Legislature(2025 - 2026)ADAMS 519
01/27/2026 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB283 | |
| Overview: Overview: Governor's Fy27 Budget by the Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 263 | TELECONFERENCED | |
| *+ | HB 283 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE BILL NO. 283
"An Act making supplemental appropriations; 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."
1:34:56 PM
KEN ALPER, STAFF, REPRESENTATIVE ANDY JOSEPHSON, introduced
the bill. He referred to an Excel spreadsheet titled
"Summary of HB 283: Fast Track Supplemental Budget" (copy
on file). He explained that HB 283 was a committee bill
introduced under the House Finance Committee (HFC), but all
items originated from the governor. When the governor
introduced his fiscal plan and budget in December of 2025,
and January of 2026, the supplemental items affecting the
current fiscal year were embedded within the regular
operating and capital budgets rather than presented as a
standalone supplemental budget. Based on input from the
construction industry and other stakeholders, it was
determined that a supplemental budget needed to be passed
quickly to ensure that funding could be secured. The
decision was made to extract the supplemental items from
the governor's operating and capital budget bills and
create a separate committee bill containing only the
supplemental items. He relayed that the intent was to move
the bill on an expedited basis.
Mr. Alper stated that the spreadsheet reflected the
contents of the bill. He would walk through the items
included in the bill, explain how they were funded, and
describe how they related to other legislation. He noted
that if the bill passed, the corresponding items would be
removed from amended versions of the operating and capital
budget bills.
Mr. Alper relayed that the first purpose of the bill was to
provide a funding source for a known budget deficit
associated with expenditures that had already been
approved. He recalled that when the budget passed at the
end of the prior legislative session, projections indicated
a surplus even after the governor's vetoes and the
subsequent overrides in August of 2025. He stated that the
expectation at the time was for approximately $130 million
more in revenue than in known expenditures. The shift moved
the state from an anticipated surplus of approximately $130
million to a known deficit of approximately $51 million
based on the most recent revenue forecast. He explained
that the bill would fund the deficit before addressing
individual supplemental items.
Mr. Alper stated that almost all items in the bill
originated in the governor's budgets, but there was one
exception. The first item on the spreadsheet indicated that
there was a Medicaid line item in Sections 1 through 3 of
the bill that came to the committee in a report from the
Department of Health (DOH). He stated that the item
represented a relatively precise figure and reflected a
known shortfall in the state match for the Medicaid
program. He stated that Medicaid was one of the largest
programs in the state budget, with more than $700 million
in unrestricted general funds (UGF) and close to $2 billion
overall when federal funds were included. Based on
information from DOH, the program was projected to be short
by $36.4 million. The amount was expected to appear in the
next round of the governor's supplemental proposals but was
not included in the governor's budgets as introduced in
December of 2025.
Mr. Alper stated that the remaining line items on the
spreadsheet originated in the governor's budgets. The next
item, in Sections 4 through 6, was the federal Department
of Transportation (DOT) matching funds, primarily for the
highway program. He stated that the funding replaced money
that was previously appropriated through reappropriations
and was later vetoed by the governor. He stated that the
$70 million item represented matching funds that could
leverage up to $700 million in federal construction
funding. The intent was to secure the funding so that
contracts could be executed and work could proceed during
the upcoming construction season.
Mr. Alper stated that the next item was a reappropriation
that redirected previously appropriated funding to serve as
a match for the United States Department of Energy's State
Energy Program in the amount of $650,000. He noted that the
item did not represent new money and had been included by
the governor in the capital budget as a supplemental item.
He stated that the committee relocated it into the bill
when the supplemental items were separated from the
operating and capital budgets.
Mr. Alper explained that Section 8 of the bill contained a
$40 million capitalization of the Disaster Relief Fund
(DRF). He stated that the amount reflected the governor's
estimate of the need for the remainder of the fiscal year.
He relayed that additional DRF appropriations appeared in
the operating budget for FY 27. He added that recent
disasters were expected to generate significant costs, such
as Typhoon Halong. He noted that additional testimony would
address the interaction between state disaster funding and
federal disaster assistance.
Mr. Alper stated that the next item in the bill addressed
the Fire Suppression Fund (FSF). The item was unusual due
to inconsistencies in information provided by the
administration to the committee.
Co-Chair Josephson recognized that Representative Julie
Coulombe had joined the audience.
1:39:41 PM
Representative Galvin asked whether the $69.695 million
item referenced represented a ten-to-one match, given the
discussion of leveraging $700 million in federal funding.
Mr. Alper responded that most highway programs operated on
a 90-10 match structure, meaning that each dollar of state
funding leveraged nine dollars in federal funding. The
fiscal summaries and tables assumed a $55 million fire
suppression expenditure. For the most part, the money had
already been spent under the terms of a disaster
declaration related to summer fires. He stated that the
purpose of the appropriation was to cover expenditures that
had already occurred.
Mr. Alper relayed that the governor had not included the
$55 million fire suppression line item in his proposed
budget. He understood that the administration had intended
to use ratification as a different mechanism to address the
expenditure, but he did not know whether it remained the
administration's intent. Based on guidance from the
Legislative Finance Division (LFD) and historical
legislative practice, it was determined that including the
item as a line item in the budget was the clearest
approach. He stated that doing so clarified that the
legislature was capitalizing FSF to meet its needs and to
account for expenditures that had already occurred.
Mr. Alper stated that the next line items in Section 9(a)
and 9(b) related to the oil and hazardous substance release
prevention and response funds. He explained that the funds
supported spill cleanup and spill response activities and
were maintained by two revenue sources: a per-barrel
surcharge on North Slope oil production and a tax of
slightly less than $0.01 per gallon on refined fuels
administered through the motor fuel tax by the Department
of Revenue (DOR).
Mr. Alper stated that the revenue was collected over the
course of the year and then appropriated at the end of the
year into the management funds administered by the
Department of Environmental Conservation (DEC). He noted
that it was a routine activity and was always handled as a
supplemental item. He clarified that the item was moved
into the supplemental bill rather than leaving it in the
operating budget because it was a supplemental item. The
item did not represent new revenue and merely placed
existing revenue into its statutorily designated accounts.
He stated that an explicit legislative appropriation was
required each year because dedicated funds were not
permitted.
1:44:32 PM
Mr. Alper relayed that the next line item, Section 9(c) of
the bill, was a fund transfer to refill the Higher
Education Investment Fund (HEIF). He stated that the fund
functioned as an endowment supporting programs such as
performance scholarships and the Washington, Wyoming,
Alaska, Montana, Idaho (WWAMI) program. He stated that HEIF
totaled approximately $400 million when fully funded. He
explained that HEIF had been used at the end of FY 25 to
balance the supplemental budget because no other funding
source was available. There had been broad agreement from
the governor, the Senate, and House leadership that the
fund should be replenished. He stated that the amount
required was slightly less than $130 million and that the
bill restored the fund to its prior balance to prevent
recurring overdrafts in future years.
Mr. Alper noted that the total of all items in the bill was
just under $382.3 million. He understood that members might
have seen a prior figure of $346 million when the governor
first introduced the budget. The total consisted of
approximately $294 million of "new stuff" in the governor's
budget plus the known $51 million deficit. He stated that
the bill added approximately $36 million for Medicaid,
bringing the total to approximately $382 million. He
relayed that the bill proposed funding the total amount
through the Constitutional Budget Reserve (CBR). The
approach was consistent with the governor's proposed
funding method, though it was structured differently. The
governor's proposal totaled approximately $280 million,
consisting of $246 million plus some additional headroom.
He stated that HB 283 did not include any headroom and was
capped at approximately $382 million. He stated that final
passage would require a three-quarters vote to access CBR.
Co-Chair Josephson asked for clarification that the
aforementioned $294 million was not for new budget items.
He noted that the items were not new expenditures but were
simply not "red ink."
Mr. Alper responded that by new items, he meant items that
were newer than those contained in the prior year's budget.
He stated that the $51 million deficit reflected
expenditures already authorized in the prior budget. There
were three line items before the committee that had been
identified by the governor as needs, in addition to the
approximately $36 million Medicaid item, which was the
newly added component.
1:47:29 PM
Representative Tomaszewski asked for more information about
HEIF. He understood that approximately $129 million had
been withdrawn to balance the budget in the prior year and
asked whether the fund had ever been used to balance the
budget. He stated that Mr. Alper had indicated a desire to
avoid recurring withdrawals from the fund.
Mr. Alper responded that HEIF supported programs such as
the Alaska Performance Scholarship (APS) education grants,
and the WWAMI program. The programs were structured around
expected earnings when the fund balance was approximately
$400 million. He explained that if the fund balance were
reduced to approximately $270 million, earnings would fall
short of annual program demand, resulting in withdrawals
exceeding earnings and gradual erosion of the fund balance.
He stated that the purpose of the proposed recapitalization
was to prevent that outcome.
Representative Tomaszewski asked whether the fund had ever
been used in the same manner as it had been used in the
prior year.
Mr. Alper responded in the negative and added that to his
knowledge, the first instance of the fund being used to
balance the budget was in the prior year.
Co-Chair Josephson noted that there had been one instance
in which the fund was swept.
Mr. Alper appreciated the comment. He noted that Co-Chair
Josephson had been part of many conversations over the
years about what was subject to the CBR sweep at the end of
every fiscal year. He noted that the reverse sweep vote did
not occur in either 2020 or 2021 and HEIF was wiped for a
period of months, but it was subsequently reconstituted to
its full amount during the following legislative session.
Co-Chair Josephson remarked that the year during which the
reverse sweep vote did not occur must have been 2021
because the state had surpluses and high oil prices in
2022. He noted that HEIF was an important enough priority
to the legislature to be recapitalized in 2022.
Mr. Alper agreed and added that approximately $400 million
had been restored to the fund in 2022.
1:50:12 PM
Representative Hannan asked for more information about
Section 5 of the bill, related to the Department of
Transportation and Public Facilities (DOT) match. She noted
that page 6 of the bill included mention of both a $69.695
million match amount and $459,000 in program receipts. She
asked for clarification that the $459,000 amount did not
represent UGF. She asked for confirmation that the program
receipts were not dependent on the match funds being
allocated.
Mr. Alper responded that he was not certain that he could
fully answer all of the questions. He noted that Section 4,
page 5 of the bill provided additional detail. He explained
that the $69.695 million item was identified as federal
program match associated with the primary highway program,
while the smaller $459,000 amount was categorized as
statewide federal program receipts. He stated that both
items functioned as match components but were treated
differently within the budget structure. He suggested that
someone from DOT or LFD provide more information. He noted
the summary spreadsheet included both the $69.695 million
figure and the $459,000 figure.
Representative Hannan commented that the committee had
heard the federal match described both as approximately $70
million and $69 million. If the program receipts simply
needed to be included in the supplemental, she wanted the
receipts to be included to ensure that the state was
maximizing its federal match. However, if the item was
ongoing, she did not want it included in the supplemental
because it could inflate the bill. She requested comment
from LFD.
Co-Chair Josephson added that the item had been identified
as a supplemental item in the operating budget. He
requested that LFD Director Alexei Painter clarify the
issue.
1:53:17 PM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
responded that Section 5 listed $459,000 as UGF receipts,
and the same title appeared in Section 6. He explained that
the items were not match funds but were standalone
appropriations within the statewide federal programs
category. He explained that the $459,000 item was unrelated
to the federal highway match. The appropriations had been
funded in the prior year's capital budget using Alaska
Industrial Development and Export Authority (AIDEA) reserve
funds, which were subsequently vetoed. He explained that
the current proposal simply restored the appropriations as
UGF, independent of any federal match requirements.
Representative Hannan asked for clarification that it was
not match funding, but was still a supplemental item needed
to restore funding that had been vetoed.
Mr. Painter confirmed that the item had no relation to
match funding. He stated that it was a separate
supplemental item identified by the governor because it had
been vetoed in the prior year. He emphasized that the item
would not affect the receipt of federal funds and consisted
solely of UGF.
Co-Chair Schrage asked Mr. Alper for clarification on his
earlier description of the bill as containing "new items."
He thought it was important to clarify that the items were
not new policy initiatives, but either costs that were
incurred after passage of the budget or costs that had been
vetoed and therefore unfunded. He stated that items such as
fire and disaster expenses reflected obligations that had
already occurred and were not forward-looking expenditures.
Mr. Alper agreed that the distinction was important and
appreciated the clarification. He stated that supplemental
requests, by definition, reflected costs that already
existed and generally had already been incurred. He
explained that the supplemental bill was intended to pay
for those known obligations. He noted that the
transportation match enabled access to available federal
funds, but it still addressed an existing need rather than
initiating new spending. He added that many of the disaster
and fire suppression items had been included in the
legislature's budget the prior year but were vetoed, and
therefore the items now required restoration through the
supplemental process.
1:57:13 PM
Co-Chair Schrage asked whether all of the items before the
committee had been proposed in the governor's budget and
were items that the governor wanted to be funded in the
current budget.
Mr. Alper responded by directing members' attention to the
rightmost column in the summary spreadsheet labeled
"source." He explained that the column identified where
each item had appeared in other appropriations or
documents.
Co-Chair Josephson asked for clarification on the Medicaid
match listed on row 2 of the spreadsheet. He noted that OMB
Director Lacey Sanders had appeared before the committee on
January 23, 2026, and had indicated that the amount would
be submitted as an amendment, possibly on February 2 or
February 3 of 2026. He asked if Mr. Alper had the same
understanding as Ms. Sanders.
Mr. Alper responded that the governor was required to
transmit supplemental requests to the legislature on day 15
of the legislative session, which fell early the following
week. He stated that he had heard Ms. Sanders give the same
explanation. He confirmed that the Medicaid match amount
listed was the figure expected to be transmitted. There was
a report from DOH that listed the same information. He
noted that Mr. Painter would be presenting later in the
meeting and would discuss pending budget issues more
broadly. He stated that the amount was expected to appear
in the next round of the governor's supplemental requests.
Representative Stapp asked for more information about the
intent and timeline for the bill. He understood that it was
an HFC bill and that supplemental budgets were structured
differently by the governor. He asked whether the bill was
intended to function as a fast-track supplemental.
Mr. Alper responded that pulling the items out and
introducing them separately implied a fast-track approach.
He thought the question was ultimately a policy matter
better addressed by the chair.
Representative Stapp asked what the status was of the prior
year's fast-track supplemental appropriation bill. He asked
whether it remained in the Senate Finance Committee (SFC).
Mr. Alper responded that his understanding was that it
remained in SFC.
Representative Stapp stated that he asked the question
because bills were often described as fast-track but did
not always move quickly. He relayed that he also had
questions for Mr. Painter regarding the DOT federal match.
2:00:22 PM
Representative Stapp asked Mr. Painter to walk through the
total amount of UGF needed to meet the federal match
requirements, prior to considering the approximately $69
million from the prior fiscal year.
Mr. Painter responded that the total amount requested by
the governor was approximately $96 million across the two
federal programs. He noted that he was rounding the number
because he did not have the precise figures in front of
him. He stated that approximately $30 million had already
been obtained. He clarified that the combined request
exceeded $100 million.
Representative Stapp asked how much money in total was the
"fiscal kabuki" that was tying the AIDEA receipts to the
funding source.
Co-Chair Josephson stated that he was aware of
Representative Stapp's feelings about the AIDEA funding. He
noted that the governor had proposed using AIDEA receipts
to fund the dividend program in his first calendar year in
office. He thought the comment was unnecessary. He shared
that he had recently taken a class on civility that
Representative Stapp had also attended. He requested that
members ask questions as politely as possible.
Representative Stapp stated that he would refrain from
using the word "kabuki." He clarified that he did not
intend the remark as an accusation and meant it as a
reference to an unorthodox process. He wanted to return to
the substance of his question because he believed it was
important. He asked how much funding from a source such as
AIDEA receipts had been used for that particular line item,
in total, out of approximately $100 million.
Mr. Painter responded that he understood the direction of
the question. He explained that AIDEA receipts were not
used for match and were instead used for other projects. He
stated that of the match requested by the governor that had
been funded with other fund sources, approximately $41
million consisted of reappropriations of older projects. He
specified that it included approximately $37 million from
the Juneau Access Improvements (JAI) Project, approximately
$3 million from an older earthquake project, and about $1
million from several smaller projects.
Mr. Painter explained that there had been an additional $20
million to $21 million of match that was categorized as
"old match," which DOT had testified had not materially
affected project delivery and primarily signaled that match
was available. He stated that there was also approximately
$7 million in match that was not funded because the Senate
version of the budget had included additional
reappropriations that were removed by HFC without
replacement. In total, approximately $27 million in
matching funds had not been funded by the legislature,
either intentionally or through the veto process. He
relayed that the $41 million gap resulted from vetoes of
other projects.
Representative Stapp stated that the explanation addressed
his concern. He understood that the state had initially
been short on match funding and the veto process had
increased the shortfall. He asserted that the sequence of
events led to the state's current situation. He asked if he
had made a fair assessment.
Mr. Painter agreed that it was a fair assessment. He
explained that the legislature had made an intentional
policy decision to not fully fund match, with the
expectation that the department could use match that was
already on hand. He noted that the department had testified
that it could operate through FY 26 even with a greater
level of underfunding than originally intended by the
legislature, which illustrated the point the legislature
had sought to make the prior year. The current situation
reflected a combination of intentional underfunding and
additional shortfalls caused by vetoes.
2:05:19 PM
Co-Chair Josephson asked Mr. Painter to clarify that when
he referenced the department's statements about operating
with reduced funding, he was not taking a position on
whether contracts would be let efficiently, whether delays
would occur, or whether employees could be affected. He
asked if Mr. Painter was simply relaying the department's
testimony.
Mr. Painter responded in the affirmative. He added that
there was a difference between being underfunded by $26
million and being underfunded by $70 million in terms of
potential impacts.
Co-Chair Josephson announced that the committee would move
to invited testimony on the bill.
2:06:39 PM
ALICIA KRESL, EXECUTIVE DIRECTOR, ASSOCIATED GENERAL
CONTRACTORS OF ALASKA, relayed that the Associated General
Contractors of Alaska (AGCA) represented more than 600
general contractors, specialty contractors, suppliers, and
service providers statewide. She expressed appreciation for
the opportunity to provide clarity on the timeline and
operational realities associated with the state
transportation match. She understood that the committee had
heard two separate messages over the past few weeks. She
explained that the industry had emphasized the urgency of
securing the match as soon as possible, while DOT had
stated that it had sufficient funding to operate through
July of 2026. She explained that both statements were true.
Ms. Kresl stated that the department had the ability to
carry its current reduced construction program through July
of 2026. She shared that the program had been submitted to
the Federal Highway Administration (FHA) under Statewide
Transportation Improvement Program (STIP) Amendment 2 and
reflected a scaled-down set of projects and funding levels
based on the limited match currently available. She
explained that the department was working with the
resources it had and that funding could be extended into
July under the constrained plan.
Ms. Kresl stated that the difference between securing the
match immediately versus later in the session was not about
whether the department could function. The difference was
whether the department, FHA, contractors, and communities
had the certainty and planning time needed to maximize work
during the short 2026 construction season and beyond. The
project development process included design, environmental
approvals, federal authorization, advertisement, bidding,
and award, all of which followed a strict timeline. She
stated that when match funding arrived late, those steps
were compressed or deferred entirely, introducing
unnecessary risk and disruption.
Ms. Kresl relayed that when funding arrived late,
construction industries and agencies shifted from planning
mode into "scramble mode." She stated that the department
had worked extremely hard the prior year to push projects
forward after early delays in program delivery. She noted
that the department had also secured a historic level of
August redistribution, from which Alaska would benefit
significantly. She added that uncertainty around
traditional match funding disrupted project sequencing,
contractor workforce planning, the availability of
equipment and materials, and the ability to secure the
maximum amount of August redistribution. She stated that
late funding also reduced flexibility.
Ms. Kresl explained that if a project finished early, the
department might not be able to advance another project
later in the construction season. If a project experienced
unexpected cost increases, the department might delay or
halt another planned project because it could not rely on
unsecured match funding later in the year. She explained
that under a constrained budget, there was little ability
to adjust, absorb changes, or accelerate work, which
ultimately harmed industry and the economy. She stated that
while the department had accurately described its ability
to stretch the reduced program through July, industry was
focused on the opportunity cost, including projects that
could not be advanced and planning time that could not be
recovered.
Ms. Kresl stated that she recognized the difficulty of the
legislature's task, but few financial decisions offered the
guaranteed return on investment associated with the 90-10
match. She stressed that early clarity on match funding
strengthened the entire system by allowing the department
to plan and obligate funds efficiently, which provided
federal highway officials with confidence in the state's
ability to deliver, gave contractors sufficient lead time
to hire and mobilize, and provided communities with greater
certainty regarding project delivery.
2:11:31 PM
Co-Chair Josephson appreciated the consistency between
industry and departmental testimony. He asked Ms. Kresl to
provide background on her professional experience and
whether she had previously seen match funding arrive so
late.
Ms. Kresl responded that she had served as the executive
director of AGCA since 2018. She had never seen match
funding arrive as late as it had recently. She recalled
that the last time Alaska missed its standard funding
timeline was around 1985. She stated that the situation was
unprecedented.
Representative Allard asked what Ms. Kresl thought was the
reason for the delay.
Ms. Kresl responded that the delay resulted from a
breakdown in the budgeting process during the prior year.
Representative Bynum emphasized that capital projects in
Alaska supported families, maintained a stable workforce,
and strengthened the construction industry. He indicated
that he supported the construction industry. He asked Ms.
Kresl to describe her interactions with DOT regarding
certainty and potential disruptions. He asked for more
information about the overall level of confidence heading
into the summer construction season.
Ms. Kresl responded that DOT had provided monthly tentative
advertising schedule updates over the past year to the
contracting community and the public. She explained that
the process was still early for the 2026 construction
season, but the most recent update showed a list of
projects ready to proceed. She stated that the next several
weeks would be important in determining how the project
delivery timeline would unfold.
Representative Bynum commented that he had a professional
background in hydropower and the long planning horizons
often required for infrastructure projects. He asked what
level of forecasting and lead time the construction
industry needed to plan effectively and whether six months
was sufficient.
Ms. Kresl responded that the required lead time depended on
several factors, including project type, location,
complexity, and workforce needs. She explained that some
projects could proceed quickly if contractors already had
equipment and personnel mobilized or if the project was
located on the road system. She added that for larger and
more complex projects in Alaska, six months to one year of
lead time was preferred, if not more.
Representative Bynum asked how insufficient lead time
impacted project cost or quality.
Ms. Kresl responded that she could not speak to project
quality, stating that contractors always aimed to deliver
high-quality work. She explained that shortened timelines
created challenges for both contractors and DOT and reduced
opportunities to address issues through advanced planning.
2:16:44 PM
Co-Chair Schrage thanked Ms. Kresl for her testimony and
stated that he had reviewed the Meet the Match Coalition
letter (copy on file). He remarked on the breadth of the
coalition supporting the letter and noted that many of the
organizations listed were not typically seen together. The
letter appeared to reflect an unprecedented level of
consensus. He asked whether Ms. Kresl had seen a letter
with that level of agreement on what was needed and the
need to advocate on the issue.
Ms. Kresl responded that the letter was remarkable but that
assembling it was not difficult. She explained that every
organization that was contacted, including those initially
viewed as unlikely participants, immediately agreed to sign
on to the letter. She stated that the response signaled
that the issue extended beyond the construction industry.
She explained that the construction industry provided
access to all industries and communities across the state
and that the issue affected everyone, not just contractors.
Representative Allard asked for a copy of the letter to be
distributed to all members.
Co-Chair Schrage stated that the letter had been emailed to
all legislators but he could ensure that it would also be
posted on BASIS. He listed some of the organizations
represented in the letter, including the Alaska Chamber,
Alaska Miners Association (AMA), AGCA, Alaska Trucking
Association (ATA), multiple labor unions including the
American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO), the Juneau Chamber of Commerce,
the Fairbanks Chamber of Commerce, the Alaska Bankers
Association, and the Alaska Oil and Gas Association (AOGA).
He reiterated that the breadth of the coalition was unusual
and that he had not seen a similar letter before. He
questioned what prompted the letter. He stated that
testimony from DOT had not conveyed a strong sense of
urgency and asked Ms. Kresl to reconcile the department's
testimony with the concerns expressed in the letter. He
asked whether the concern was with the risk and uncertainty
facing industry members during the construction season. He
understood it was important to have certainty and reduced
risk in economic development and asked whether uncertainty
was the primary concern motivating the letter.
2:20:37 PM
Ms. Kresl responded that the issue centered on certainty
for industry, for the organizations represented in the
letter, and for the agencies supporting those projects.
Co-Chair Schrage asked for specific examples of the impacts
of the uncertainty. He asked if businesses were delaying
purchasing supplies or making other decisions due to the
lack of certainty. He requested tangible examples of
potential consequences.
Ms. Kresl responded that AGCA was releasing an economic
impact report on the construction industry later in the
week. She stated that construction spending had an outsized
direct and indirect impact on Alaska's economy. She
explained that the loss of construction dollars affected
wages, local vendors, grocery purchases, and broader
economic activity. The economic impact extended beyond the
construction sector and the loss involved far more than the
direct dollar amount associated with the projects.
Representative Stapp commented that Ms. Kresl had made a
strong case regarding the importance of stability and
reliability and the role of Alaska's contractor sector as a
foundational part of the state's economy. He asked what
message she would give the legislature regarding how
funding priorities should reflect the importance of the
federal highway match. He asked what guidance she would
offer going forward.
Ms. Kresl responded that the current situation was one the
state had not faced in a long time. She suggested that the
legislature work to ensure that the situation would not
occur again in the future. She emphasized that providing
stability to the contracting community, to DOT, and to
those who relied on construction-related employment was
critically important.
2:23:26 PM
Representative Bynum wanted to reflect on how the state had
funded capital projects in recent years. He observed that
funding often focused on meeting the minimum required
match. He asked what Alaska might look like if the state
made a more serious commitment to capital investment beyond
minimum match requirements, including investing in
families, jobs, and long-term development. He asked Ms.
Kresl to describe her vision of Alaska under a robust
capital investment approach.
Ms. Kresl responded that her vision aligned with the goals
shared by members of the legislature. She stated that it
included a prosperous Alaska with development projects,
stable employment, strong communities, and reliable
transportation systems connecting communities. She
explained that a strong construction workforce allowed
workers to move among industries such as transportation,
oil and gas, and mining due to transferable skills. She
stated that infrastructure investment supported broader
economic development and future projects the state hoped to
advance.
Representative Bynum asked what such investment would mean
for attracting working-age families to Alaska. He noted
that there were concerns about declining school enrollment
and asked whether a robust capital plan could help bring
families with children into communities and support long-
term community stability.
Ms. Kresl responded that the average annual wage for a
construction worker in Alaska exceeded $100,000, which was
sufficient to support a family. She shared that the
construction industry had an approximately 82 percent
Alaska resident hire rate and she hoped the rate would
increase. She emphasized that construction jobs created
significant economic opportunity for Alaskan families.
2:26:34 PM
REBECCA LOGAN, CEO, ALASKA SUPPORT INDUSTRY ALLIANCE,
ANCHORAGE (via teleconference), shared that she served as
the CEO of the Alaska Support Industry Alliance. She
explained that the organization represented companies based
in Alaska that were providing support services to oil, gas,
and mining operations statewide. The alliance had more than
500 member companies employing approximately 35,000 people,
and many members were also part of AGCA. She supported HB
283 and the federal transportation program. She relayed
that federal transportation programs provided Alaska with a
significant and reliable source of infrastructure funding
each year, with the only requirement being a state match.
She explained that when the state met its obligation, it
unlocked approximately nine times that amount in federal
investment. She stated that there were few state
expenditures that delivered a similar level of return.
Ms. Logan stated that the approach was not new and that
Alaska had relied on its partnership with the federal
government for decades to build and maintain roads,
bridges, ports, and airports. She asserted that it was a
proven model that worked when the state provided stability
and acted in a timely manner, which was why the alliance
supported the request in the governor's supplemental
budget. She described it as a strategic investment that
would allow approximately $700 million in additional
funding to flow into Alaska. She stated that the funding
supported construction jobs, engineering and design work,
material suppliers, local contractors, and small businesses
across the state.
Ms. Logan stated that the timing of the funding was as
important as the dollar amount. She asserted that Alaska's
construction season was short, expensive, and unforgiving,
and that agencies, contractors, and communities needed
predictability well in advance to plan projects, secure
labor and equipment, and sequence work efficiently. She
warned that failing to meet the federal match or waiting
until the last possible moment placed hundreds of millions
of federal dollars at risk. She stated that delays
disrupted project schedules and workforce planning and
could lead to long-term cost increases due to inflation and
remobilization.
Ms. Logan stated that approving the match promptly sent a
clear signal that Alaska was serious about fiscal
responsibility, infrastructure investment, and efficient
use of the limited construction window. She concluded that
meeting the federal transportation match was a smart, time-
sensitive investment and that acting quickly provided the
certainty needed to plan projects, line up materials, and
fully utilize the construction season. She noted that there
was a news column by Meg Nordell of Jim Construction that
appeared in the current day's issue of the Fairbanks Daily
News-Miner that concluded that predictable investment
allowed employers to plan and hire, supported
apprenticeship programs and career pathways, and gave young
Alaskans a reason to train, work, and remain in the state.
Ms. Logan relayed that during the prior summer in
Fairbanks, she had spoken with three young people who had
planned to work a full construction season. She explained
that due to delays, the projects did not proceed, and those
individuals were working reduced hours and seeking
additional employment. She emphasized the importance of
predictable industries in retaining young workers in
Alaska.
Co-Chair Schrage remarked that the committee had heard
repeatedly about the importance of certainty and long lead
times for industry planning. He asked whether delaying the
funding until May of 2026 would have a material impact on
the construction industry during the upcoming season and
the following year.
Ms. Logan responded that it would have a significant
material impact and stated that Ms. Kresl had expressed
similar concerns. She explained that when projects and work
declined in Alaska, the support industry also declined,
resulting in the loss of workers and equipment. Without
sufficient lead time, it was difficult to rebuild workforce
capacity and equipment availability in a short period.
Co-Chair Schrage stated that the legislature faced a
difficult budget climate and it was going to be difficult
for the legislature to make progress in many areas,
including supporting industry. He thought that one of the
most impactful actions to support resource development and
construction industries would be to meet the federal match
and provide early certainty. He asked whether Ms. Logan
agreed that providing certainty was likely among the top
three actions the legislature could take to support
industry and resource development during the year.
Ms. Logan responded that she agreed. She relayed that the
issue had become one of the alliance's legislative
priorities for the year and it was likely the first time
the alliance had taken a position. She explained that the
issue was critical to many sectors because of shared
membership with AGCA and the extent to which their work
depended on a strong construction industry, transportation
systems, and supply chains. She stated that the critical
nature of the issue was why such a diverse group had signed
the letter. She explained that at a high policy level, the
issue was about stability, and at an operational level it
concerned the practical needs required on the ground to
support industry.
2:33:30 PM
Representative Stapp stated that he was a strong supporter
of the alliance and that Ms. Logan's comments regarding
stability were well taken. He asked if the alliance had
concerns during the prior fiscal year when the legislature
tied match funding to a fund source other than UGF.
Ms. Logan responded that the alliance had concerns about
how the situation would unfold. She stated that during the
prior year, there had been significant work on the North
Slope, which absorbed some of the workforce that otherwise
would have relied on construction projects. She clarified
that many members who were not doing their expected
construction work had employment opportunities on the North
Slope. There had been concern that the situation could have
resulted in greater disruption.
Representative Stapp asked if Ms. Logan felt the
legislature had prioritized industry stability when the
funding decision occurred.
Ms. Logan responded that she did not recall having formed a
clear conclusion at the time. She stated that her focus
then had been more on how the situation would resolve
rather than on the process that led to it.
Co-Chair Josephson thanked Ms. Logan for her testimony and
stated that the committee would move to the final
testifier.
2:35:16 PM
SCOTT VIERRA, DIRECTOR OF BUSINESS DEVELOPMENT, NORTH STAR
TERMINAL, NORTH STAR EQUIPMENT SERVICES, ANCHORAGE (via
teleconference), shared that North Star Terminal (NST)
operated eight facilities across Alaska, including
Deadhorse, North Pole, Delta Junction, Anchorage, Seward,
Homer, Valdez, and Dutch Harbor. He stated that NST
supported oil and gas, mining, and construction
infrastructure projects throughout the state and employed
several thousand longshoremen to support project cargo and
the tourism industry. He supported HB 283 and thought it
was important that the bill passed quickly, particularly
the approximately $70 million required for DOT to meet the
state match for federal transportation funding. He stated
that the state match was not optional and it unlocked
approximately $700 million in construction investment.
Mr. Vierra stated that federal funds could be delayed or
lost if the legislature did not act quickly to fast-track
and pass the bill. He explained that once funding was
approved, projects still had to proceed through engineering
approval, bidding, award, and contracting processes, which
could result in additional delays of several weeks before
construction could begin. Additionally, materials for
projects had to be sourced, oftentimes from locations
outside of Alaska. He stated that time was the enemy in
Alaska because the construction season was short. He
explained that the funding was fundamentally about jobs and
workforce stability. After the prior year's initial project
delivery challenges, getting projects out quickly had been
difficult. The delays created losses and postponements of
significant projects and many contractors had reduced their
workforce by 20 to 50 percent. He stated that some
contractors were still on the verge of closing their doors.
Mr. Vierra relayed that without certainty and continuity,
skilled operators, mechanics, and blue-collar workers were
forced to leave Alaska for steady work in other states. He
stated that it was a significant blow because the same
workers supported oil, gas, and mining projects. He
explained that once workers and their families left Alaska,
they were extremely difficult to replace, which weakened
multiple sectors of Alaska's economy and resulted in the
loss of constituents. He reported that approximately $700
million in DOT construction funding would have supported 25
to 30 major projects statewide. The projects were not
limited to roads and bridges but also included airports,
docks, and marine system projects that affected nearly
every legislative district. He explained that those
projects would have generated approximately 4,000 to 6,000
direct jobs, along with significant secondary economic
activity in transportation, materials, lodging, housing,
and local businesses across Alaska.
Mr. Vierra noted that Alaska had met the federal match for
decades and that failing to provide the full match would
delay projects, increase costs, result in job losses, and
weaken the workforce. He stated that the match remaining
unmet would be especially harmful if the Alaska Liquefied
Natural Gas (AKLNG) pipeline were to move forward.
Mr. Vierra stated that NST's civil division had taken a
major hit during the prior year and that they had reduced
their workforce by 30 percent. He urged the committee to
support HB 283 and ensure that DOT received the full,
uncompromised state match as quickly as possible. He stated
that Alaska could not afford to lose construction jobs for
a second consecutive summer and could not afford to lose
its workforce to other states. He stressed that replacing
workers would be far more difficult and costly.
Representative Bynum asked Mr. Vierra to identify the
trades he represented and the number of jobs his company
supported in Alaska. He also asked how a robust capital
program would have affected NST's ability to provide
working jobs that supported families and encouraged them to
remain in Alaska.
Mr. Vierra responded that his company had both an on-dock
and an off-dock division. He explained that the on-dock
division operated in Anchorage, Seward, Homer, Valdez, and
Dutch Harbor and handled project cargo through
longshoremen. He stated that the company had issued
approximately 5,000 W-2s in the prior year, with about 90
percent associated with longshore work, including both
project cargo and tourism-related activity.
Mr. Vierra stated that the off-dock division operated
approximately 40 cranes, drill rigs, and heavy equipment
used for large infrastructure projects, including military,
refinery, and DOT projects. He stated that the company
maintained a core workforce of approximately 60 to 70
employees and added an additional 40 to 60 workers when
major projects were available, including oil and gas work
on the North Slope and civil projects during the summer
construction season. He stated that smaller projects were
less desirable, but helped save jobs, while larger projects
brought about long-term jobs. He asserted that if the
pipeline moved forward, it would be important to hire
Alaskan workers and keep them in the state. He asked for
the second part of the question to be repeated.
2:40:01 PM
Representative Bynum clarified that the second part of the
question addressed how a robust financial investment by the
state in its capital program would affect long-term
stability for workers.
Mr. Vierra responded that increased capital investment
would bring more people to Alaska, including workers from
other states. He relayed that one of the primary
discussions at AGCA focused on how to bring more high
school and college graduates into the trades. He stated
that the availability of more projects encouraged
individuals to pursue trade careers that paid more than
$100,000 per year. He added that increased funding produced
more jobs and generated secondary economic benefits that
flowed into communities. Additional funding allowed
companies to purchase more equipment, hire more workers,
create more jobs, support families, and increase school
enrollment. He asserted that the effects compounded over
time and the industry needed the legislature's help.
Co-Chair Josephson clarified that the first testifier, Ms.
Kresl, served as the executive director of AGCA. He stated
that the second testifier, Ms. Logan, served as CEO of the
Alaska Support Industry Alliance. The final testifier, Mr.
Vierra, worked in business development for North Star
Equipment Services.
HB 283 was HEARD and HELD in committee for further
consideration.
2:44:28 PM
AT EASE
2:48:31 PM
RECONVENED
^OVERVIEW: OVERVIEW: GOVERNOR'S FY27 BUDGET BY THE
LEGISLATIVE FINANCE DIVISION
Mr. Painter introduced the PowerPoint presentation,
"Overview of the FY27 Budget" dated January 27, 2026 (copy
on file). He skipped to slide 3 and stated that when the
legislature adjourned the prior year, there was a projected
budget deficit in FY 25 and a surplus in FY 26 based on the
spring revenue forecast. He stated that the vote to fill
the FY 25 deficit from the Constitutional Budget Reserve
(CBR) failed, which resulted in the FY 25 deficit being
filled first through a draw from the Alaska Industrial
Development and Export Authority (AIDEA) and then through
the Higher Education Investment Fund (HEIF). He noted that
there was no source identified for a potential FY 26
deficit.
Mr. Painter stated that during construction of the FY 26
budget, the legislature accepted approximately $43 million
of the governor's proposed $80 million in UGF increments.
He stated that the legislature added $44.5 million in
increases that were not proposed by the governor and made
$34 million in budget reductions. Overall, the enacted
budget was slightly smaller than the governor's request
because it denied increments and the reductions exceeded
the added items. He explained that the summary did not
include the K-12 impacts of legislation passed separately.
Mr. Painter relayed that the legislature's budget fully
funded the K-12 foundation formula and most statewide
items, with the exception of school debt reimbursement and
the Community Assistance Fund (CAF). The legislature also
funded the Fire Suppression Fund (FSF) and the Disaster
Relief Fund (DRF) at five-year average levels.
Mr. Painter moved to slide 4. He noted that vetoes had been
discussed extensively the prior day but he would provide a
brief recap. He relayed that vetoes occurred in FY 25,
including reappropriations for the DOT match and the AIDEA
portion of the deficit-fill language, which resulted in the
remaining deficit being filled from HEIF. The FY 26 vetoes
included $103 million from the operating budget and $14.3
million from the capital budget. The largest veto affected
the K-12 foundation formula, but the legislature overrode
that veto. After the veto overrides, the enacted FY 26
budget reflected a projected surplus of $130 million based
on the spring forecast.
Co-Chair Josephson asked whether the surplus included veto
dollars that were restored.
Mr. Painter responded in the affirmative.
Co-Chair Josephson asked for confirmation that the figure
included the override amounts.
Mr. Painter responded that it did.
2:51:54 PM
Representative Hannan asked for clarification on an earlier
implication that the DOT match in the prior year's budget
was not UGF. She asked for confirmation that the $62.2
million was general fund money, even though it appeared as
a reappropriation.
Mr. Painter replied in the affirmative. He explained that
the original fund source was UGF. The funds had been
appropriated to specific projects, but they remained UGF
and could be used for any purpose, subject to
appropriation.
Representative Galvin asked for more information about
differing figures related to the veto of the K12
foundation formula. She noted that the spreadsheet
["Summary of HB 283: Fast Track Supplemental Budget,"
presented earlier in the meeting by Mr. Alper] showed a
veto amount of $50.64 million, while slide 4 reflected
$45.4 million.
Mr. Painter responded that LFD and the Office of Management
and Budget (OMB) disagreed about the effect of the veto. He
explained that he had written a memorandum to the
legislature addressing the issue, which had been posted on
the LFD website and distributed with the MayJune
newsletter.
Representative Galvin relayed that she had missed the
memorandum and asked what it said.
Mr. Painter explained that the issue was largely academic
because the veto had been overridden. He described that the
legislature had reduced funding into the Public Education
Fund (PEF) based on anticipated pre-kindergarten
expenditures that could not statutorily be spent due to a
provision limiting pre-kindergarten funding increases to $3
million per year. He noted that the legislature reduced the
estimate to the statutory level, while OMB had not
reflected the adjustment. He explained that LFD's analysis
found that if the veto had been upheld, the impact would
have been approximately $45 million, rather than $50
million. He reiterated that the matter was now academic
because the veto had been overridden and the funding had
been restored.
2:54:39 PM
Mr. Painter continued to slide 5. There was significant
skepticism during the prior year's session about the $68
per barrel price used in the spring forecast. He explained
that oil prices had declined after the spring forecast, and
the governor had issued an unofficial revenue forecast at
the time of signing the budget that assumed $62 per barrel.
He added that the Senate had aimed for $64 per barrel. He
stressed that that all legislators seemed to be aiming
below the $68 per barrel price.
Mr. Painter explained that the fall forecast ultimately
reduced the projected FY 26 oil price to $65.48 per barrel
and reduced projected revenue by $181 million. He noted
that the reduction exceeded what might have been expected
from the price change alone due to reduced production,
increased expenses, and lower corporate income tax revenue.
He explained that the reduction shifted the outlook from a
projected $130 million surplus to an approximately $51
million deficit before consideration of any supplemental
appropriations.
Mr. Painter moved to slide 6 and explained that vacancy
rate data from OMB showed that hiring trends had improved
earlier in the fiscal year, with vacancy rates declining by
more than 2 percent between the beginning of FY 25 and
legislative adjournment. He noted that the governor had
announced a hiring freeze in May of 2025 in response to
lower oil prices, and vacancy rates subsequently increased.
He indicated that the rates appeared to begin declining
again in December of 2025. He stressed that the trend of
improved vacancy rates had declined again during the hiring
freeze.
Representative Tomaszewski asked if Mr. Painter could
provide an associated dollar figure or rough estimate
representing the impact of the changing vacancies.
Mr. Painter responded in the negative. He explained that
the next slide would address the issue by discussing how
much lapse occurred and where it went. He moved to slide 7.
He asserted that it was not surprising that there was some
lapse given the level of vacancies in FY 25. He explained
that there was a typical waterfall in the budget each year
showing how various lapsing dollars were applied. He noted
that most of the items in FY 25 followed the usual lapse
waterfall, but the School Major Maintenance Grant Fund
(SMMGF) was an exception.
Mr. Painter explained that the legislature had inserted an
additional item for SMMGF, anticipating that vacant
positions would generate lapse that could be carried
forward and deposited into that fund. The approach had not
worked as intended due to a combination of factors. He
explained that there was less lapse than anticipated, in
part because vacancy rates were improved compared to
earlier projections. He also noted that a significant
portion of vacancy-related funding was redirected to
contracts to perform the same work or to overtime for other
employees, which reduced the amount of money that
ultimately lapsed.
Mr. Painter stated that although some lapse occurred, the
majority of it had gone into the Group Health and Life
Benefits Fund (GHLBF). He explained that $23.1 million was
deposited into the fund, which supported AlaskaCare. He
added that AlaskaCare had been relying on lapsing funds
rather than fully increasing rates to meet actuarial needs.
He noted that the FY 26 budget included intent language
directing the Department of Administration (DOA) to begin
increasing rates to address the issue, but the direction
had not yet been implemented in FY 25.
Mr. Painter explained that even with the $23.1 million
deposit, there remained a $1.6 million shortfall that could
not be filled with available lapse and would need to be
carried forward and addressed with lapse in FY 26. In
response to the intent language, rates were still not
increased to the full actuarial level, but 6.4 percent. He
noted that employee premiums were increased, but employer
contribution rates were not. As a result, AlaskaCare
continued to rely heavily on lapse funding.
Mr. Painter stated that estimates indicated AlaskaCare
would require more than $10 million of lapse in FY 26, and
the need was projected to be between $18 million and $26
million in FY 27. Without policy changes, projections
showed AlaskaCare could require between $27 million and $50
million of lapse annually. The current structure resulted
in vacancy-related lapse effectively subsidizing AlaskaCare
because the rates charged by DOA were insufficient.
Mr. Painter stressed that it was important to understand
what was happening to tens of millions of dollars of
funding that the legislature had anticipated might be
available for SMMGF. He noted that the governor had vetoed
$25 million for the fund. He explained that the legislature
had structured the funding so that it would first come from
lapse funds and would be supplemented with general funds in
FY 26 if the lapse was insufficient. He stated that the
governor vetoed the approach, resulting in $4.9 million
being funded from lapse and the remaining amount,
approximately $8 million, coming from the FY 26 budget,
with no additional funding provided.
Mr. Painter explained that the lapse was largely redirected
into GHLBF. There would not have been sufficient lapse to
fully fund SMMGF even without the veto. He relayed that
fully funding it would have added to what was now the FY 26
deficit. He added that no lapse was needed for some other
accounts, and that $5 million was applied for central
services rate smoothing.
Mr. Painter clarified that none of the lapse went into the
CBR. He explained that the projected FY 25 deficit had been
approximately $188 million, while the actual transfer was
$129 million from HEIF. He stated that the reduction was
entirely due to revenue coming in slightly above forecast,
and not due to lapsing appropriations, because every dollar
of general fund lapse had been used in the waterfall.
3:01:50 PM
Representative Stapp asked when employer contributions for
AlaskaCare were last increased.
Mr. Painter replied that contributions had been increased
every year, but not to the full actuarial amount.
Representative Stapp asked whether there had ever been a
clear rationale for not using the full actuarial amount for
the AlaskaCare employer contribution rate, aside from
relying on lapse.
Mr. Painter responded that the department's response to the
intent language had been that it intended to take what it
described as a conservative, stair stepped approach. He
explained that the department increased the rate by 6.4
percent and increased the employee contribution. He
indicated that relying on lapse was a problem and the rates
should be increased further to avoid the issue. He added
that relying on between $27 million and $50 million
annually was more than could reasonably be expected, but he
believed the department had been cautious about
significantly increasing the budget because shifting to
full actuarial funding would materially increase overall
budget costs.
Representative Stapp remarked that the approach made sense
because increasing employer contributions would require
additional budget appropriations, whereas increasing
employee contributions would not. He expressed that he was
concerned about ongoing disconnects with OMB lapse reports.
He observed that each year, the reports projected zero
lapse through the end of session, despite known vacancy
rates that suggested that lapse would occur. He stated that
he routinely relied on LFD to estimate lapse and asked
whether there was a way to better align expectations with
OMB. He noted that agencies consistently had unfilled
positions but did not acknowledge anticipated lapse.
Mr. Painter responded that LFD calculated lapse by
examining vacant positions, which allowed for an estimate.
He explained that FY 25 demonstrated that not all
anticipated lapse actually materialized because agencies
often reused available funds for other purposes. He
provided an example involving DOH and the Department of
Family and Community Services (DFCS), which had the
authority to transfer funding between appropriations. He
explained that when lapse occurred in one area, it was
often used to cover shortfalls elsewhere. He noted that the
DFCS still experienced a shortfall even after using all
available lapse to cover payment assistance for the pioneer
homes. He stated that underfunding certain items led
agencies to repurpose lapse, meaning projected lapse did
not always occur. He concluded that while projections could
be improved, the availability of lapse did not guarantee
that it would remain unused.
3:05:21 PM
Representative Stapp asked for more information about the
$10 million in transfer authority for lapse within DOH and
DFCS. He stated that the scale of cross appropriation
authority was concerning and the need to fully utilize it
suggested the costs for the pioneer homes had been
significantly underestimated. He asked for Mr. Painter's
opinion on how to better project expenditures to avoid the
issue in the future.
Mr. Painter responded that projecting the costs for the
pioneer homes was difficult because the costs depended on
resident population and the costs changed over time. He
described the issue as a challenging policy decision for
both the legislature and the governor. He explained that
adding a margin of error could result in funds lapsing,
while underfunding could require transfers. The department
projected a shortfall in FY 26 based on current population.
He stated that accurately projecting population changes a
year in advance was difficult and the most direct way to
avoid the issue would be to appropriate additional funding.
He acknowledged that doing so would require tradeoffs given
limited budget resources.
Representative Bynum remarked that it was clear that
significant funding remained tied up in unfilled positions.
He observed that the state consistently funded vacant
positions year after year. He clarified that he did not
object to funding open positions, but expressed concern
that the resulting lapse created a cascading process in
which unspent funds were used to cover shortfalls
elsewhere. He noted that the legislature repeated the same
process every year. He asked how long the practice had been
occurring within the budgeting process.
Mr. Painter responded that some form of a lapse waterfall
had existed for a long time. He explained that the planned
use of lapse had become more common within approximately
the last five years. He noted that historically, the Group
Health and Life Fund (GHLF) relied on lapse only
intermittently, such as when unusually high medical claims
or increased pharmaceutical costs occurred. He explained
that the occasional use aligned with the original intent of
the fund. He added that the more recent practice of planned
reliance on lapse emerged during and after the COVID-19
pandemic period and had not been the historical norm.
Representative Bynum asked what the consequence would be if
the legislature decided to discontinue the practice
altogether.
Mr. Painter replied that if funding were not placed into
GHLF through lapse, the fund would experience a shortfall.
He explained that because the legislature did not set
AlaskaCare rates, DOA would need to increase rates more
significantly in a subsequent year to cover the gap. There
was a similar situation at the University of Alaska (UA),
where a prior shortfall resulted in approximately $10
million in increased health care costs the following year.
Representative Bynum asked if the issue could be addressed
instead through the supplemental budget process.
Mr. Painter responded that the legislature could
appropriate money directly into the fund rather than
relying on lapse. He clarified that doing so would place
the entire cost on UGF, whereas increasing rates would
distribute the cost across multiple fund sources.
3:10:02 PM
Mr. Painter moved to slide 8, which provided additional
historical context. He explained that there had also been
instances of overspending. He noted that a legislative
audit identified that the Department of Corrections (DOC)
overspent its UGF appropriation by $8 million in FY 24. He
relayed that OMB subsequently changed reporting practices
to make such overspending more visible. In FY 25, unaudited
figures showed overspending of approximately $12.6 million
in DOC and $700,000 in DFCS. The expenditures were expected
to be brought before the legislature through future
ratification requests. He added that reduced lapse was
partially attributable to overspending, which ultimately
drew from the general fund.
Mr. Painter proceeded to slide 9 and briefly addressed the
supplemental items. He noted that an updated fire
suppression figure was expected from the governor the
following week, which would incorporate spring costs and
potentially adjust prior disaster estimates. He explained
that the disaster funding language relied on a fixed dollar
amount. He warned that if oil prices declined further or if
costs exceeded estimates, the fixed amounts would not be
covered under the existing structure.
Mr. Painter advanced to slide 10 and detailed the fall
revenue forecast. He explained that the fall forecast
reflected lower oil prices in FY 26 and FY 27 compared to
the spring forecast. He noted that the forecast showed
lower production in FY 26 but higher production in FY 27.
He added that lease expenditures, which were deducted in
the production tax calculation, had increased. He explained
that because of the lower price projection, all companies
were projected to hit the 4 percent gross tax floor. He
noted that a calculation using total production multiplied
by a 4 percent gross tax would yield a higher figure than
the actual revenue projection because some companies paid
below the floor. He clarified that not all lease
expenditures reduced state revenue because many
expenditures only reduced liability to the floor and no
further. The petroleum corporate income tax projections
declined more than expected based solely on price changes
alone. He indicated that DOR attributed the decline to
broader global factors. The combined effect resulted in
lower revenue in FY 26 and FY 27 than would have been
expected based solely on oil price sensitivity tables from
the spring forecast.
Mr. Painter moved to slide 11 and addressed revenue from
Natural Petroleum Reserve-Alaska (NPRA). He stated that the
revenue was not highly material in FY 26 or FY 27 but had
significant long-term implications. He explained that
federal royalties from NPRA leases had historically been
split 50-50 between the state and federal government. He
noted that federal law required the state to prioritize use
of the funds for subdivisions that were most directly or
severely affected by NPRA development. He explained that
litigation approximately 40 years earlier resulted in the
creation of the NPRA grant program, which was established
in statute. He explained that appropriations to the program
were made annually in the capital budget, typically based
on estimated receipts. Communities submitted grant
applications through the Department of Commerce, Community
and Economic Development (DCCED) and the funds were
distributed accordingly.
Mr. Painter explained that federal H.R.1, also referred to
as the One Big Beautiful Bill Act, changed the royalty
split to 70-30 for leases issued after July 2025, with the
change not taking effect until 2034. He explained that LFD
and DOR reviewed whether H.R.1 altered the statutory
requirement to prioritize distributions to local
governments. He stated that he requested a legal opinion
from Legislative Legal Services (LLS) in November of 2025,
and LLS concluded that the bill would not amend the
revenue-sharing requirement. He stated that under the legal
interpretation, the requirement to prioritize distributions
to impacted communities remained in effect. He noted that
some ambiguity had been discussed regarding treatment
beginning in FY 34, but LLS did not identify any ambiguity
prior to that date.
3:16:02 PM
Mr. Painter advanced to slide 12 and continued discussing
NPRA revenue treatment. He explained that the fall Revenue
Sources Book reclassified NPRA revenue beginning in FY 27
as UGF revenue rather than federal revenue, with portions
restricted for the Permanent Fund and the Public School
Trust Fund (PSTF). He noted that the governor's capital
budget did not include the typical NPRA grant program
appropriation. The governor's operating budget included
standard language that annually appropriated unspent NPRA
funds first to the Permanent Fund up to 25 percent, then to
PSTF up to 0.5 percent, and then to the Power Cost
Equalization (PCE) endowment. He explained that although
the administration classified the revenue as UGF, the funds
were still directed to the stated purposes.
Mr. Painter relayed that none of the NPRA revenue reduced
the deficit. He stated that the OMB fiscal summary did not
reflect the appropriations at the time, which resulted in a
discrepancy of approximately $9.6 million related to the
PCE allocation. He stated that LFD continued to classify
NPRA revenue as federal revenue based on the interpretation
provided by LLS. As a result, there was a difference
between the LFD fiscal summary and the OMB fiscal summary
of approximately $9.6 million in UGF, along with additional
associated amounts. He noted that the table at the bottom
of the slide showed the cumulative impact of the
difference. He explained that when LFD prepared long-term
revenue projections, NPRA revenue was treated as federal
revenue in all years, while the official revenue forecast
classified a portion of that revenue as UGF. He explained
that it reflected a difference of interpretation, and that
LFD relied on advice from its legal counsel.
Representative Stapp asked Mr. Painter whether the legal
opinion could be shared with the committee. He expressed
concern with the treatment of NPRA revenue as UGF in the
Revenue Sources Book. He remarked that the interpretation
did not align with his understanding. He asked if Mr.
Painter could articulate the administration's rationale for
its conclusion.
Mr. Painter responded that he had not seen a legal analysis
supporting the administration's position and therefore he
could not speculate on the reasoning.
Representative Hannan asked for confirmation that the
revised royalty split moved from 50-50 to 70-30. She asked
which party received each share.
Mr. Painter replied that the split allocated 70 percent to
the state and 30 percent to the federal government, with
the state share directed to impacted communities first.
Representative Hannan asked whether OMB immediately applied
the 70-30 split beginning in FY 26 or if it would not apply
until FY 34.
Mr. Painter responded that DOR assumed the 70-30 split
would not begin until FY 34.
Representative Galvin noted that her questions related to
slide 8 and slide 12. She asked whether statutory guidance
existed for addressing general fund overspending, similar
to the statutory framework that directed the treatment of
lapsing NPRA revenue. She stressed that there was
documented overspending by DOC.
Mr. Painter replied that NPRA revenue was designated while
UGF was not.
Representative Galvin asked if there was anything in
statute that helped the state recover when there was a UGF
overspend, such as the approximately $12.6 million
overspend by DOC.
Mr. Painter responded that general fund overspending was
identified typically through the audit process and the
issue was brought to the legislature as a ratification,
which retroactively authorized the expenditure and resolved
the audit finding.
3:22:26 PM
Co-Chair Josephson asked if communities such as Nuiqsut
would receive substantial windfall of capital dollars if
the LLS opinion were upheld.
Mr. Painter responded in the affirmative.
Mr. Painter continued to slide 13, which illustrated the
percent of market value (POMV) draw calculation. He noted
that although oil revenue was frequently discussed, the
POMV draw constituted the state's largest general fund
revenue source. He explained that in FY 26, the POMV draw
was based on balances from FY 20 through FY 24, resulting
in approximately $3.8 billion.
Mr. Painter continued that in FY 27, the calculation
dropped FY 20, which reflected a balance of $64.9 billion,
and added FY 25, which reflected a balance of $84.7
billion. He explained that removing a low year and adding a
high year resulted in an increase of nearly $200 million in
the POMV draw. He stated that the increase was helpful for
the FY 27 budget situation; however, the increase should
not be expected to continue. He explained that the large
increase in FY 21 drove recent growth in the POMV draw and
that FY 27 represented the final year in which that
unusually high market year was incorporated. He stated that
absent another exceptionally strong market year, similar
increases should not be anticipated. He relayed that FY 27
would be easier than FY 28 from a budgetary perspective
because FY 28 would not benefit from that prior market
spike.
Mr. Painter moved to slide 14 and explained that the
following slides addressed the adjusted base calculation.
He described the adjusted base as the process of taking the
prior year's budget and establishing a clean starting point
for the next fiscal year. He explained that the process
involved removing one-time appropriations and adding
statewide decisions such as policy adjustments, salary
adjustments, and formula changes necessary to maintain
services at a status quo level.
Mr. Painter noted that several years earlier, LFD worked
with OMB to modify adjusted base rules to clearly
distinguish policy choices from formula-driven changes. He
explained that changes in student counts, for example,
reflected formula adjustments rather than policy decisions.
While the approach made the adjusted base more complex, it
provided greater clarity regarding gubernatorial policy
choices. When a formula item was funded at a partial
amount, such as the Permanent Fund Dividend (PFD), the
funding level was carried forward into the adjusted base
for the following year. The approach avoided resetting
calculations to statutory levels that had not been funded
for decades and instead reflected current policy decisions.
Mr. Painter continued to slide 15 and stated that the first
step in establishing the adjusted base involved removing
one-time or expiring items. He noted that the slide
contained a minor error in which the amounts for the
Department of Law (DOL) Statehood Defense item and the
Department of Environmental Conservation (DEC) PFAS item
were reversed. He clarified that the totals shown at the
bottom of the slide were correct. He explained that many of
the items listed originated in FY 25 or earlier and were
carried forward. The amounts reflected carried-forward
balances rather than original appropriations. He relayed
that $31.6 million in one-time or expiring items were
removed to reach a clean starting point.
Co-Chair Josephson asked for clarification on the error on
slide 15 and asked which two items were reversed.
Mr. Painter confirmed that the DOL Statehood Defense and
the DEC PFAS amounts were reversed. He stated that a
corrected version would be provided to the committee.
Co-Chair Josephson asked for confirmation that LFD's
definition of the PFD had an adjusted base of $1,000.
Mr. Painter responded in the affirmative.
3:26:27 PM
Co-Chair Josephson stated that the committee had completed
approximately half of the presentation. He noted that staff
would coordinate a future time for Mr. Painter to complete
the presentation.
Co-Chair Josephson reviewed the agenda for the following
day's meeting.
HB 283 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| FY27 Overview HFIN.pdf |
HFIN 1/27/2026 1:30:00 PM |
HB 263 HB 264 HB 265 |
| HB 283 Sup Spreadsheet 012626.pdf |
HFIN 1/27/2026 1:30:00 PM |
HB 283 |
| HB 283 Meet the Match Coalition Letter 01.15.26.pdf |
HFIN 1/27/2026 1:30:00 PM |
HB 283 |