Legislature(2023 - 2024)SENATE FINANCE 532
03/29/2023 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| University of Alaska - Fy 24 Operating and Capital | |
| Confirmation of Governor's Appointee: Anita Halterman, Alaska Mental Health Trust Authority | |
| SB107 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 107 | TELECONFERENCED | |
SENATE BILL NO. 107
"An Act relating to the Alaska permanent fund;
relating to income of the Alaska permanent fund;
relating to the amount available for appropriation and
appropriations from the earnings reserve account;
relating to the permanent fund dividend; and providing
for an effective date."
9:57:41 AM
Co-Chair Olson relayed that the committee would consider a
Committee Substitute (cs).
Co-Chair Hoffman MOVED to ADOPT proposed committee
substitute for SB 107, Work Draft 33-LS0349\Y (Nauman,
3/27/23).
Co-Chair Stedman OBJECTED for discussion.
9:58:36 AM
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, announced
that the initial legislation contained a solid foundation
for the committee to build upon, maintaining the belief
that the 75/25 POMV split was a split that would pencil out
and hold up over time with the current assumptions. He
explained that the new CS offered a 50/50 POMV split if
certain revenue conditions were met. He noted that the
first change in the bill was found on Page 2, new Section
3, which allowed for the 50/50 split. The second change was
located on Page 4, new Section 9(a), which offered a
conditional effect; If $900 million in new revenue was
achieved, Section 3 would take effect. He furthered that
new Section 9(b) set the date for Section 9(a) trigger of
December 1, 2026. He said that Section 10 clarified that
the new revenue had to be in the bank and not an
estimation. Section 11 set the effective date for FY25. He
said that the bill did not set the dividend for FY24. He
stated that 75/25 would be in effect for FY 25 and FY 26
and a 50/50 could be possible in FY 27if the conditions
were met. He relayed that there was an update revenue
forecast to draw assumptions from. He noted the issue of
increased funding for the base student allocation (BSA) and
the future effects of inflation on the POMV draw.
10:02:25 AM
Mr. Grussendorf spoke to a document entitled "Review of
Committee Modeling Assumptions," (copy on file). He turned
to page 3, which showed the model Senate Finance baseline
budget with 25 percent POMV to the permanent fund dividend
(PFD).
Mr. Grussendorf advanced to slide 4, which showed a model
with the assumption of the $900 million being achieved for
FY27, with no other new revenue coming in between FY24 and
FY26. He noted that in FY27 the Constitutional Budget
Reserve (CBR) draw was reined in, but earlier on the CBR
would grow at a modest rate. He shared that there would be
some surplus in the first three years.
10:03:55 AM
Mr. Grussendorf showed slide 5, which portrayed a slow new
revenue build up to the $900 million mark by FY27.
10:05:11 AM
Senator Merrick asked if the CS essentially raised revenue
to pay a larger PFD.
Mr. Grussendorf replied in the negative.
10:05:43 AM
AT EASE
10:06:01 AM
RECONVENED
Co-Chair Stedman WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered.
Co-Chair Hoffman commented that the intent was for the
committee to review the legislation and take public
comment. He thought the bill would set in place the 75/25
split for the foreseeable future and if adopted the
conversation would continue about how the state could get
to a 50/50 split. He believed that oil tax structure
legislation currently in play could bring in revenue as
well as some legislation related to carbon capture. He
added that there was legislation in the building that would
raise between $50 and $80 million through an internet fee.
He thought all the bills could bring in additional revenue.
10:09:51 AM
Senator Wilson had questions about the bills at play meant
to increase revenue and whether the new fields or wells
would count as new revenue and if the modification of the
slider in statue would be considered new revenue.
Co-Chair Hoffman thought the bill proposed a change in law
that allowed for an increase in revenue, which he would
consider new revenue.
Senator Wilson reiterated his question about whether new
fields being brought online would be considered new revenue
to the state.
Co-Chair Hoffman thought the matter needed to be
researched.
10:11:07 AM
Co-Chair Stedman thought the committee needed to discuss
the CBR balance and the current minimum balance. He noted
that the CBR was at $2 billion and that the Legislative
Finance Division (LFD) recommended a balance of $3.5
billion. He considered some fiscal projections and thought
it looked as though putting the 50/50 in place, and meeting
the minimum threshold of $900 million, by FY30 the POMV
draw could limit the growth of the CBR. He believed that
the minimum balance of $3.5 billion should be strongly
considered. He did not think that the state was in a strong
financial position with only $2 billion in the CBR. He
believed that the $900 million figure looked a little
light and could be reconsidered. He considered the long
duration of the projected timeline and stressed the need
for further discussion.
10:14:12 AM
Co-Chair Olson asked whether Co-Chair Hoffman wanted to
comment on Co-Chair Stedman's remarks. He asked
specifically about the recently approved Willow Project,
which was projected to generate revenue for the state in
the next decade.
Co-Chair Hoffman referenced Senator Wilson's question about
what should be considered new revenue. To Co-Chair
Stedman's point, he thought the CBR balance was important,
but not as important as coming up with a solution
surrounding the PFD. He thought there would be a lot of
debate about what the dividend should be in the current
fiscal year. He cited that the other body had already
proposed a 50/50 split in the operating budget. He thought
the 50/50 split would cripple the state financially within
3 years and jeopardize other programs. He feared that not
having the necessary revenue to meet whatever number split
was decided upon would lead future legislatures to ignore
the law, as was the current practice with the current
statute governing the 5 percent POMV draw. He considered
that it had not been the intention of the legislature to
ignore the statute but that that was what had happened. He
strongly believed that the PFD should be addressed within
the fiscal year and noted that all spending discussions
within the legislature eventually came down to the question
of what the payout of the dividend should be. He argued for
a long-term solution to the issue of the dividend split and
an end to the reoccurring arguments on the matter.
10:18:53 AM
Co-Chair Stedman referenced the concern about the minimum
CBR balance. He argued that a fiscal package that included
the 50/50 split would gain nothing for the state and would
leave the state on precarious fiscal footing. He stressed
that it was only a matter of time before oil prices dropped
and the state was unable to meet its financial obligations.
10:19:48 AM
AT EASE
10:20:16 AM
RECONVENED
Senator Bishop wanted to discuss the capital budget.
10:20:50 AM
Senator Bishop referenced a document entitled "Capital
Budget Estimate," (copy on file). He spoke of the shock he
felt when he first began work in the Palin Administration
and was told of a $1.2 billion deferred maintenance
schedule. He referenced United States Senator Lisa
Murkowskis most recent state-of-the-state as well as a
speech by the late Senator Stevens that warned that the
days of earmarked funds on the federal level were numbered.
He mentioned the IIJA but noted that those funds had a
limited lifetime.
Senator Bishop considered figures on the capital budget
estimate document.
10:24:08 AM
Senator Bishop read from the prepared document:
Capital Budget estimate
200$ State Match for federal funds
Most likely will increase as more IIJA grants are
put forth.
125$ Department-wide Capital Rebuild/replace
dilapidated buildings/equipment.
Based on GOV current budget of $303m minus the
match, rounded up
75$ Department-wide Initiatives, New Builds, New
Equipment
For NEW GOV initiatives, i.e. Statehood defense,
DPS initiatives, F&G research.
155$ 2% Deferred Maintenance
2-4% rule to avoid accruing new Deferred
Maintenance, the 2% figure would halt the backlog
from growing, but not address the $2.2B Backlog
(4% would be $310m)
50$ AEA Bulk Fuel Deferred Maintenance backlog of
$800m per AEA in 2021 Annual Report
100$ University DM
Priority list typically is $50-75m. Current
Backlog is over $1.5B.
Following the 2-4% rule would be $98-196m per
year.
50$ School Major Maintenance
Current FY24 list is $413.5m. List is recurring
yearly.
50$ School Construction
Current FY24 list is $195.6m. List is recurring
yearly.
20$ Legislative Adds
Estimated based on $1m per Senate District.
Potentially a low estimate, for example last year
the State put match forward for Port of Nome,
Army Corps projects.
825$ million - total
*Gov proposed Cap budget of $303m does not include:
University DM
School Major Maintenance
School Construction
Harbor Matching Grants
State supported match for Muni's who received federal
BUILD grants, or the like
Co-Chair Bishop thought the Capital Budget items should be
part of the conversation.
10:26:25 AM
Co-Chair Stedman asked whether the request for discussion
was about increasing the $400 million for the Capital
Budget in the LFD modeling in the presentation.
Senator Bishop responded that his intention was to
highlight that the $400 million was not going to cover many
of the estimated Capital Budget projects.
10:27:27 AM
Senator Kiehl appreciated Senator Bishop's additional
information regarding capital needs. He thought additional
modelling including a BSA increase would be helpful. He
thought it was reasonable to model with additional
education spending in the Operating Budget. He agreed with
Co-Chair Hoffman that SB 107 stabilized both state revenue
and state spending.
10:29:36 AM
Co-Chair Hoffman noted that there was $400 million included
in the modelling and wondered whether that number was
adequate. He suggested that the committee needed to discuss
various ways of looking at the problem.
10:30:53 AM
Co-Chair Hoffman commented that the legislation did not
limit the committee from exploring other revenue measures.
He commended Senator Bishop for coming up with an alternate
revenue measuring with the Education Raffle and the Fuel
Tax Measure. He stressed that not all new revenue measures
had to be in the form of taxes. He felt that it was
important that the other body have adequate time to
consider the legislation before the end of the legislative
session.
10:33:07 AM
SB 107 was HEARD and HELD in committee for further
consideration.
Co-Chair Olson discussed housekeeping.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 032923 FY24 SFin UA Financial Overview 3 29 2023 FINAL.pdf |
SFIN 3/29/2023 9:00:00 AM |
|
| 032923 Anita Halterman AMHTA resume_redacted.pdf |
SFIN 3/29/2023 9:00:00 AM |
|
| SB 107 work draft version Y.pdf |
HW&M 5/8/2023 6:00:00 PM SFIN 3/29/2023 9:00:00 AM SFIN 4/12/2023 9:00:00 AM |
SB 107 |
| SB 107 Capital Budget assumption Backup Packet.pdf |
HW&M 5/8/2023 6:00:00 PM SFIN 3/29/2023 9:00:00 AM SFIN 4/12/2023 9:00:00 AM |
SB 107 |
| SB 107 Modeling Slides_20230328.pdf |
HW&M 5/8/2023 6:00:00 PM SFIN 3/29/2023 9:00:00 AM SFIN 4/12/2023 9:00:00 AM |
SB 107 |