Legislature(2023 - 2024)ADAMS 519
03/20/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB144 | |
| SB22 | |
| Overview: Budget Update |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 144 | TELECONFERENCED | |
| += | SB 22 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 268 | TELECONFERENCED | |
| += | HB 270 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 268
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making capital 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. 270
"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: BUDGET UPDATE
2:33:08 PM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
shared that he would be providing a fiscal update based on
the spring revenue forecast, the latest round of governor's
amendments, and the committee substitute (CS) for the
operating budget. He introduced a PowerPoint presentation
titled "Fiscal Update" dated March 20, 2024 (copy on file).
He began on slide 2 with an updated fiscal summary of the
governor's amended budgets. The amendments received by the
Legislative Finance Division (LFD) on March 13, 2024, were
included in the update, as well as the impacts of the
spring revenue forecast.
Mr. Painter continued that the revenue forecast increased
the expectation in both FY 24 and FY 25, which could be
seen on the first line on the chart on the slide as an
increase of about $58 million in FY 24. The governor's
amended language included a provision that amended the
Permanent Fund Dividend (PFD) appropriation for FY 24 and
increased unrestricted general fund (UGF) revenue by
another $6.9 million. The UGF revenue increase was beyond
the spring forecast numbers. In FY 25, the difference was
about $140 million of UGF revenue over the fall forecast.
For agency operations in FY 25, the governor's amendments
resulted in an increase of about $1.9 million in UGF, which
was not significant. The capital budget increased slightly
in the governor's amended budget in FY 25, as well as in FY
24 supplementals.
Mr. Painter explained that the biggest change in the
governor's amended budget was to the supplemental. There
was a decrease of $19 million for fire suppression based on
updated estimates as well as some increases, particularly
for the Grid Innovation and Resilience Partnerships (GRIP)
projects and Alaska Energy Authority's (AEA) grid
resilience project. Overall, the governor's supplementals
had been reduced. The supplementals totaled $183 million
before the amendments were added and were now $175.8
million with the inclusion of the amendments. There would
be a post-transfer surplus in FY 24 of $116.5 million.
Mr. Painter continued to slide 3 and stated that in FY 25,
the main impact of the spring forecast was a reduction in
the deficit in the governor's budget. The deficit was $1
billion prior to the forecast and was currently down to
$867 million with the inclusion of the amendments. The
slide also included a visual representation of the FY 24
budget at various oil prices. The oil prices were on the
bottom and the revenue was on the y-axis on the graph. The
blue bar area on the bottom represented the revenue
allocated to the FY 24 budget that was authorized during
the previous legislative session. The dark blue section
represented the $175 million of new supplementals. If the
price of oil was below about $75 a barrel, the budget would
have an unfilled deficit, which was an increased price from
his previous report to the committee because of the
addition of the supplementals. He relayed that it was
theoretically possible for prices to crash and go below $75
a barrel for the year, but it was highly unlikely.
Mr. Painter noted that if revenue equaled the amount in the
spring forecast or higher, the budget would have a $292.3
million surplus. The governor's supplementals totaled
$175.8 million which would leave $116.5 in revenue
available for the supplementals in the current year. If the
surplus was not spent, the money would lapse into the
Constitutional Budget Reserve (CBR). The additional revenue
would be split equally between an energy relief payment
that would be distributed as part of the PFD in FY 25 or as
a separate payment, and all additional revenue would go
into the CBR. He thought the oil revenue would most likely
fall somewhere between the dotted lines on the graph which
indicated that there would be an energy relief payment, but
the payment would not be maxed out. The maximum would be
about a $500 dollar payment per person at the top of the
range. He estimated that the energy relief payment would be
about $220 dollars per person and a total of $143 million
dollars.
2:38:13 PM
Mr. Painter advanced to slide 4, which detailed the changes
in the CS for the operating budget as compared to the
governor's amended budget. He relayed that the CS was $6.6
million in UGF above the governor's amended budget for
agency operations. However, there was $10 million in UGF
allocated for the movement of a university capital budget
item to the operating budget, which netted out of the total
impact. He noted that the governor's operating budget
amendments, which were not introduced prior to the CS,
added $2 million in UGF.
Mr. Painter explained that the CS for statewide items for
the House was $5 million below government items. The CS
added $5.2 million of new mental health capital
appropriations to match the Alaska Mental Health Trust
Authority's (AMHTA) recommendation. There was a reduction
of roughly $4.8 million overall.
Mr. Painter continued to slide 5 which compared the FY 24
and FY 25 spring revenue forecast items. He explained that
the chart reflected adding the additional mental health
items in the CS and moving a $10 million project to agency
operations. There was no appropriation for a PFD yet. He
thought the most important item of note was that there was
about $1.45 billion remaining that could go to any number
of items, including the PFD.
Mr. Painter advanced to slide 6 and detailed some of the
major outstanding items in the fiscal update. He remarked
that upholding the governor's veto on SB 140 was a
significant action and fiscal notes for that bill had
totaled $241.3 million. The largest item in the bill was
the proposed Base Student Allocation (BSA) increase of
$680, which would cost about $175 million. There was also a
provision for broadband that may not be able to be
addressed in the current year due to time constraints. If
SB 140 or another education bill did not pass, broadband
would need to be addressed in FY 26. The majority of the
other items within SB 140 could be accomplished through
one-time items or permanent items in the budget, such as
the BSA increase and the pupil transportation increase. He
noted that SB 140 was the only bill that had passed both
bodies during the current legislative session and some of
the bills still in circulation would be costly if the bills
were to pass.
Mr. Painter shared that a significant bill that had only
passed the Senate thus far was the Senior Benefits Bill (SB
170]. The legislation passed with a fiscal note that
required $23.5 million in UGF and there were no other bills
with fiscal notes as large. The funding was not included in
the governor's budget because the benefits program was
expiring. The program had typically been funded each year
and extended when it was set to sunset. There was also a
potential shortfall in the Alaska Marine Highway System
(AMHS) that could be quite significant. If AMHS ran a full
seven-ship schedule but received the same sized grant as it
had in recent years, it would have a budget of about $38
million; however, the grant was not guaranteed. The state
was eligible for a grant that would be large enough to fill
AMHS's entire federal authority in the governor's budget,
but the state had not necessarily received the full grant
amount each year. In 2023, the legislature put in backstop
funding as a compensatory measure if federal receipts were
insufficient. He did not think the legislature needed to
exercise such caution because the state could assess
whether additional funds needed to be added every year. If
the state was not granted the entirety of the grant, the
costs would likely need to be made up with UGF.
Mr. Painter noted that there were four unions that were
currently negotiating bargaining contracts: the Alaska
Correctional Officers Association, the supervisory unit of
the Alaska Public Employees Association, the Labor, Trades,
and Crafts Unit, and the new University of Alaska union for
graduate student employees. The university union was
currently working on its first contract. All of the unions
were actively negotiating new contracts to begin in FY 25.
If salaries were increased as well, the potential cost
would increase.
2:44:33 PM
Representative Josephson understood that the total for the
new items was not known, but he anticipated the cost would
be around $20 million. If SB 140 were replaced with similar
legislation, the items would total around $341 million. He
understood that the $341 million would be subtracted from
the post-transfer surplus of $1.44 billion detailed on the
previous slide. He asked if he was correct in his
understanding that the total would be around $1.1 billion.
Mr. Painter responded that Representative Josephson's math
was correct as long as the items on slide 6 were funded. He
reiterated that negotiations were still occurring and the
totals could not yet be known. The negotiations were due
statutorily on day 60 of legislative session, but it was
rare to receive the negotiations by the statutory deadline.
He agreed that the items would total about $1.1 billion if
the budget were to remain balanced and savings were not
utilized.
Representative Stapp asked when he could expect to know
more details about the cost-budget analysis (CBA).
Mr. Painter responded that the CBAs were due in statute by
day 60; however, he was not certain if the deadline had
ever been met. He noted that last year, CBAs were added on
the last day that it could have been added to the budget.
He recalled that the University of Alaska (UA) had asked
for a CBA during a conference committee at one point but it
was not feasible. He noted that there was often very little
time to review the agreements and make a considerate
decision.
Representative Stapp asked why it was in statute if it was
not followed.
Mr. Painter responded that the point of the statute was to
ensure that CBAs were considered. He recalled one year in
which there was an item that the legislature felt there was
no time to review, and the conference committee wrote a
letter accompanying the conference committee report that
said that the exclusion of the union from the conference
committee budget would not represent denying the bargaining
unit. He relayed that there was simply not enough time to
consider some items and therefore, the items were delayed
until the following year's supplemental. He explained that
it was not an unusual action.
2:47:39 PM
Mr. Painter continued on slide 7, which included other
potential budget items. He explained that the
administration generated a list of funding requests. The
first item was $5 million in funding for a renewable energy
fund. When the governor prepared the budget, the list had
not yet been developed. He noted that AEA subsequently
requested $32 million and the governor's amount would pay
for the top two projects and about a quarter of the third
project. Last year, the governor added $7.5 million for
renewable energy and the legislature subsequently increased
the funding amount. The total list cost for school
construction was $260.5 million and the governor funded the
top project on the list for $4 million. The total list cost
for school major maintenance was $249 million and the
governor funded the top two projects for $4.3 million.
Finally, the state had a nearly $2.2 billion backlog of
deferred maintenance. The governor had $28.2 million for
deferred maintenance purposes coming from the Alaska
Capital Income Fund and the legislature had often allocated
additional funding. The university had a $1.5 billion
backlog and requested $35 million through a bill. The
university item had been frequently vetoed when the
legislature allocated additional funding for it.
Representative Galvin asked if the backlog was inclusive of
the actions that had taken place in the past. She asked if
the full list represented the current backlog.
Mr. Painter responded that the difference was that the
state as a whole had a $2.2 billion dollar backlog and the
university made up $1.5 billion of the backlog. The vast
majority of the state's deferred maintenance was at the
university. He shared that the university cataloged its
deferred maintenance more rigorously than the rest of the
state. The university had much larger square footage than
other agencies, which contributed to its deferred
maintenance.
2:51:06 PM
Mr. Painter continued on slide 8, which included additional
potential budget items. In 2023, the governor vetoed a $30
million capitalization for the community assistance fund.
Without the $30 million capitalization, the FY 25
distribution would have been $20 million. At the beginning
of a new fiscal year, one-third of the balance as of the
end of the previous fiscal year was added to the fund,
which would be $20 million for FY 25. The base payments
were distributed to every local government based on the
type of government. The additional amount was the per
capita payment and would be equally distributed to all
local governments in the state. The impact of that veto was
primarily felt in urban areas with higher populations.
Mr. Painter explained that there were a few potential
strategies to compensate for the funding that would have
been available if it was not vetoed. One strategy would be
to fully capitalize the fund in FY 24 and essentially
replace the amount that was vetoed. The other strategy
would be to allocate $10 million to the fund in FY 25.
However, there would still be a shortfall in the fund in
the following year because of the $20 million dollars
difference, but it would fill the distribution hole in FY
25.
Mr. Painter relayed that additionally, there were a number
of bills that were listed on the slide that had only passed
one body. There were a number of bills that had the
potential to become law. The list was not inclusive of all
legislation but represented a sampling for informational
purposes. He suggested that legislators leave some money
for fiscal notes to ensure that the bills that would likely
pass could be funded. The governor's capital budget would
not include legislative district projects, but it simply
reflected the governor's priorities. He noted that he had
heard much discussion on the university and noted that
there was a difference between the regents' request and the
governor's budget. There was a difference of $18.6 million
in UGF in the operating budget between the regents' request
and governor's budget and a $27 million difference in the
capital budget. He noted that $10 million in the operating
budget was changed from university receipts to UGF.
Mr. Painter noted that he had also heard significant
discussion on child care. In 2023, the legislature
allocated $7.5 million dollars as a one-time increment for
child care; however, the funding was not in the governor's
current budget. Also in 2023, the Council on Domestic
Violence and Sexual Assault (CDVSA) received $3.7 million
for one-time items, which was also not in the current
budget. There could be additional items that would emerge
in the legislative process that members could be interested
in funding that were not yet reflected.
2:55:37 PM
Representative Hannan asked for confirmation that an
additional $20 million for the Community Assistance Fund
would provide both the money needed for distribution in FY
25 and as well as the capitalization needed for the
following fiscal year.
Mr. Painter responded in the affirmative, but noted that
the timing would be different. The budget currently
included $10 million in FY 25, but $30 million would be
needed for FY 24. The difference was an increase of $20
million. The $10 million in FY 25 was intended to "top up"
the distribution.
Representative Hannan understood that the fund balance was
normally $90 million and one-third of it was paid out each
year. If the fund were to decrease to $60 million, the
total amount paid out would be $20 million. She understood
that $30 million should be added to compensate.
Mr. Painter responded that it would not put any more money
into the fund, but would add to the one-time distribution
in FY 25 alone. If $30 million was deposited into the fund,
the $10 million would be unnecessary. The cost would
increase by $20 million, but it would be directly
distributed to communities.
Representative Hannan asked if the recommendation was to
include a $30 million amendment into the FY 24 supplemental
capitalizing fund instead of leaving the $10 million in FY
25.
Mr. Painter responded in the affirmative. If $20 million
was added, the distribution would be based on $80 million,
and it would not function properly.
2:58:28 PM
Mr. Painter continued on slide 9 and gave an overview of
fire and disaster funding, which was often underfunded in
the budget and later paid with supplementals. From FY 14
through FY 23, the actual UGF spending for fire suppression
averaged $49.3 million dollars. He noted that the amounts
for FY 22 and FY 23 were based on the amount included in
the budget in addition to the final supplemental. The
reconciliation process for the funding took a number of
years, but $49.3 million was the average final authorized
amount. The governor's budget for fire suppression
preparedness included $14.2 million, which meant there was
a difference of $35 million. The governor's budget also
included an increment to increase firefighters' salaries.
The state would need to allocate about $49.3 million in
order to fund an average fire year. The governor's
supplemental budget included $75 million in supplemental
funding for fire suppression activity in the current year.
There had been a supplemental for fire suppression activity
almost every year since FY 14 and a history of
underbudgeting. The state overspent the original budgeted
amount every year and therefore needed to request a
supplemental every year. The green line on the chart
represented the average spend. There were several years
above the average as well as several years below the
average.
Mr. Painter noted that the Disaster Relief Fund (DRF)
supported other types of disasters. The fund was not
financed in a routine manner and the last deposit was $50
million in FY 22. The governor was requesting $5 million
for disaster relief purposes. The actual average spending
from the fund was about $20.5 million, but it was
impossible to predict whether disasters would occur. He
relayed that the state did not experience disasters every
year and it was impossible to know when a disaster would
occur, but it was routinely under budgeting. He expected
that the state would probably require a supplemental in FY
25.
Representative Stapp asked why fire service was grossly
underbudgeted every year.
Mr. Painter responded that it was a policy decision by the
legislature. He noted that in an effort to increase budget
transparency in FY 20, the legislature increased the
funding to be equal to the lowest funding level in the last
10 years. He shared that the state had never tried to fund
an average amount for fire suppression.
3:02:23 PM
Representative Josephson asked why it would be a problem if
the funding were to remain a supplemental item.
Mr. Painter responded that the downside of budgeting for
supplementals was that all of the costs could not be known.
For example, California had a history of underbudgeting
Medicaid and rolling bills to the next year. The costs
eventually had to be trued up which could be expensive. The
combination of routine underbudgeting and relying on the
supplementals meant the legislature would need to make
difficult budgetary decisions. He noted that sometimes it
was often easier to get a CBR vote for the supplemental
than for the current year, which happened in 2023. He
thought it was a political calculation. Routine
supplementals would not provide clarity for budgetary
purposes and could lead to potential misallocation of
resources.
3:04:31 PM
Mr. Painter continued to slide 10, which included the
change in budgeted positions. The state currently had a
high vacancy rate of about 14 percent. The FY 24 budget
would increase the number of budgeted positions by 115.
There was continued growth in the budget despite the
vacancies.
Representative Josephson understood that the standard cost
for a position with benefits was about $100,000, which
would mean that the total for the increased number of
positions would be $115 million. He asked if he was
correct.
Mr. Painter responded in the affirmative as long as all of
the positions were fully funded. The legislature had
occasionally chosen to partially fund new positions to
allow time for hiring.
HB 268 was HEARD and HELD in committee for further
consideration.
HB 270 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the agenda for the following day's
meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 22 Public Testimony Rec'd by 031524.pdf |
HFIN 3/20/2024 1:30:00 PM |
SB 22 |
| HB 144 Sectional Analysis ver A.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 Sponsor Statement ver A.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144- ETC Brochure.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 Education Tax Credit Presentation 032024.pptx.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144- Dept of Revenue Ed Tax credit FAQ.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 DOR 2011-2023 Summary Ed Tax Credits.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HFIN Fiscal Update 3-20-24.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 268 HB 270 |
| HB 144- Support letter Alaska's-Education-Tax-Credits-SB-120-and-HB-144.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |
| HB 144 Presentation 3.18.24.pdf |
HFIN 3/20/2024 1:30:00 PM |
HB 144 |