Legislature(2021 - 2022)SENATE FINANCE 532
09/08/2021 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB3003 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB3003 | TELECONFERENCED | |
CS FOR HOUSE BILL NO. 3003(FIN) am(brf sup maj fld)
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; making capital
appropriations and supplemental appropriations; and
providing for an effective date."
9:05:46 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
explained that the original version of the bill submitted
by the governor had only three items including a series of
fund source changes from the Higher Education Investment
Fund to Unrestricted General Funds (UGF) for scholarship
programs and the Washington, Wyoming, Alaska, Montana, and
Idaho (WWAMI) Program. Additionally, the original bill
version had $1.5 billion in appropriations from the
Earnings Reserve Account (ERA) to the Dividend Fund, and an
additional $1.5 billion from the ERA to the Constitutional
Budget Reserve (CBR). The other body made a number of
changes to the bill on the floor and in committee, many of
which incorporated amendments submitted by the governor.
The Senate Finance Committee had heard the changes the
previous week. He stated he would review the changes to the
bill and how the governor's amendments were incorporated.
Mr. Painter discussed the document titled, "Multi-year
Agency Summary - FY 2022 Conf Committee Structure" (copy on
file). The document showed the totals represented in the
bill, with columns showing different types of funding. He
reviewed the column titles. The bill in total had $877.8
million of all funds, $792.6 million of which was UGF. The
vast majority of the amount was an appropriation to the
Dividend Fund. The other items, excluding the dividend,
totaled $147.3 million of all funds.
9:08:15 AM
Mr. Painter highlighted the document titled, "HB 3003/SB
3001 Operating and Capital Amendments" (copy on file). He
referenced a spreadsheet of amendments presented by the
Office of Management and Budget (OMB) the previous week and
noted that the other body had incorporated all but one of
the amendments. The amendment not adopted was Amendment 13
(shown on page 2), which signified an appropriation of
$50.4 million to the Unemployment Insurance Trust Fund. The
fund source was Coronavirus State and Local Fiscal Recovery
Funds (CSLFRF). The appropriation as proposed was designed
to try to avoid a tax increase on employers to refill the
fund. The other body incorporated the other 33 amendments
in the packet.
Co-Chair Stedman remarked that the operating budget was
completed a few months ago. He queried the logistics of why
the committee had not seen the information earlier in order
to incorporate the proposed funds into the operating
budget.
Mr. Painter replied that he was aware that there was a
possible shortfall in the Unemployment Insurance Trust Fund
that could potentially cause a tax increase on employers,
which was the normal statutory mechanism to refill the
fund. The administration had used Coronavirus Aid, Relief,
and Economic Security (CARES) Act funds that would have
otherwise lapsed and deposited them into the trust fund.
The amount had not yet been finalized but he had heard it
was in excess of $24 million. The deposit would partially
offset the shortfall. He thought the proposal was to make
up the shortfall, but there had not been a proposal during
session to address the potential issue other than using the
CARES Act funding.
Co-Chair Stedman asked if the $50 million in funds would be
deducted from the funds the state would receive from the
American Recovery Act the following year.
Mr. Painter replied in the affirmative and stated that that
the legislature had spent half the CSLFRF funds, and would
receive the other half from the federal government in May.
The $50 million would come out of the following year's
allocation.
Co-Chair Stedman noted that there was a normal budget cycle
being completed before the funds arrived in May. He
wondered why the item was so time sensitive to be on the
agenda for the current meeting and bill rather the fast-
track supplemental or normal operating budget that the
legislature would complete in April.
Mr. Painter understood that the timing of the item was
related to the rates being tied to the calendar year for
employers, so having the deposit during the 2021 calendar
year would affect the 2022 calendar year. If the
legislature waited until January, any deposit would be too
late to affect the 2022 calendar year employer
contributions.
Senator Wilson wondered about the percentage that employers
might have to increase in tax.
Mr. Painter stated that he had not received the information
from the administration.
Co-Chair Stedman asked for Mr. Painter to repeat the
question.
Mr. Painter stated the question was what the tax increase
percentage would be on employers if the funding were not
approved. He had asked the administration and had not yet
received a response.
Senator Hoffman asked if the fund faced insolvency if the
item was not funded.
Mr. Painter stated that without funding, the state would
face a "danger zone" for the fund balance, which would
trigger a statutory additional tax on employers to make up
the potential insolvency.
9:13:28 AM
Co-Chair Bishop thought the committee might entertain the
idea of having the department come and address the issue in
committee. He pointed out that different employers would be
affected differently by the potential increase in tax.
Co-Chair Stedman asked if there was any relief or waivers
that could be used to avoid the impacts of a rate change.
Mr. Painter agreed to reach out to the department for the
information.
Co-Chair Stedman asked for Mr. Painter to get back to the
committee with the information. He commented that Co-Chair
Bishop had knowledge on the subject.
Mr. Painter continued to address the operating and capital
amendments. He stated that the other body made changes to a
number of the items, which he would review. He commented
that Item 11 pertained to the Department of Health and
Social Services (DHSS) Emergency Programs. As submitted,
the item was $50.2 million in federal receipts that was
open ended for any receipts received for the purpose of
Coronavirus Relief by DHSS. The other body had changed to
item to "not to exceed" $50.2 million, rather than leaving
it open ended. He continued that the administration could
seek a Revised Program Legislative (RPL) for the item if it
received additional funds. The $50.2 million would cover
grants received to date but would not cover additional
grants that came in the future.
9:16:53 AM
Mr. Painter continued to discuss the amendments. He
considered Item 20, which concerned Alaska Marine Highway
System (AMHS) employees and the Masters, Mates, and Pilots
(MMP) Union agreement. The item was submitted during the
Conference Committee and had been too late to add to the
budget. The amendment covered a calendar year's funding,
however in the legislature's budget and enacted budget,
AMHS's budget was forward funded to establish a calendar
year budget in the future. There was 18 months of
appropriations for AMHS in the current budget, so the other
body amended the item to conform to the 18-month schedule
by adding 6 months of funding ($221,000) and moving the
item to the language section.
Co-Chair Stedman recalled that the amendment had come in
late in the Conference Committee cycle.
Senator Hoffman thought items 16 through 18 referenced a
lump sum payment. He assumed that there was not an ongoing
increase but asked if the 3 percent cost of living
allowance (COLA) would be an ongoing. He asked about the
annual inflation rate.
Mr. Painter relayed that the 4 percent was an ongoing rate,
however the salary increase had not been paid out in 2021
because of confusion about the terms of the bargaining
agreement. The contract had a 4 percent increase in FY 21
that was not paid out, and an additional 2 percent in FY
22. The 3 percent increase for MMP was also an ongoing
increase. He shared that LFD was currently assuming a 2
percent inflation rate. He noted that item 16 through 18
were brought forward late in the budget process. The items
essentially paid out the increase as a one-time lump sum,
while the higher salary was built into the FY 22 budget.
9:19:58 AM
Senator Hoffman asked about the annual inflation rate for
the previous two years.
Mr. Painter recalled that it had been in the five percent
annualized rate for the past few months, before which it
was under 2 percent.
Senator Olson asked if Mr. Painter was aware if the changes
that came from the House were made in consultation with the
administration, and if the administration had been in
favor.
Mr. Painter could not speak to whether the administration
was in favor of the proposed changes. He cited that many
items were technical changes that LFD had consulted with
OMB about.
Mr. Painter addressed Item 21, a $1 million grant for
economic development through the Department of Commerce,
Community and Economic Development. The item had been
submitted as a capital project, but the terms of the grant
expressly prohibited the funds for being used for capital
purposes. At the suggestion of LFD, the House had converted
the item to a multi-year operating item, which would be
more appropriate.
Senator Hoffman requested a copy of the state economic
development initiatives.
Mr. Painter agreed to provide the information. He noted
that at the time the amendment was submitted the department
had not had an exact plan as the grant application was not
due until later in the month. He agreed to follow up for
more information.
Senator Hoffman relayed that he wanted to see the regional
balance of how the dollars would be spent.
Mr. Painter stated that he finished reviewing the
substantive changes made by the other body. There were a
couple of items the Legal Services Division had felt needed
to be rewritten slightly in order to clarify the purpose of
the appropriation, but the items were technical in nature
and not substantive.
Co-Chair Stedman asked if Mr. Painter wanted to address
what had been deleted from the bill in the other body.
9:23:39 AM
Mr. Painter discussed the document titled, "2021
Legislature - Operating Budget Transaction Compare - Conf
Committee Structure; Between HB 3003 GovAmd and HB 3003 -
House" (copy on file). The document compared the governor's
amended bill to the House version of the bill. He pointed
out the first difference listed on page 1, in which the
House Finance Committee added $400,000 UGF to restore a
vetoed grant to the Alaska Legal Services Corporation
(ALSC).
Co-Chair Stedman asked if the item was to restore a veto.
Mr. Painter answered "yes."
Senator Wilson asked about the amount in the budget that
passed the Conference Committee.
Mr. Painter stated there were two grants that went to ALSC,
one for $400,000 UGF and $350,000 in Designated General
Funds (DGF) from the Alaska Legal Services Fund. He
detailed that the DGF funding was enacted but the governor
had vetoed the $400,000.
Senator Olson asked about the changes made to the bill in
the other body and if the governor could veto the items
again.
Mr. Painter answered in the affirmative.
Senator Olson relayed that he had grave concerns.
Mr. Painter continued to address the governor's amendments.
He addressed page 5 and an addition to the bill. The House
added $114 million for the statutory deposit to the Oil and
Gas Tax Credit Fund, $60 million of which was from the CBR
and the vote on accessing the CBR funds had failed. The
item in the final version proposed a deposit of $54 million
in UGF. The item had been funded in Conference Committee
entirely with CBR funds, and when the supermajority vote
had failed there were zero dollars in the enacted budget.
Co-Chair Stedman asked for a brief rundown of how much
General Fund flexibility there was, and how much
flexibility there was in the CBR.
9:26:54 AM
Mr. Painter explained that the state was in an unusual
situation in which there was not a backstop fund to
utilize. Typically, with an enacted budget there would be
the option of using the CBR for deficit-filling. In the
past the state had also utilized the SBR and other funds.
He continued that with the failure of the CBR access vote
from the Conference Committee bill, there was no fund to
utilize as a backstop if there was a deficit. The bill
being considered spent a majority of the post-transfer
surplus that was projected with the spring forecast, and
there was about $60 million in the CBR. He noted that in
efforts to project CBR balances over the years, the
projection of the deficit and the actual deficit were often
significantly different due to different accounting
practices. He recounted that the previous year LFD
predicted a $400 million deficit, which ended up being
significantly larger after the final audit. He cautioned
that having no margin of error without a backstop fund was
concerning due to difficulties with precision of
projections in the budgetary process.
Co-Chair Stedman asked how the lack of a backstop fund
would position the state in January, when there was
normally a substantial supplemental budget request.
Mr. Painter suggested that if there was a higher oil price
forecast, the state could have additional room in the
budget. If not, the state might have to find funds other
than General Funds to pay the supplemental items.
Co-Chair Stedman wanted to put a finer point on the issue.
He thought there would be funds available in the CBR, which
would require a three-quarters vote and would draw the
balance below the minimum floor of $500 million (as
communicated by OMB).
Mr. Painter agreed, and explained that without the reverse
sweep, the balance of the CBR was significantly higher
because the balance of the Higher Education Investment Fund
and other funds were in the account. He thought it was hard
to speculate what a three-quarter vote would look like.
There were more funds in the CBR because of the failure of
the reverse sweep, but the DGF funds were empty. He added
that the funds available via a majority vote in January
would be limited to the Power Cost Equalization Fund and
the ERA. He summarized that with a three-quarter vote,
depending on whether the sweep was reversed, there was
potential to access the CBR.
Co-Chair Stedman thought there would be roughly $500
million in the CBR.
Mr. Painter agreed.
9:31:00 AM
Senator Hoffman thought the committee would consider the
option of funding the $54 million for the Oil and Gas Tax
Credit Fund out of the CBR. In watching the other body, he
observed the House had counted on a second chance to
address the item. He thought perhaps the lower amount
funded with the CBR should be considered.
Senator Wilson asked what would be paid if the state
emptied the balance of the "overdraw account."
Mr. Painter replied that if an overdraw was projected ahead
of time, the governor or legislature had the opportunity to
submit supplemental items. If not, the governor could
impound appropriations. He shared his concern that the size
of the deficit was not apparent until the audits were done
and the fiscal year was closed, at which point everything
was paid but there would be an unfilled deficit that would
need to be retroactively fixed.
Co-Chair Bishop mentioned the absence of the CBR as a
backstop and the "stressed" General Fund. He referenced Mr.
Painter's comment about revenue anticipation notes.
Mr. Painter explained that revenue anticipation notes could
be used for cashflow within the year but had to paid back
by the end of the year. If there was an unexpected deficit
the notes could be a bridge for a short time but would have
to be paid back by the end of the year.
Co-Chair Bishop wanted to make note of the experience of
the committee members. He thought it was interesting to
recall that OMB's floor for a minimum balance in the CBR
had gone from $6 billion to $4 billion to $3 billion to $2
billion and was now a half of $1 billion. He thought the
amount was a moving target.
9:34:30 AM
Mr. Painter discussed page 6 of the budget transaction
comparison document, which pertained to the Permanent Fund
Dividend (PFD). The governor had submitted the bill with a
dividend totaling $1.5 billion from the ERA to the General
Fund, equal to the 50 percent of the percent of market
value (POMV) draw. He continued that the entire POMV draw
for FY 22 had already been taken and incorporated in HB 69
[the operating budget bill signed into law in August 2021],
which was why there was a post-transfer surplus. Taking the
additional draw would be beyond the statutory POMV. He
noted that the amount in the governor's original proposal
did not account for $8.5 million that the governor did not
veto from the original dividend appropriation.
Mr. Painter continued to address the item on page 6. He
shared that the other body had removed the governor's
appropriation and replaced it with $730.5 million; when
added to the $8.5 million, the amount equaled the estimated
$1,100 PFD proposed by the Conference Committee. The fund
source for the item was about $400 million from the General
Fund and $330 million from the SBR. There was some dispute
about whether the funds were available. If the funds were
swept and not released for the purpose, the PFD was
estimated to be about $600 with just the $400 million in
general funds.
Mr. Painter highlighted page 7, which related to an
additional draw of $1.465 billion from the ERA to the CBR.
With the addition of the dividend appropriation, the total
added up to $3 billion, which was the governor's proposed
"bridge funds" for future deficits and to be used in future
years. The item had been removed by the other body.
Senator Hoffman wondered whether the item was removed on
the floor or in the House Finance Committee.
Mr. Painter replied that the item was removed at the
finance table.
Senator Hoffman asked if Mr. Painter recalled the vote.
Mr. Painter replied that he did not.
Mr. Painter discussed the document titled, "2021
Legislature - Capital Budget Project Detail by Agency -
Senate Structure" (copy on file). He explained he would not
go through the report because the other body had adopted
what the governor requested, with the exception of moving
$1 million to the operating budget.
Co-Chair Stedman asked why the items were not included in
the capital budget that had been passed a few months
previously.
Mr. Painter stated that the items, such as the Alaska
Energy Authority (AEA) Renewable Energy Grants had been
submitted to the administration and had not made it as
official amendments before the capital budget moved out of
the Senate. The item essentially used DGF renewable energy
funds that were already in the fund to fund another round
of renewable energy grants.
9:38:31 AM
Co-Chair Stedman questioned the timeline and noted that the
legislature had the bill for some time before it was
executed. He thought it seemed odd that the items were not
submitted early enough to be added into the normal capital
budget cycle. He thought the committee should ask about the
project status the following year.
Co-Chair Bishop was sure that AEA and OMB had a reminder to
meet the next capital budget deadline in a timely fashion.
Co-Chair Stedman stated that amendments were due by 5pm the
following day.
CSHB 3003(FIN)am(brf sup maj fld) was HEARD and HELD in
committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Copy of HB3003 Amendments 8.25.2021 Department Representatives.pdf |
SFIN 9/8/2021 9:00:00 AM |
HB3003 |
| HB 3003 MultiYearAgencySummary UGF.pdf |
SFIN 9/8/2021 9:00:00 AM |
HB3003 |
| HB 3003 MultiYearAgencySummary All Funds.pdf |
SFIN 9/8/2021 9:00:00 AM |
HB3003 |
| 090821 CapitalProjectDetailByAgency.pdf |
SFIN 9/8/2021 9:00:00 AM |
HB3003 |
| 090821 ALL-TransactionCompare1.pdf |
SFIN 9/8/2021 9:00:00 AM |
HB3003 |
| HB 3003 LFD Response to SFC 9.8.21 CSHB 3003 Hearing Questions.pdf |
SFIN 9/8/2021 9:00:00 AM |
HB3003 |