Legislature(2025 - 2026)GRUENBERG 120
05/15/2025 03:15 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB11 | |
| HB1 | |
| HB133 | |
| HB4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 114 | TELECONFERENCED | |
| += | HB 146 | TELECONFERENCED | |
| *+ | HB 100 | TELECONFERENCED | |
| += | HB 1 | TELECONFERENCED | |
| + | HB 133 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 11 | TELECONFERENCED | |
| += | HB 4 | TELECONFERENCED | |
HB 133-PAYMENT OF CONTRACTS
5:19:00 PM
CHAIR CARRICK announced that the next order of business would be
HOUSE BILL NO. 133, "An Act establishing a 30-day deadline for
the payment of contracts under the State Procurement Code;
establishing deadlines for the payment of grants, contracts, and
reimbursement agreements to nonprofit organizations,
municipalities, and Alaska Native organizations; relating to
payment of grants to named recipients that are not
municipalities; and providing for an effective date." [Before
the committee was CSHB 133(CRA).]
5:19:36 PM
REPRESENTATIVE HIMSCHOOT, as prime sponsor, introduced CSHB
133(CRA). She said that the issue that the proposed legislation
seeks to address is Alaska's longstanding challenges to fulfill
financial commitments to the nonprofit, municipal, and tribal
partners. She said that this is not a new issue, nor was it
attributed to any single administration, but it has taken place
over many years. She remarked that the state struggles to meet
payment obligations in a timely manner.
REPRESENTATIVE HIMSCHOOT commented that as the committee
understood, the state relies heavily on these various partners
to deliver essential services to state residents, including
services not provided by the State of Alaska. She said that
when the state fails to make payments, especially grant funding,
there can be consequences for the benefactor. She said that the
standard payment window is 30 days and, when missed, it can
impair organizations, especially ones with small budgets. She
said that a small municipality, nonprofit or tribal organization
could have services disrupted or be forced to withdraw emergency
funds to cover expenses while awaiting state commitments. She
said that the strain can impact payroll, infrastructure
projects, and service continuity.
REPRESENTATIVE HIMSCHOOT noted that in many rural areas, the
cost associated with demobilizing projects due to delays is
significant. Failure for scheduled payment increases the
overall cost of projects and even reduces investment returns.
She said that the bill strives for parity in treatment of
private contractors and nonprofit, municipal, and tribal groups.
She said the proposed legislation would establish a prompt
payment required for the State of Alaska. She said that
affected partners would receive interest much like private
sector contracts. In conclusion, she explained that the
proposed legislation is about accountability.
CHAIR CARRICK noted that the sectional analysis to CSHB 133(CRA)
could be saved for after testimony.
5:23:28 PM
CHAIR CARRICK announced that the committee would hear invited
testimony.
5:23:55 PM
NILS ANDREASSEN, Executive Director, Alaska Municipal League
(AML), began his invited testimony in support of CSHB 133(CRA).
He remarked that CSHB 133(CRA) would make significant strides to
leveling the playing field and ensuring that local government,
tribes, and nonprofits are paid on a timely manner. He remarked
that community assistance program funding is one such sector
where government payments have been consistently delayed and was
an issue for local governments. He said that historically these
payments were available as early as July, but that timeline has
not consistently been met. He said that AML understood that
[the Department of Commerce, Community & Economic Development's
(DCCED's)] Division of Community and Regional Affairs (DCRA)
requirements often affect the timing of payments for some
municipalities. However, given changes, prompt payments could
occur early enough in the year to be effective. He discussed
the timeline for community assistance applications and that DCRA
recently switched to a new system. He was looking forward to
ensuring local government access.
MR. ANDREASSEN expressed optimism in working through issues seen
as barriers to fund distribution and encouraged the committee
and administration to explore solutions, whether it was adding
support staff or even technological solutions. He asked what
could be done to strengthen the information flow between
agencies so that documentation and payment schedules can be
prompt. He argued that it had to do with increasing capacity
and removing both barriers and complexity. He raised questions
regarding how much of the process is established by law and what
has been added through regulation where complexities may have
been added. However, he acknowledged that removing safeguards
was not ideal and there would have to be other areas of
streamlining worthy of attention.
MR. ANDREASSEN noted that the effect of past due payments can be
challenging for local government. He discussed complications
with payroll, workers compensation, and property insurance. He
said that delays can cause cancellations for non-payment, and it
is stressful when delays affect payroll for community members.
He asked for consideration how this would affect the provision
of services to residents and highlighted plowing, potholes,
sewage, and other services.
MR. ANDREASSEN noted that cash management can become crucial for
organizations and other priorities often get deferred, all of
which would limit the benefit and services provided to customers
and taxpayers. He said that the system lacks the capacity to
meet current obligations, let alone do more.
MR. ANDREASSEN acknowledged fiscal notes and the limited state
budget due to revenue shortfalls. He argued at the very least
the state should try to provide service across all types of
contractors or grantees with a level of parity. He remarked
that strengthening the state would require additional resources
and it was something not to run from but to plan for. He said
that CSHB 133(CRA) is good government, and it asks to put prompt
payment into law so the State of Alaska can be a dependable
partner.
5:29:21 PM
LAURIE WOLF, The Foraker Group, began her invited testimony in
support of CSHB 133(CRA). She noted that the bill establishes
prompt payment parity for Alaska nonprofits, municipalities, and
tribal organizations for grants, contracts, and reimbursements
from the State of Alaska as well as federal pass-through
funding. She stated that this is one of the most important
pieces of legislation for Alaska's nonprofit sector since the
"Pick, Click, Give" initiative 15 years ago.
MS. WOLF said that organizations are experiencing payment delays
ranging from several months to over a year with amounts varying
from a few hundred dollars to over one million dollars. She
said that delays affect every department in the state and impact
a wide range of services, including senior care, childcare,
domestic violence support, housing, food security,
transportation, public safety, and other services. She said
that the State of Alaska relies on nonprofit sectors to deliver
these essential services and payment benefactors were state
partners. She said when it comes to cash flow, these
partnerships were broken. She said many nonprofits are asked to
report on funding delays to receive the next payment, which is
often also delayed. She said that delayed payments have become
normalized or even accepted, despite funds in question already
being approved by an appropriate body. She argued that if
monetary funds were budgeted, approved, and allocated, then
spending should occur promptly. She noted that prompt payment
is already required by AS 36.90.200 for transactions with for-
profit businesses, but it did not include rules for non-profit
entities.
MS. WOLF commented that efforts to address this issue have
occurred for multiple years and administrations. She noted that
a former commissioner suggested that nonprofits secure lines of
credit to manage delayed payments, implying that it was their
responsibility to subsidize the state. She said many nonprofits
lack the collateral required for such credit lines and it was
not their job to do this.
MS. WOLF commented that the Foraker Group surveyed Alaska
nonprofit sectors and studied cash flow disruptions and how they
affect administrative operations, financial planning, staff,
business, and other nonprofit activities. She reiterated that
nonprofits do not have the financial reserves to cover major
state grants or contracts while waiting for allocated funds.
She said that these delays can impair local economies and result
in vendors not getting paid. She noted that the study would be
shared with the committee.
MS. WOLF stated that unlike businesses or contractors working on
public projects, nonprofit payment schedules are not protected
by statutes that guarantee timely payment. She said that
stopping services without pay has profound consequences. She
acknowledged that the state may have some workforce shortages
and technological hangups, but the nonprofit sector could not
remain silent when a broken system is burdensome to its
organizations. She urged support for CSHB 133(CRA).
5:36:20 PM
SAM CHANAR, Mayor, City of Toksook Bay, began his invited
testimony in support of CSHB 133(CRA). He said that Toksook Bay
plays a waiting game: The city receives a letter from the State
of Alaska; the city waits for another letter regarding Community
Assistance Program payments; the city then enacts an ordinance
providing for the budget of the upcoming fiscal year; the city
then passes a resolution certifying a financial statement;
applications are submitted to comply with payment requirements;
and the city then waits for payments. He discussed
complications with insurance contributions and renewal
processes. He said that come July, the waiting game starts
regarding whether coverage would be in place. He said that if
the July 31 deadline cannot be met then the city would be sent a
30-day notice of nonpayment that requires payment in full or a
payment plan for the end of August. This requires additional
fees and interest. He said that the city regularly risks losing
its insurance coverage. He discussed challenges in Toksook Bay
such as the absence of commercial fisheries, tourism unlike
other areas in Alaska, and the challenges given funding holds.
He said that last year Toksook Bay received Community Assistance
Program funding in October, over three months after the
insurance renewal deadline. He said that the City of Toksook
Bay is in full support of the passage of CSHB 133(CRA).
5:41:11 PM
CHAIR CARRICK opened public testimony on HB 133.
5:41:38 PM
The committee took a brief at-ease at 5:41 p.m.
5:42:19 PM
CHAIR CARRICK said that there was a slight technical delay.
5:42:32 PM
SUSAN ANDERSON, CEO, Boys & Girls Club of Southcentral Alaska,
testified in support of HB 133. She said that the Boys & Girls
Club of Southcentral Alaska serves over 4,000 youth in twenty-
one locations across Alaska. She said that it serves youth in
nearly every legislative district. She said that the proposed
legislation would create a 30-day deadline for state contracts,
grants, and reimbursement agreements and a 21-day payment
deadline for federal pass-through funding. She said that HB 133
would provide reliability, transparency, and accountability for
payment of state obligations. She shared that in January 2024,
the state owed more than $1,000,000 to the Boys & Girls Club and
it took 150 days to receive the payment. She said that January
2025 was better, but funding still took about 65 days to reach
the organization. She echoed Ms. Wolf's previous testimony that
delayed funding disrupts services to children, families, and
caregivers. Organizations either take on debt or face fines
when dealing with delayed payments. Further, delays impair
planning and strain relationships with vendors and providers of
services. She said that there had been positive developments as
a recent payment from the state took only 10 days.
MS. ANDERSON noted that The Boys & Girls Club was a grant funded
organization with an annual budget of about $12 million and it
did not have the flexibility to float payments on behalf of the
state. She said that services cannot be paused because of the
youth and families being supported by services. She remarked
that if pay dates are missed, negative adjustments need to be
made. She stated that HB 133 would support organizations such
as The Boys & Girls Club and the youth affected by their
services.
5:45:53 PM
TREVOR STORRS, President & CEO, Alaska Children's Trust,
testified in support of HB 133. He said that the proposed
legislation would ensure timely payment schedules from the State
of Alaska to all the parties that provide essential services
under state agreements. He said that the Alaska Children's
Trust is a leading statewide organization focused on the
prevention of both child abuse and neglect and supports policies
that strengthen Alaska's communities and families. Ensuring
that partners are paid on time is one such policy. He said that
the proposed legislation would ensure that both state and
federal pass-through funding would be available. He said that
the nonprofit sector continues to experience systemic challenges
with lengthy delays in payments which have adversely impacted
the state's communities and economy. He said that prompt
payments are crucial for nonprofits and partners to execute
state policy efficiently, including policies designed to protect
children.
MR. STORRS remarked that according to Kids Count, in 2023,
37,000 families accessed public assistance which accounted for
21 percent of Alaska families with children. He said that
families who access public assistance are also likely to access
services provided by nonprofit, tribal, and community-based
organizations that partner with the State of Alaska. He
remarked that delays have affected services ranging from
childcare, domestic violence support, housing, food security,
public safety, and more. Accessing these services plays an
essential role in preventing child abuse and neglect. He
encouraged support for HB 133.
5:48:07 PM
CHAIR CARRICK, after ascertaining there was no one else who
wished to testify, closed public testimony on HB 133.
5:48:34 PM
REPRESENTATIVE STORY said that there was compelling testimony
regarding the need for timely payment. She noted that she had
read the report from the Foraker Group and she knew there was an
updated fiscal note regarding the bill. She inquired about how
many entities such as nonprofits were not getting paid on time.
Additionally, she asked how many staff could be added to ensure
timeliness and what processes could be changed. She inquired as
to the current process for paying benefactors. She was aware
that some private contractors were not paid on time either,
despite current statute. . She raised concerns given any
interest fees that are having to be paid to contractors for
untimely payment.
CHAIR CARRICK noted that some testifiers were available online
to field some of these types of questions.
5:50:44 PM
REPRESENTATIVE HIMSCHOOT remarked that relevant departments
would be available online for questions in the upcoming
committee hearing on the proposed legislation. She remarked
that she has worked with many departments to determine causes of
these delays. She said it often stems from staff turnover and
challenges related to computers and technology. She said that
most departments have acknowledged the 30-day requirement and
expressed a powerful desire to meet these deadlines. Some
departments use centralized email addresses to avoid staffing
change complications and facilitated contact with benefactors.
She said that another issue was the lack of uniform grant
management software. She said some states use a single software
whereas Alaska departments use different systems, potentially
resulting in lost efficiency. She said efforts are underway to
better understand these types of challenges and that CSHB
133(CRA) was not intended to accuse departments of negligence.
She acknowledged that the 30-day deadline can often be difficult
to meet; however, the burden often shifts to benefacting
organizations not equipped to manage delays.
REPRESENTATIVE STORY said that this explanation did help clarify
the process and potential impediments to payment deadlines. She
asked whether it may be appropriate to move the timeline to 45
days and how adversely it may affect contractors. She affirmed
that parity across the board was ideal and asked how an
effective timeline could be established. She said that she was
interested to hear more about interest payments made by the
state due to delays, what the approximate costs were, and
approaches to mitigate the problem. She said that she was
hesitant to include a timeline with the bill if it was an
unrealistic timeline and asked what would be considered
reasonable.
5:54:41 PM
REPRESENTATIVE MCCABE said that he appreciates the proposed
bill. He said it encourages the state to do the job that it is
supposed to do. He said there is a 30-day standard for
contractors and delayed payments are inappropriate. He raised
alarm given a one-year delay of $1,000,000 to a village or small
Native corporation and noted that current delays impact villages
poorly.
REPRESENTATIVE MCCABE said that one reason he supports the bill
is from his personal work experience. He said that he worked
for a company that flew a significant amount of hours for the
State of Alaska, and he did not know whether they had ever been
paid, and they may have given up seeking payment. He said that
he knew some contractors that would not do business with the
State of Alaska because of the reputation regarding payments.
He agreed with Mr. Andreassen that there needs to be a way to
prevent the departments from "weaponizing" fiscal notes.
REPRESENTATIVE HIMSCHOOT urged caution in placing blame on
anyone as she believed the issues were systemic in nature. She
said that this topic would require evaluation of the processes.
5:56:59 PM
CHAIR CARRICK noted that the testimonies were compelling and
asked Representative Himschoot what processes occur in other
states when doing state to state comparisons. She raised
concern about any potential interest payments from delayed
payment schedules. She asked what type of remediation could be
done for the issue.
REPRESENTATIVE HIMSCHOOT responded to Chair Carrick that there
is an Alaska Statute that requires 30-day prompt payment for the
private sector, and it comes with a 10.5 percent interest
penalty for past due payment. She said that she had reached out
to the Department of Transportation & Public Facilities (DOT&PF)
regarding late fees and was awaiting a response. She said that
she would need more information for better understanding of
state-to-state comparisons regarding payment schedules.
CHAIR CARRICK asked for elaboration on the 10.5 percent interest
fees.
REPRESENTATIVE HIMSCHOOT responded that she was unsure where the
10.5 percent figure came from, but it was in statute. She
imagined it was to "make an entity whole" for any additional
costs incurred.
5:59:27 PM
REPRESENTATIVE HOLLAND remarked that he thought the fiscal note
should include a statement by the departments regarding how much
money they are making "on the float" - money made while holding
the corpus - which he explained concerned him because it is an
unfair practice. He spoke about the challenge of determining
when an organization is paid, noting that in this regard,
consistency would lead to better management of cash flow,
whether on a 30- or 60-day payment schedule. He asked whether
there was a way to improve the expectation for payment
consistency and communication.
REPRESENTATIVE HIMSCHOOT responded that understanding the
"float" was a reasonable request. She said there were
accountability measures built into a lot of these grants for
performance. She acknowledged that consistency matters but
understood that making a new "floor" for payments could be
tricky, for instance if a 60-day payment became 70 days, rather
than a 30-day payment becoming 40 days. She suggested one
solution to this could be improved communication with partners.
She reminded the committee of the Foraker Group study,
[available in the committee file].
6:04:41 PM
CHAIR CARRICK announced that CSHB 133(CRA) was held over.