Legislature(2019 - 2020)ADAMS ROOM 519
02/21/2020 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB205 || HB206 || HB234 | |
| Governor's Amendments and Supplemental Request Overview: Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 205 | TELECONFERENCED | |
| += | HB 206 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 234 | TELECONFERENCED | |
HOUSE BILL NO. 205
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; making
appropriations under art. IX, sec. 17(c), Constitution
of the State of Alaska, from the constitutional budget
reserve fund; and providing for an effective date."
HOUSE BILL NO. 206
"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."
HOUSE BILL NO. 234
"An Act making supplemental appropriations,
reappropriations, and other appropriations; amending
appropriations; capitalizing funds; making
appropriations under art. IX, sec. 17(c), Constitution
of the State of Alaska, from the constitutional budget
reserve fund; and providing for an effective date."
1:35:36 PM
^GOVERNOR'S AMENDMENTS AND SUPPLEMENTAL REQUEST OVERVIEW:
LEGISLATIVE FINANCE DIVISION
1:35:41 PM
PAT PITNEY, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
provided a PowerPoint presentation titled "Governor's
Amendments and Supplemental Request Overview: House Finance
Committee," dated February 21, 2020 (copy on file). She
began on slide 2 titled "Governor's Supplemental Requests."
The governor had proposed $1.117 billion in unrestricted
general fund (UGF) supplemental requests for FY 20
including $271.1 million operating, $30 million capital,
and $815.9 million for additional dividend payments (the
dividend was also in the operating budget). She reported
that compared to FY 19, the governor's proposed FY 20 UGF
supplemental budget was $809 million higher and agency
operations were up $17.8 million dollars even after cuts
made to the Alaska Marine Highway System (AMHS), the
University, and the Department of Health and Social
Services. She explained that the cuts to the aforementioned
items were offset by the supplemental request including
fire.
1:38:26 PM
Representative Wool referenced Ms. Pitney's statement that
the FY 20 budget was $809 million higher [than the FY 19
budget]. He asked how the $815 million in additional money
for an additional dividend was accounted for in the FY 19
budget. He asked if the FY 20 budget was actually $6
million lower [than FY 19] if $815 million was added for a
[previous] dividend and the budget was $809 million higher
[than FY 19].
Ms. Pitney replied that she would answer the question with
a following spreadsheet.
Representative LeBon considered a scenario where the
governor's supplemental request of $815.9 million for the
2019 dividend was paid with an additional draw from the
Permanent Fund Earnings Reserve Account (ERA). He asked Ms.
Pitney if she had an opinion on the Constitutional Budget
Reserve (CBR) balance at $491 million and its use of
working capital for the state operating budget.
Ms. Pitney answered that the projected CBR balance of less
than $500 million was very risky for the state because it
was the only remaining reserve account that was not
expected to be a source of ongoing revenue. She added that
the governor's proposal for an additional $815 million to
go to the [2019] dividend would overdraw the POMV. She
added that the reduction in the CBR was other spending. She
elaborated that in addition to the significant depletion of
the CBR, the budget required an overdraw of the POMV from
the Permanent Fund. The POMV was anticipated to be the
ongoing revenue stream. Overdrawing the POMV just once
would cost the state $40 million annually in POMV revenue.
1:41:17 PM
Co-Chair Johnston stated her understanding that for the
state's daily cash management needs the balance in the CBR
should be $400 million to $500 million.
Ms. Pitney replied that the treasury put money into cash
management when the General Fund was at or below $400
million. She explained that perhaps the treasury would draw
on the CBR at that amount or take a draw from the
anticipated POMV appropriation. The threshold used was $400
million. She noted that the treasury drew from the CBR
often in chunks of $400 million to $500 million.
Co-Chair Johnston stated it was her understanding that the
POMV draw from the Permanent Fund happened earlier - she
believed the money had been taken since March. She asked
for verification that it became more difficult to balance
cash management during closeout from one year to the next
and sometimes there was a spiked to a relatively high
period due to a lack of revenue.
Ms. Pitney would have to follow up on the specifics - there
were charts that showed when the draws took place. A CBR
balance of below $500 million changed the flexibility
available and all of the money from POMV would have to come
first. The more money invested and held with the Permanent
Fund or the more money invested in the CBR, the more money
the dollars earned. The existing asset was being drawn
down, which took away its ability to earn dollars
throughout the year.
Co-Chair Johnston stated it was her understanding it was
not clear that unstructured draws could be taken from the
ERA to use as it as a cash management system similar to how
the CBR had been used. She asked if Ms. Pitney would
suggest the legislature obtain a legal opinion on the
issue.
Ms. Pitney replied that a legal opinion would be a point of
clarification on the issue.
Co-Chair Foster highlighted that over the years the
legislature had been told that the CBR balance should be at
least $1 billion. More recently the legislature had been
told $400 million was part of a MOU [memorandum of
understanding] and was an absolute minimum balance. He
noted that the $400 million number was not necessarily the
minimum recommended. He asked if the $400 million was in
the MOU.
1:45:38 PM
Ms. Pitney answered the $400 million was the point that the
treasury made certain there where funds in the General Fund
to account for the cashflow. The MOU did not address the
CBR balance. The memorandum directed borrowing from the CBR
if the treasury balance fell below $400 million to ensure
there was always a minimum of $400 million in available
assets for the cash management of the state. She referenced
testimony by Mike Barnhill (Deputy Commissioner with the
Department of Revenue) that the CBR should have the highest
minimum balance possible if the fund was used as an ongoing
revenue stream. She relayed that until the structural
deficit was addressed, having as much money in the CBR was
important. Under a scenario with no structural deficit, $1
billion would be the minimum recommended balance (20
percent of the state's annual revenue). She stated that the
balance should be closer to $1.5 billion to $2 billion on
an ongoing basis, based on the size of the state's budget.
Representative Josephson stated that the administration's
current position was that the money listed in the first
bullet [on slide 2] would be funded using an overdraw of
the SB 26 [Permanent Fund legislation passed in 2018]
number and that the FY 21 dividend would be funded by
drawing down the CBR to $400 million to $500 million.
Ms. Pitney replied that the statements were correct.
Representative Knopp provided his understanding of Ms.
Pitney's statements. He asked for verification that with
the supplementals the FY 20 budget was higher than all of
the FY 19 actuals, even with the vetoes.
Ms. Pitney agreed.
Representative Knopp asked for verification that it
included all of the vetoes and not just the AMHS. He asked
if the FY 20 budget was $17.8 million higher than FY 19.
Ms. Pitney referred to a table showing a UGF comparison on
slide 4. She pointed to the $5.8 billion appropriations
total for FY 19 in the first column. The governor's FY 20
proposal including the supplementals was $6.6 billion. She
looked at column 1, line 7 and highlighted that agency
operations totaled $3.9 billion in FY 19. Column 2, line 7
showed an FY 20 agency operations total of $4 billion.
There was a reduction in statewide items associated with
community assistance, school debt reimbursement, and oil
tax credits. The largest increase was the additional PFD of
$815 million shown in column 2, line 16. Column 4, line 13
showed a total Permanent Fund difference of $932 million
from FY 19 to FY 20. Column 4, row 5 showed a total
appropriations difference of $809 million from FY 19 to FY
20.
1:51:25 PM
Ms. Pitney turned to a table titled "Short Fiscal Summary -
FY20 with Governor's Supps/FY21 Governor's Amended Budget"
(reflecting all funds) on slide 3. Prior to the
supplementals the FY 20 ending value was over $2 billion.
The FY 21 balance had been projected at nearly $600
million, but the number had declined to $491 million under
the governor's proposal.
1:52:12 PM
Ms. Pitney turned to a bar chart on slide 5 reflecting UGF
revenue and budget with a bar chart. The green portion of
the chart reflected traditional oil-based revenue and the
gray portion represented the POMV draw from the ERA. The
light blue portion of the chart reflected the overdraw of
the POMV to cover the additional dividend included in the
governor's proposal. There were three bars reflecting
different variations of the FY 20 budget. The first bar
labeled "FY20" represented the budget when the legislature
had adjourned special session the previous summer, with the
addition of the governor's vetoes. The second bar labeled
"FY20 w/ Gov Sups thru 2-4" reflected the FY 20 budget
including the early February [2020] supplemental package.
The third FY 20 bar labeled "FY20 w/ Gov Sups thru 2-20"
reflected the FY 20 budget with the most recent
supplemental request. She highlighted the last bar on the
slide showing the governor's FY 21 budget as amended.
Representative Sullivan-Leonard highlighted a transfer by
the legislature of a little over $5 billion from the ERA to
the corpus of the Permanent Fund. She asked where it would
appear on the graph and whether it was considered an
additional ERA draw.
Ms. Pitney answered that the transfer was not considered
spending. The action reflected the movement of one asset to
another asset or government to government.
Representative Sullivan-Leonard considered the additional
ERA draw. She stated that the $815 million reflected the
governor's preexisting desire to fund a full PFD in FY 20.
Ms. Pitney answered that the gray portion of the chart
represented the POMV of just over $3 billion. The blue
shaded area on the chart reflected the additional $815
million spend proposed by the governor.
Representative Wool referenced the last two bars on the
right for FY 20 with the supplemental and FY 21. He
observed that the PFD was the same for both years and
reflected a full statutory PFD. He looked at the pink
portion of the bars showing the net fund transfer. He
surmised that in FY 20 the PFD was paid by the ERA draw and
in FY 21 it was paid with a CBR draw. He asked for
verification that the pink portion of the FY 21 bar was
larger because of a larger fund transfer from the CBR.
1:56:03 PM
Ms. Pitney answered in the affirmative. The governor's
proposed supplemental budget would pay the additional
dividend for FY 20 with funding from the ERA. Under the
proposed FY 21 budget, the ERA would pay the PFD first and
the remaining funds would pay for government. She explained
that any remaining needs would be funded by the CBR. She
clarified that FY 20 with the supplemental was structured
differently than the governor's proposal in FY 21.
Co-Chair Foster knew the transfer versus an appropriation
was always a confusing topic. He explained that paying out
a "payback" dividend would be money coming out of the
treasury. Whereas, a transfer moved from one part of the
treasury to the other and was still within the state's
purview.
Ms. Pitney agreed.
Ms. Pitney turned to slide 6 titled "FY20 Supps and CBR
Headroom." The statutory CBR headroom was $250 million in
FY 20. The governor's recent supplemental package was $301
million and exceeded the headroom by $51 million.
Representative Josephson asked why the additional $51
million could not be funded through the general treasury.
He asked for verification the legislature did not have to
get the money from the CBR.
Ms. Pitney answered that the spending amount had exceeded
the balance in the UGF accounts. The CBR was the most
traditional place to cover the $51 million.
Representative Josephson stated that nothing had been
appropriated for FY 21 at present. He thought receipts from
royalties and taxes were coming in, meaning there must be
some funding in the treasury.
1:59:51 PM
Ms. Pitney returned to slide 4 [column 1, row 1] and looked
at revenue available for FY 20 estimated at $5.163 billion.
She noted that all of the supplementals were FY 20 spend.
The operating budget of $4.5 billion [row 6], the capital
budget, and original dividend exceeded the estimated
revenue amount. The $51 million could come from other
accounts such as Power Cost Equalization (PCE) or Higher
Education. She relayed that other accounts could be used,
but traditionally the CBR had been used when available UGF
funds were not sufficient.
Representative Josephson understood they were dealing with
an FY 20 issue and they were trying to true up based on
needs that had arisen. He asked for verification that the
legislature was not required to only spend from FY 20
sources for the FY 20 supplemental. He asked if by law, the
legislature was to treat the funding of the bill as if it
were June 30, 2019.
Ms. Pitney answered that the committee was considering two
bills - one impacted FY 20 and one impacted FY 21. The
money appropriated for FY 20 needed to fit into the FY 20
revenue stream. She noted that if there were FY 20 items
that could be pushed into FY 21, the legislature could use
FY 21 revenue as a funding source. Based on the governor's
request, slide 6 showed FY 20 budget requirements for
dollars associated with FY 20.
Co-Chair Foster stated the items were all legitimately FY
20 expenses. He recognized that if there was a way to push
some items to FY 21, it was a possibility. He reasoned that
if an expense was from FY 20, it should be in the FY 20
supplemental. He noted that the CBR headroom cap was $250
million and beyond that amount a three-quarter vote [by the
legislature] was required.
Co-Chair Johnston remarked on the concept of mixing two
budget years. She pointed out that the legislature had to
wrap up its budget and audit it for the Comprehensive
Annual Financial Report (CAFR).
2:03:48 PM
Ms. Pitney moved to slide 7 titled "Gov Amendments
Addressed in Subcommittee." The slide showed all items that
had been addressed in subcommittee that were also
governor's amendments. She explained that the items had
been taken care of in the subcommittee process and did not
need to be taken care of in the amendment process for FY
21.
KELLY CUNNINGHAM, ANALYST, LEGISLATIVE FINANCE DIVISION,
elaborated that slide 7 contained items that could be
accepted or denied by the committee going forward. She
reviewed the first two of seven items listed on the slide.
The first item was a $17.8 million reduction from the
Department of Corrections tied to the removal of the
request for proposal to send prisoners out of state. The
subcommittee had denied the increment and the governor had
also removed it. Additionally, the finance subcommittee for
the Department of Commerce, Community and Economic
Development had added carry forward language [for Alaska
Oil and Gas Conservation Commission (AOGCC) receipts]. She
communicated that she was available for questions.
Co-Chair Foster observed that the largest increment on
slide 7 was the reduction of $17.8 million due to the
out-of-state contract for prisoners that was no longer
going forward. He observed that other items on the slide
reflected smaller UGF numbers.
Representative Carpenter asked if the list on slide 7 was
exhaustive.
Ms. Cunningham replied that the list contained all of the
items LFD had identified as duplicative from the
subcommittee action.
Co-Chair Foster looked at the Judiciary item of $334,700 to
restore previously vetoed funding. He asked for
verification the restoration meant there would be no cut.
Ms. Pitney agreed. She clarified that the list only
included amendments proposed by the governor that had also
been addressed in subcommittee. Slide 7 did not include an
exhaustive list of amendments. She noted that the Office of
Management and Budget had presented a spreadsheet with the
full list of the governor's amendments the previous day.
She was happy to take any questions on all of the
amendments. She reiterated that slide 7 was limited to
governor's amendments that had already been addressed by
the finance subcommittees.
2:07:23 PM
Representative Carpenter thought the information on slide 7
was misleading. He believed the slide made it appear that
subcommittees only addressed the items listed on the slide.
He referenced a subcommittee action item for the Department
of Law that was not included on the slide. He thought the
public would not understand why the information was not
listed on the slide.
Ms. Cunningham replied that slide 7 only contained
governor's amendment items that had been duplicated in the
subcommittee process. She noted there were several
amendments that were not included on the slide. The intent
of the slide was to let the committee know the $17.8
million reduction did not need to be adopted because it had
not been approved [by the subcommittee] in the first place.
Co-Chair Foster clarified that the governor had made
numerous amendments and the subcommittees had also made
numerous amendments. He explained that the overlapping
amendments were included on the list [on slide 7].
2:09:09 PM
Representative Wool looked at slide 4, row 5 that showed an
$809 million or 14 percent increase under the FY 19 to FY
20 column. He asked if the $809 million reflected the
increase in the PFD from the ERA in the supplemental budget
for FY 20.
Ms. Pitney answered that the FY 20 column represented all
of the governor's proposed supplemental requests. She
clarified the column reflected the budget the governor had
asked the legislature to consider.
Representative Wool understood. He knew there had been
other supplemental items such as Medicaid and fire
[suppression]; however, the lion's share of the $800
million was the requested draw from the ERA.
Ms. Pitney agreed.
Representative Josephson stated that the governor had
vetoed about $430 million at the end of June 2019. The
legislature had come back in July and had tried to restore
about $375 million; it had successfully restored $222
million. He extrapolated that it meant there was $200
million the legislature had wanted that the governor had
declined. He asked where the money was that the governor
had saved by veto.
Ms. Pitney answered that Medicaid was the largest example.
The vetoes enacted in Medicaid had been requested back in
the governor's FY 20 supplemental budget. The agency
operating budget for FY 20 was now higher than what had
been finalized after all supplementals for FY 19.
Representative Josephson asked for verification that even
though Medicaid had not been fully funded, the claims had
come in and had been paid.
Ms. Pitney answered that the claims would only be paid if
the supplemental request was appropriated.
2:12:32 PM
Representative Knopp looked at the third bullet point on
slide 7 associated with the Department of Environmental
Conservation. He noted that the governor's amended budget
added back $164,600. He observed that the slide showed the
governor was proposing to collect $15,000 in SDPR
[statutory designated] program receipts. He believed the
subcommittee had rejected the decrement [related to the
commercial dairy program].
Ms. Cunningham would have to follow up on the question. She
had been informed that both items had been adopted in
subcommittee, but she would follow up.
Representative Knopp knew the commissioner was working with
the dairies on the issue. He noted that a workable deal had
been struck with two dairies - one of which was a
nonprofit. He remarked that $15,000 in receipt authority
for two dairies could be substantial. He wondered what deal
had been worked out. He wondered if the item was something
he needed to look into further or if "the other" had been
left in place.
2:14:03 PM
Co-Chair Johnston noted that she had asked the following
question to OMB as well regarding the new supplemental and
budget. She discussed that in 2019 the legislature had held
hearings on a spending cap bill. She noted the governor had
also introduced spending cap legislation. She believed
there would be other spending cap bills introduced. She
asked if the governor's proposed budget met his spending
caps. She requested a report with the information from LFD.
Ms. Pitney discussed that an area of interest had been on
the mental health budget forwarded by Alaska Mental Health
Trust Authority (AMHTA) trustees. She communicated that the
subcommittee actions and amendments put forward by the
governor included everything the trust had requested.
Representative Knopp communicated the sense of urgency to
have responses from LFD as soon as possible due to the
upcoming amendment deadline for committee members.
HB 205 was HEARD and HELD in committee for further
consideration.
HB 206 was HEARD and HELD in committee for further
consideration.
HB 234 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
meeting. He RECESSED the meeting until 5:00 p.m. [note: the
meeting never reconvened. A new meeting began at 5:07 p.m.,
see meeting document dated 2/21/20 5:07 p.m. for detail].
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 205 HB 234 HFC LFD Amendment Presentation 2-21-20.pdf |
HFIN 2/21/2020 1:30:00 PM |
HB 205 HB 234 |
| HB 205 Public Testimony Rec'd by 2.20.20.pdf |
HFIN 2/21/2020 1:30:00 PM |
HB 205 |