompt the
courts to resolve the cases more quickly or allow for
resolutions such as credit for time served. He explained
that DOC responded that it coordinated with the courts, but
time spent on electronic monitoring was not always treated
the same as time served in custody and it did not always
lead to earlier releases. The intent behind the
notification was to help reduce case backlogs by
accelerating the legal resolution process.
Representative Galvin asked whether DOC was using actual
expenditure trends to inform future overtime projections
and whether it was making adjustments based on the trends.
She asked what the potential size of future supplemental
budget requests was. She noted that the department had a
surprisingly large supplemental request in the previous
year.
Mr. Painter responded that there was a difference between
how LFD typically understood a budget projection model and
the way in which DOC was currently operating. He explained
that in an ideal model, actual spending patterns, such as
current overtime usage, would be used to forecast end-of-
year costs and adjust for one-time anomalies or known
policy changes. However, DOC had not taken that approach
and had instead used the original budget as a baseline. He
explained that DOC had simply noted areas where the
original budget was no longer accurate, such as unaccounted
standby pay and unresolved issues with federal mandate
billing. There was no incorporation of actual expenditures
into a forward-looking model.
Mr. Painter noted that one area likely to require
additional funding through a supplemental was the federal
mandate billing issue. He estimated that the cost could be
similar to the $7.5 million already included for FY 26. The
second area was related to contracts for CRCs. The prior
year's budget was prepared while the contracts were still
under negotiation. All CRC contracts had now been
renegotiated and the department was still analyzing how the
new terms would affect the budget. He believed the outcome
would not require a supplemental as large as the $10
million increase that had been required in the previous
year. The renegotiated contracts offered more cost
certainty and better alignment with actual service
utilization, which could possibly save money. However, a
small supplemental might still be necessary depending on
the final analysis.
3:06:09 PM
Representative Stapp asked whether DOC had complied with
the intent item instructing the department to conduct a
fiscal analysis of closing a correctional institution. He
understood that the department had essentially declined to
do so and had offered no supporting explanation beyond
suggesting that there would be no savings.
Mr. Painter responded that the department's response was
that it did not believe closing a facility would generate
savings and it did not provide an analysis to justify the
position.
Representative Stapp asked whether the current prison
population was lower than it had been in the past.
Mr. Painter responded that the current population had
remained fairly stable in recent years but was lower than
it had been a decade ago.
Representative Stapp asked whether the state currently had
more correctional facilities than it did a decade ago.
Mr. Painter confirmed that there the number of facilities
had increased. He noted that the Palmer Correctional Center
had been reopened in anticipation of rising prisoner
numbers, but the rise ultimately did not occur.
Representative Stapp understood that there were more
prisons and fewer people in the prisons, but the prisons
could not be closed for "no reason."
Mr. Painter responded that the department had said there
were maintenance issues at many of the prisons. If a prison
was closed, the maintenance funding and prisoners could be
reallocated, but DOC had not provided a full fiscal
analysis and pertinent information was not available.
3:08:05 PM
Representative Hannan noted that there had been similar
discussions in the DOC finance subcommittee. She explained
that the reopening of the Palmer Correctional Center had
occurred just before the onset of the COVID-19 pandemic.
The pandemic had then stalled movement within the system,
causing backlogs in court cases and effectively locking
populations in place. She explained that most correctional
facilities were either designated for pretrial detainees or
sentenced inmates, which limited the state's ability to
shift prisoners among available beds. She emphasized that
the challenge was not simply about the number of empty
beds, but about matching inmates to the appropriate
facility based on gender, sentence status, and custody
level. For example, a pre-sentence female inmate might only
be able to be housed in a single facility because she could
not be mixed with sentenced female inmates. In Juneau, the
combined facility housed all genders and both pretrial and
sentenced inmates. The facility had recently experienced a
structural failure that forced the relocation of the
inmates which further limited flexibility. She acknowledged
that from the legislative perspective, the solution of
closing facilities seemed obvious, but the logistical
reality was more complex. She asked if Alaska was the only
state being affected by federal manday billings because it
did not have any federal correctional facilities.
Mr. Painter replied that he was unsure if Alaska was the
only state dealing with the issue, but he confirmed that
Alaska was certainly unique in how far it was from the
nearest federal prison. He noted that while other states
might not have federal facilities either, the other states
were typically close enough to one that transporting
prisoners overland was feasible. In Alaska's case,
transporting inmates to federal facilities meant flying the
inmates to Washington and back, which would make the issue
much more costly and logistically challenging.
Representative Hannan asked whether the manday billing
issue only arose when inmates faced joint state and federal
charges. She offered an example involving cooperation
between the FBI and ICE and asked whether the federal
government covered the cost when inmates were entirely
under federal hold.
Mr. Painter responded in the affirmative. The federal
government paid when inmates were detained solely on
federal charges. The mandate billing issue emerged only
when charges were mixed between state and federal
jurisdictions.
3:11:22 PM
Mr. Painter continued on slide 12 which detailed the
statewide salary study. He explained that in FY 24, the
legislature had appropriated $1 million for a capital
project to study all executive branch job classes. The
purpose was to identify and address pay disparities
compared to similar private-sector roles within the state.
He noted that the last salary study had been conducted in
2009 but was never implemented. He relayed that two intent
items had been tied to the capital project: the first
directed that compensation be aligned to the sixty-fifth
percentile to improve recruitment and retention, and the
second required that the study include total compensation,
which meant that benefits would be considered as well.
Additionally, the FY 25 operating budget included an intent
item directing the Office of the Governor to implement the
result of the study and report on implementation efforts by
December 20, 2024. At the time, the report had been
expected to be completed by June of 2024. The report had
still not been submitted and it was not known when it would
be submitted.
Representative Galvin was concerned about the timeliness
and usefulness of the salary study. She understood the
reasoning behind funding the study and thought it was
important; however, she questioned whether the data being
collected would still be relevant by the time it became
available. She asked whether the delay might render the
findings outdated given the evolving nature of the economy
and recent economic changes.
Mr. Painter responded that he shared Representative
Galvin's concerns. He explained that the current
expectation was that the study would be delivered at the
end of March of 2025, which coincided with the deadline for
bargaining agreements on the sixtieth day of the
legislative session. The overlap meant that many unions
might be negotiating contracts before the results of the
study were available. Once the agreements were made and
presented to the legislature, the salary study would also
be released, creating a complicated scenario where the
state would either ignore the study or risk having to
renegotiate and revise newly finalized salary structures.
The challenge was ongoing and salary levels and conditions
would always be shifting, meaning that waiting for a
perfect moment when the data would be static was
unrealistic. He acknowledged the tension in timing but did
not think that there was an easy solution. The cycle of
constant change meant that any salary study would
eventually become slightly outdated, but it could still be
a valuable tool if used appropriately.
Representative Galvin asked whether inflation metrics like
the Consumer Price Index (CPI) could be used to update the
data and make it more current. She asked whether national
or sector-specific wage trends were stable enough to allow
the state to extrapolate from older data and still produce
relevant comparisons. She stressed that if the ultimate
goal was to benchmark state salaries against industry
standards, it would be important to know whether the
benchmarks stayed relatively consistent or changed too
quickly to be reliable.
3:15:56 PM
Mr. Painter replied that the study could still be useful
even if it was not entirely up to date. He explained that
much of the analysis focused on structural differences in
pay between public and private sectors, such as whether
certain roles like accountants or engineers were
systematically underpaid compared to their private-sector
counterparts. He emphasized that it was unlikely for
specific professions to experience dramatic wage changes in
a short period that would render the study obsolete. He
acknowledged that the administration was concerned about
recent wage increases tied to new bargaining agreements
that went into effect on July 1, 2024, but adjustments to
account for those changes were already being made. He
remarked that a deadline had to be chosen at some point,
and it was important to make the deadline clear and
transparent.
Co-Chair Josephson understood that the FY 24 intent
language directed the administration to align wages to the
sixty-fifth percentile and the follow-up intent language in
FY 25, which directed implementation of the study's
results. He asked whether the instruction to the
administration was to incorporate the salary changes
directly into the FY 26 budget. For example, if the study
concluded that a position like an OCS social worker was
underpaid and recommended raising the starting salary from
$45,000 to $55,000, the intent language suggested that the
administration should include the increases in the next
operating budget.
Mr. Painter explained that the legislative intent language
from the previous year directed the administration to
incorporate salary study recommendations into the budget
preparation process. The instruction was not to begin
implementing the changes immediately, but to build a plan
to implement the changes and reflect the changes in the
proposed budget. The legislature had essentially given a
green light to start moving toward implementation, even
though the final study had not yet been released.
Co-Chair Josephson commented that it seemed like a bold
move as it could potentially lead to substantial growth in
the budget.
Mr. Painter agreed and noted that since the study had not
been made public, the legislature had committed to
supporting implementation without knowing the full scope of
the cost. However, any actual expenditures would still
require appropriation approval by the legislature, and it
would still have the chance to assess the proposals before
funding them.
3:18:43 PM
Representative Bynum asked whether the legislative intent
had addressed situations where positions being paid higher
than the market rates. He wondered whether the
administration was expected to freeze or limit future
increases for the positions.
Mr. Painter replied that the intent language did not go
into that level of detail.
Representative Bynum acknowledged that while it was
unlikely that wages would be cut, freezing future increases
might be a more plausible outcome in cases where positions
were found to be over market.
Co-Chair Josephson noted that any changes would also be
subject to collective bargaining agreements. He asked if
his understanding was correct.
Mr. Painter responded that when a job classification was
downgraded in past classification studies, incumbent
employees typically did not see salary reductions. Instead,
employees might stay in the same pay range or receive step
increases, even if the overall range for the position had
changed. He emphasized again that no detailed plan had yet
been submitted and it remained unclear how such cases would
be handled.
Representative Bynum asked for clarification that there was
no specific intent to address the issue.
Mr. Painter confirmed that the intent language included by
the legislature simply instructed the executive branch to
develop a plan to implement the salary study's findings,
but did not specify how to implement it.
3:20:43 PM
Mr. Painter introduced slide 13, which addressed two intent
items related to maintenance and operations of state-owned
buildings and vehicles. In the FY 25 budget, the
legislature had made structural changes aimed at improving
compliance with AS 37.07.020(e). The statute was enacted in
the 1990s and required that maintenance and operations
costs be separately accounted for and distinct from
programmatic expenses. The purpose was to prevent agencies
from cutting maintenance funding when faced with budget
reductions, which would avoid long-term degradation of
state assets.
Mr. Painter explained that the legislature had not made
major budget shifts due to limited visibility into the
executive branch's internal accounting. Instead, the
legislature had renamed existing allocations and added
intent language directing the governor's office to continue
the process and align the FY 26 budget more closely with
the statutory requirements. He noted that most agencies had
followed through and restructured their budgets
accordingly. While a few had not yet completed the changes,
the overall response had been a good-faith effort to
improve adherence to the statute.
Mr. Painter added that there was a separate intent item
requesting a report on operating and maintenance costs for
all state-owned assets, including vehicles, vessels,
aircraft, and heavy equipment that were not part of the
State Equipment Fleet unit. He explained that most vehicles
owned by state agencies were managed through the State
Equipment Fleet which was operated by DOT. He noted that
agencies paid the department a rate intended to cover both
maintenance and replacement, but the arrangement did not
extend to all equipment. Many assets, including vessels,
aircraft, and snow machines, fell outside the fleet and
were managed directly by individual agencies. He indicated
that the legislature had expressed concern in the previous
year that maintenance for non-fleet assets was being
underfunded.
Mr. Painter stated that OMB had acknowledged deficiencies
in tracking maintenance spending for these items. In
response, OMB had implemented a new object code in the
accounting system to allow improved tracking going forward,
which began on January 1, 2025. He explained that it would
provide more accurate data in the future. The governor's
proposed budget included additional funding in several
areas for the maintenance of vehicles outside the fleet,
such as vessels and aircrafts. He suggested the addition of
the funding reflected a recognition by the executive branch
that more support was needed for the assets.
3:24:08 PM
Mr. Painter advanced to slide 14 which detailed the Alaska
Permanent Fund Corporation's (APFC) Anchorage office. He
explained that the legislature had restricted the
corporation's office expenditures by renaming the
appropriation to refer solely to the Juneau office and
allocating only $100 for the Anchorage location. He
highlighted that there was intent language directed by APFC
not to establish or maintain any new office locations
without corresponding budget increments, and all
expenditures related to the Anchorage office were required
to be reported to the legislature. The governor vetoed the
Anchorage office funding but APFC's Board of Trustees
decided to keep the office open. He noted that APFC
reported increased FY 25 expenditures such as travel to the
Juneau office and equipment purchases. He reiterated that
the corporation did not follow the legislative intent to
close the office.
Co-Chair Josephson understood that the governor and the
legislature were aligned on the issue and that APFC
disregarded the intent of both branches.
Mr. Painter responded that he could not speak on behalf of
the governor. He explained that the governor's veto of the
$100 appropriation was intended to facilitate the
decommissioning of the Anchorage office and the governor's
intent was unclear. He reiterated that the decision to keep
the office open was made by the board itself.
Co-Chair Josephson remarked that the governor's veto of the
funds could be interpreted as support for maintaining the
Anchorage office.
Mr. Painter responded that it was similar to DOL's "Janus"
agreement, in which the governor vetoed the contract's
funding but left the general structure in place. He
indicated the two scenarios were similar, but he did not
want to deviate from the main conversation.
Mr. Painter continued to slide 15 which detailed items
outside an agency's control. There were situations where
intent language required agencies to perform actions that
were ultimately the responsibility of the governor or the
legislature. He explained that while agencies could develop
plans, they did not have the authority to fund the plans.
For example, in FY 24, the legislature requested that DFCS
submit a plan and timeline for renovating or replacing the
Fairbanks Pioneer Home. The department complied and
provided cost estimates. In FY 25, the legislature asked
the department for a plan to pay for the renovation, but
such funding decisions rested with the governor and the
legislature.
Mr. Painter provided a second example also involving DFCS.
He explained that the federal government had notified the
state that the Online Resource for the Children of Alaska
(ORCA) system needed to be upgraded to comply with federal
standards. In FY 24, the department developed a plan and
estimated the cost to be $52 million, with approximately
half to be funded by UGF. In FY 25, the legislature
requested a funding plan, but the governor's proposed
budget did not include funding for the project. He
reiterated that decisions about funding were outside the
department's control, and that the agency had fulfilled its
responsibilities in providing the necessary plans and
estimates. The department had indicated it was working to
develop a phased strategy in case full funding could not be
secured at once, but the approach was time consuming and
was not ready for inclusion in the current year's budget.
Mr. Painter explained that the final item was for the
Department of Public Safety (DPS) and concerned funding for
child advocacy centers in the FY 26 budget. He shared that
no additional funding for the centers was included in DPS's
budget nor was there funding allocated through DFCS, which
was another appropriate agency. He emphasized that
decisions regarding which projects received funding rested
with the governor and the legislature, not with the
agencies themselves.
3:28:14 PM
Representative Tomaszewski asked if Mr. Painter knew the
cost estimate for replacing the Fairbanks Pioneer Home.
Mr. Painter responded that there had been two options under
consideration. One option involved renovation, which would
have required relocating residents during construction. He
relayed he did not recall the cost of that option, though
he believed it was the more expensive of the two. He
relayed that the replacement option had an estimated cost
of $115 million and was the cheaper option.
Representative Tomaszewski asked for confirmation that
replacement was the less expensive option.
Mr. Painter responded in the affirmative. He elaborated
that attempting to renovate the facility while keeping part
of it operational would extend the project timeline
significantly. The department estimated it would take
approximately a decade to fully renovate the facility and
that constant relocation of residents during the process
would substantially increase overall costs.
Co-Chair Josephson thanked Mr. Painter and thought the
presentation was useful.
HB 53 was HEARD and HELD in committee for further
consideration.
HB 55 was HEARD and HELD in committee for further
consideration.
Co-Chair Josephson reviewed the agenda for the following
day's meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DFCS Budget Overview HFIN 2.6.25.pdf |
HFIN 2/6/2025 1:30:00 PM |
hb53,hb55 |
| FY25 Legislative Intent Responses 2-6-25.pdf |
HFIN 2/6/2025 1:30:00 PM |
hb53,hb55 |
| Response to Q LFD Leg Intent 020625 DOH Log 13075 Response.pdf |
HFIN 2/6/2025 1:30:00 PM |