Legislature(2025 - 2026)BELTZ 105 (TSBldg)
04/01/2025 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HJR5 | |
| SB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 5 | TELECONFERENCED | |
| *+ | SB 129 | TELECONFERENCED | |
SB 129-PAYMENT OF CONTRACTS
1:41:43 PM
CHAIR MERRICK reconvened the meeting and announced the
consideration of SENATE BILL NO. 129 "An Act establishing a 30-
day deadline for the payment of contracts under the State
Procurement Code; establishing deadlines for the payment of
grants, contracts, and reimbursement agreements to nonprofit
organizations, municipalities, and Alaska Native organizations;
relating to payment of grants to named recipients that are not
municipalities; and providing for an effective date."
1:42:04 PM
SENATOR SCOTT KAWASAKI, District P, Alaska State Legislature,
Juneau, Alaska, paraphrased the sponsor statement for SB 129:
[Original punctuation provided.]
Sponsor Statement
SB 129
Prompt Payment
Any large-scale endeavor requires money. Whether that
organization is structured as a profit or nonprofit
organization money is required to fulfill the goals of
a company. In order for these entities to run
efficiently, they rely on good faith dealings that
when a deal for services is entered upon, they will
get paid, in a timely manner, for those services.
Currently, for profit construction businesses enjoy
legislation that prioritizes prompt payment from the
State to ensure they can run effectively. That same
consideration is not presently extended to Alaska
Native organizations, municipalities, and nonprofits,
who face the same operational challenges as for-profit
businesses. SB 129 seeks to rectify this disparity by
legislating the need for prompt payment to these
essential organizations.
1:43:51 PM
SENATOR KAWASAKI continued to paraphrase from the sponsor
statement for SB 129:
[Original punctuation provided.]
The State of Alaska is responsible for distributing
funds such as Medicaid reimbursements to healthcare
organizations, Community Assistance to municipalities,
and grants for public service initiatives. According
to a survey distributed by the Foraker Group the
groups entitled to these monies wait an average of 3-6
months and in some cases over a year, for these funds.
These chronic delays force these organizations to
operate without a guaranteed cash flow and maintain
minimal cash reserves. Which is not ideal for any
organization and jeopardizes their ability to pay and
retain staff, maintain services for Alaskans, and meet
financial obligations. Some organizations must choose
between relying on costly lines of credit or deplete
their cash reserves altogether.
Municipalities have reported that the delays in
receiving funds from the state have affected payroll,
project funding, insurance renewals, and critical
infrastructure investments. Alaska Native
organizations have reported the same issues but feel
them more keenly due to the vulnerable populations
they serve who rely on consistent, high-quality care
and support, especially when it comes to their health
care. The State's inability to pay these entities in a
timely manner is not only harmful to them but also
increases long-term costs due to interest, lost
investment returns, and administrative inefficiencies.
1:44:49 PM
SENATOR KAWASAKI continued to paraphrase from the sponsor
statement for SB 129:
[Original punctuation provided.]
Prompt payment parity is fundamentally agreed to be a
principal of fair contracting. The State of Alaska is
not exempt from that expectation and has an obligation
to honor its financial commitments in a timely manner.
In not doing so, they are causing undue hardship for
the organizations that support our communities. This
legislation, which is already present for construction
contracts, will ensure the financial security of
Alaska Native organizations, municipalities, and
nonprofits which will lead to our communities being
better served by these entities.
This legislation will ensure that prompt payment to
Alaska Native organizations, municipalities, and
nonprofits will be a matter of fact, which will
improve the partnerships the State has with these
entities. It will also increase governmental
transparency, implement penalties for late payments,
and streamline reimbursement processes. SB 129 also
ensures that funds are distributed efficiently,
equitably, and on time. In so doing, the State of
Alaska will uphold their contractual obligations to
those citizens who work tirelessly on behalf of
Alaskan communities.
1:45:30 PM
CHAIR MERRICK invited Ms. Colquhoun to proceed with the
sectional analysis for SB 129.
1:45:33 PM
JENNA COLQUHOUN, Staff, Senator Scott Kawasaki, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for SB 129:
[Original punctuation provided.]
Senate Bill 129
"An Act establishing a 30-day deadline for the payment
of contracts under the State Procurement Code;
establishing deadlines for the payment of grants,
contracts, and reimbursement agreements to nonprofit
organizations, municipalities, and Alaska Native
organizations; relating to payment of grants to named
recipients that are not municipalities; and providing
for an effective date."
SECTIONAL ANALYSIS
Section 1:
Amends AS 36.30 by adding a new section requiring a
state agency to promptly pay a contractor for
satisfactory service. Criteria are established for
acceptable delays in payment and the protocol related
to alerting a contractor to the reason for this delay.
This section provides several timelines for the
accruement of interest on late payments: a late
payment will begin to accrue interest on the thirty-
first calendar day after invoice, and a reasonably
delayed payment will begin to accrue interest on the
twenty-first calendar day after resolution on the
contract has been found.
MS. COLQUHOUN continued her presentation of the sectional
analysis for SB 129:
[Original punctuation provided.]
Section 2:
Amends AS 36.30 article 4 by adding a new section to
include the prompt payment of grants and
reimbursements for nonprofit organizations,
municipalities, and Alaska Native organizations.
Timelines delineating the accruement of interest on
late payments for state funds and federal pass-through
funds are established, as are acceptable delays in
payment and the protocol for noticing as such. An
agency has twenty-one calendar days from invoice to
pay without interest penalty if using federal pass-
through funds and thirty calendar days from invoice to
pay without interest penalty for all other payments.
This section also defines the terms used throughout
this bill.
Section 3:
Amends AS 37.05.316 by adding a new subsection (d)
which requires a state agency to pay at least twenty
percent of the grant amount within 10 days. This
section also delineates how the rest of the grant must
be paid out to a named recipient either in monthly
installments equal to the recipient's monthly
expenditures or a lump sum determined by the
Department of Commerce, Community, and Economic
Development.
Section 4:
Provides an immediate effective date for this measure.
1:47:34 PM
CHAIR MERRICK asked why payments are not made promptly and
whether late payment is related to staffing issues. She directed
the question to Mr. Mayer, Chief Procurement Officer.
TOM MAYER, Chief Procurement Officer, Department of
Administration (DOA), Juneau, Alaska, replied that his office
does not make payments but establishes contracts that are used
by multiple agencies. He recalled that most of the late payments
are related to grant funding that is not being processed and
dispersed to grantees. He said he is unsure whether this is
related to staffing issues. He added that DOA has reached out to
other agencies for fiscal notes.
CHAIR MERRICK asked Senator Kawasaki what might cause the
delayed payments.
1:48:34 PM
SENATOR KAWASAKI replied that he has seen anecdotal evidence and
heard reports of 20 to 30 percent vacancy rates at basic levels
in various departments. He added that these are often the
positions responsible for ensuring funding is processed and
payments are dispersed on time. He said for the past 10 years
there has been a shortage of governmental employees and
commented on the large amount of paperwork required for
bureaucratic processes. He emphasized the importance of prompt
payment and opined that high vacancy rates are part of the
problem.
CHAIR MERRICK expressed concern that SB 129 would not help if
the late payments are a result of a staffing issue.
1:50:00 PM
CHAIR MERRICK announced invited testimony on SB 129.
1:50:15 PM
CAROLE TRIEM, Government Affairs Manager, Alaska Municipal
League, Juneau, Alaska, read the following written testimony on
SB 129:
[Original punctuation provided.]
Every single one of our 165 members receives payments
from the State in one way or another and every single
one provides essential services that cannot stop or be
turned off. For the smallest communities in the state
especially, receiving delayed payments is not just an
administrative inconvenience - it creates real
hardship.
For many small cities, Community Assistance is the
most important state program that remits payments from
the State to local governments. Community Assistance
is the State's way to fulfill its promise of revenue
sharing. It is one of the main sources of revenue in
smaller communities, particularly those without large
tax bases or gaming revenue. Municipal resources are
typically stretched thin or depleted by the end of the
fiscal year, making it very important that these local
governments receive payments from the State on time.
Without timely payments, cities face cash flow issues,
problems making payroll, and delays can cause extra
costs in contracts and purchases. For example, in the
City of Toksook Bay, delayed Community Assistance
payments resulted in higher insurance costs when
interest penalties were added after missed payment
deadlines.
Community Assistance is not the only program through
which the State remits money to local governments.
Here is a non-exhaustive list of others, just to give
a sense of the scope that we're talking about:
• PCE
• Community Assistance (94)
• Legislative Grants (212 active)
• Community Development Block Grant (16)
• Shared state taxes, including fisheries business
and landing taxes
• School Bond Debt Reimbursement
Additionally, federal money is passed through the
state through PILT, National Forest Receipts and
Secure Rural Schools, and NPR-A Impact Mitigation
Grants.
Thank you for allowing us this time today. We
appreciate your consideration of SB 129.
1:52:51 PM
LAURIE WOLF, President and Chief Executive Officer, Foraker
Group, Anchorage, Alaska, paraphrased the following testimony on
SB 129:
[Original punctuation provided]
Foraker Supports Senate Bill 129:
Prompt Payment Parity
Good morning, Committee Chair Merrick, Vice-Chair
Dunbar, and committee members. For the record, my name
is Laurie Wolf. I am the President/CEO of The Foraker
Group.
Thank you for inviting me to testify in support of SB
129, which establishes prompt payment parity for
Alaska nonprofits, municipalities, and tribal
organizations for grants, contracts, and
reimbursements from the State of Alaska, including
federal pass-through funding.
We appreciate the attention from Representative
Himschoot and Senator Kawaski and other co-sponsors to
one of the most important pieces of legislation
supporting Alaska nonprofits since the passage of the
Pick.Click.Give. program 16 years ago.
1:53:25 PM
MS. WOLF continued to paraphrase the following testimony on SB
129:
[Original punctuation provided.]
Here's what Alaska organizations are facing right now
and why this legislation is critical. Three, six, nine
months, some more than a year in delayed payments. A
couple hundred thousand dollars to more than one
million dollars in delayed payments.
Delayed payment comes from almost every department in
the state and impacts all types of services from
seniors to child care to domestic violence to housing,
food security, transportation, public safety, and
more. The state relies on us to deliver services as
its partner through grants, contracts, and
reimbursements. Yet, this partnership when it comes
to the money is broken. Because of the current
process, we are asked to report on money that we have
not received in order to stand in line for the next
payment, which could also be delayed.
This should sound odd and unbelievable, and yet, it's
real for hundreds of Alaska organizations far too
often. Some of our executives don't even know a
reality that could look different because this has
been their reality for so long. Sadly, delayed
payments have become a normal and even acceptable
practice for nonprofits that are providing essential
services around the state. Importantly, this is money
that has been approved by the legislature. One would
simply assume that if the money is budgeted, approved,
and allocated, then spending could occur. That seems
efficient. That seems like good government. In fact,
prompt payment is exactly the rule the state must
follow when conducting transactions with for-profit
businesses as directed by Statute: AS 36.90.200.
Unfortunately, these rules do not apply to nonprofits,
municipalities, and tribal organizations and they
should.
1:55:09 PM
MS. WOLF continued to paraphrase the following testimony on SB
129:
[Original punctuation provided.]
Over many years and multiple administrations, we have
tried to solve this problem, hoping honestly that we
wouldn't get to this stage. One former commissioner
told us that nonprofits should just take out a line of
credit to manage delayed payments as though it was
the job of the nonprofit to subsidize the state. Not
only do lines of credit require collateral, which many
nonprofits will never have, it is not the job of
nonprofits to subsidize the state and that is exactly
what many of them do every day. What other choice do
they have? Our goal is to ensure the state is
efficient and that the work organizations provide for
Alaskans is predictable, stable, and available.
To demonstrate the severity of this issue, we surveyed
Alaska organizations to learn more about their
experiences. Here's what they told us about their
reality.
The survey data you have in your packet of information
from us is simply a point-in-time survey to give a
snapshot of the pervasive nature of this issue. The
top-line impact of delayed payments includes:
1:56:08 PM
MS. WOLF continued to paraphrase the following testimony on SB
129:
[Original punctuation provided.]
Cash Flow Issues: Many respondents emphasized the
severe strain on cash flow, with organizations needing
to use reserves, lines of credit, or borrow funds to
cover operational costs such as payroll, purchases,
and bills. This was particularly difficult for
organizations that rely on grant funding or
reimbursable services.
Operational Delays: Delays disrupted services, project
timelines, and the ability to make necessary purchases
(e.g., books, equipment, vehicles). Some organizations
even had to pause operations or reduce staff until
payments were received.
1:56:40 PM
MS. WOLF continued to paraphrase the following testimony on SB
129:
Increased Administrative Burden: Organizations
reported spending significant time and resources
dealing with delayed payments, including advocating
for overdue funds, rebilling, and communicating with
funding agencies. This diversion of resources led to
additional stress on staff and operational
inefficiencies.
Uncertainty and Financial Planning Challenges: The
lack of predictability of payment schedules created
uncertainty in budgeting and financial planning.
Several organizations had to make difficult decisions
about whether to proceed with projects or delay them
based on the expectation of when funds might
eventually arrive.
Negative Impact on Staff and Services: Some
respondents noted that delayed payments led to late
payrolls, staff dissatisfaction, and the possibility
of layoffs. In certain cases, it was reported that
delays could jeopardize continuing vital services for
vulnerable populations.
Strained Relationships: Delays also strained
relationships with contractors, vendors, and other
third parties, with some organizations reporting
difficulty in meeting obligations or renegotiating
payment terms.
Impact on Program Continuity: For some organizations,
delayed payments threatened the continuity of programs
and services, especially in critical areas such as
health care and education, where funding delays can
have immediate consequences.
1:57:58 PM
MS. WOLF continued to paraphrase the following testimony on SB
129:
[Original punctuation provided.]
Our reality is that nonprofits do not have the
financial reserves to float a major state grant or
contract to support a program or project with their
own funds while waiting for allocated state dollars to
come through. And even if they do, as I have already
pointed out, it is not the responsibility of
nonprofits to subsidize the state's delayed payments.
These impacts should be enough to compel us all to
change how this process operates. But consider, too,
that it's not just our entities and Alaskans who are
hurt the economies around the state are also harmed.
Specifically, we know that: Delayed payment has a
direct impact on the ability of Alaskans to access
essential services. It has a direct impact on
nonprofit staff recruitment and retention across
Alaska. It hurts the whole economy because nonprofits
cannot pay their bills to other for-profit and
nonprofit vendors.
We need this legislation because unlike a business or
contractor working on a public project, where current
Alaska statute says they will be paid on time or
receive penalties and interest, the rules also say the
contractor can stop work until payment is received.
Our reality is that we cannot just stop doing what we
are doing to get the state's attentionthe
consequences are too high for Alaskans who depend on
us.
I anticipate one of your questions is: "How much money
are we talking about?" Unfortunately, we have been
trying to calculate this number for years. We have
solid data from surveys and personal accounts, but
there is no single system for tracking delayed
payments that we know about. Each state department has
its own system and process for tracking.
1:59:28 PM
MS WOLF continued to paraphrase the following written testimony
on SB 129:
[Original punctuation provided.]
I anticipate that you will also ask how we think this
problem should be fixed. To be sure, we know the state
faces workforce shortages and technology issues, but
we can't tell you how to fix those. Still, we will say
that we are no longer willing to remain silent while a
broken system asks nonprofits, municipalities, and
tribal organizations to carry the burden of both
delivering services and covering the costs while we
wait. We want parity with for-profit businesses and to
be treated as partners in the work of serving
Alaskans. After all, that is how Alaska's economy
works best when we as organizations come together
with local, state, and federal governments to serve
Alaskans.
2:00:09 PM
MS. WOLF continued to paraphrase the following testimony on SB
129:
[Original punctuation provided.]
To be clear, we are not asking the state to go back
and address their past delays with penalties and
interest. We simply want to establish a foundation for
moving forward based on prompt payment parity, along
with powerful incentives for the state to pay on time
just like in the private sector. That is the purpose
of Senate Bill 129.
I will end with this reminder. The health and well-
being of Alaskans and Alaska's economy depend on
strong working relationships among nonprofits, tribal
organizations, municipalities, and the state. Payment
for services is an expected part of this relationship.
I strongly urge you to consider this bill favorably.
Foraker, Alaska's nonprofit association, is pleased to
be working arm-in-arm with the Alaska Municipal
League, Alaska's statewide association supporting
local governments, and Senate Bill 129 sponsors on
this critical issue. As part of this testimony, we
will also share the resolutions that both Foraker and
AML approved last year as well as our most recent
survey results on the impact of delayed payment on
Alaska organizations.
Thank you.
2:00:54 PM
CHAIR MERRICK asked what reasons were given for the delayed
payments.
MS. WOLF replied that, over the years, a host of reasons have
been offered as explanation; however, none address the systemic
issues that create delayed payments in every department.
2:01:39 PM
SENATOR YUNDT asked what percentage of payments are made late,
and, of those, what is the average length of the delay.
MS. WOLF replied that she has a survey that she can provide;
however, there is no one system to track all late payments
across all departments. Foraker Group previously requested this
information and has not received an answer. She said she would
provide the data that is available.
2:02:48 PM
SENATOR YUNDT said any data available for review before the next
committee hearing would be helpful.
2:03:20 PM
STEPHANIE BERGLUND, Chief Executive Officer, thread, Anchorage,
Alaska, read the following testimony on SB 129:
[Original punctuation provided.]
SB 129 testimony
Senate Community and Regional Affairs Committee
Thank you chair Merrick and members of the committee
for the opportunity to testify. I'm Stephanie
Berglund, CEO of thread - Alaska's statewide Child
Care Resource and Referral organization. thread is a
39-year-old nonprofit - primarily a direct service
organization - and our largest sources of funding come
from partnerships with the State Department of Health
(DOH) and the Department of Education and Early
Development (DEED).
While we work very closely with the State and are
thankful for their partnership to empower families in
finding child care and ensuring early educators are
trained and supported to deliver high quality early
care and learning services - the grant process, namely
timely payments - has been a long-standing problem
impacting consistent and reliable early care and
education support services. That is why I'm here today
endorsing SB 129.
2:04:10 PM
MS. BERGLUND continued to read the following testimony on SB
129:
[Original punctuation provided.]
While some of our DOH grants have most recently seen
improvements to the payment process, grants and
contracts through both the DOH and the DEED are
overall inconsistent and do not follow the agreements
as outlined. thread encounters significant delays and
uncertainty surrounding payments and reimbursements
from the State of Alaska.
Over the last five years alone, it has been the
exception, not the norm that thread's State grants and
contracts are processed and paid on time, following
the outlined agreements. While thread can usually
support the cash flow of the irregular or
unpredictable payment schedules, we have been put in
tight financial and programming situations. This
includes a few years back when two of our grants were
paid for the advance payment (agreed on and expected
in early July) in January of that FY. We've also been
in the situation to provide first quarter fiscal
reports to receive the subsequent quarter payment
without ever receiving the first payment - that
triggered needing to get direction on how to report
spending that did not use State money for the actual
expenses. The grant payment process is further
compounded when there are amendments needed, which are
also repeatedly not timely or responsive to the scope
of work and service delivery needs. These issues
disrupt and delay services and ultimately create a
bottleneck of service delivery needing to be completed
in a shortened period of time as grants need to be
fully spent by June 30th.
2:05:41 PM
MS. BERGLUND continued to read the following testimony on SB
129:
[Original punctuation provided.]
Overall, there is inconsistency in how Departments
issue, approve, disperse and pay for
granted/contracted services. This includes
irregularity in following agreement timelines. The
lack of payment parity has been a growing issue and
has persisted across multiple administrations,
affecting organizations statewide including thread
clients.
thread supports the nearly 400 child care small
businesses across the state. Most are enrolled in the
Child Care Assistance program, relaying on State
assistance payments to support their operations and
regular business expenses. Unlike private pay family
tuition paid at the start of a child care service, the
State Child Care Assistance is paid as a reimbursement
and is - and has been - paid inconsistently to child
care business owners. One child care business in
Soldotna shared that she at times has to negotiate
paying her utilities late due to late child care
assistance reimbursement payments. Child care programs
work on very tight margins and need reliable
reimbursement payments. Payment delays put the
sustainability of these child care programs at risk,
compromising the high-quality services they provide to
families every day.
I strongly urge you to prioritize the passage of SB
129 to allow nonprofits like thread to continue our
vital work without the financial and service delivery
instability caused by delayed payments. Resolving this
issue is essential to Alaska's nonprofit sector and
ensuring that we continue to effectively serve our
communities.
Thank you.
2:07:28 PM
CHAIR MERRICK asked how the sponsor envisions the enforcement of
SB 129.
SENATOR KAWASAKI opined that agencies want to do the best they
can. He directed attention to the fiscal note from the
Department of Labor and Workforce Development, [OMB Component
Number 340, dated March 28, 2025,] which discusses the potential
for assessment obligations and estimates interest and liability
for those obligations. He pointed out the last sentence, which
discusses the issue from a programmatic perspective and states
that the department would make every effort to change program
processes in order to avoid interest. He emphasized that
everyone wants on-time payments and shared his belief that, if
SB 129 passes with a zero fiscal note, state agencies will
respond by improving the process. He added that, in addition to
an improved process, organizations doing business with the State
of Alaska would be assured of timely payments.
2:09:38 PM
CHAIR MERRICK noted that the fiscal note in question is from
Department of Labor and Workforce Development, OMB Component
Number 340, dated March 28, 2025.
2:09:56 PM
SENATOR KAWASAKI expressed appreciation to the committee.
2:10:16 PM
CHAIR MERRICK held SB 129 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 5 Sponsor Statement Version A 03.18.2025.pdf |
SCRA 4/1/2025 1:30:00 PM |
HJR 5 |
| HJR 5 Support Letter Packet.pdf |
SCRA 4/1/2025 1:30:00 PM |
HJR 5 |
| SB 129- Sponsor Statement.pdf |
SCRA 4/1/2025 1:30:00 PM |
SB 129 |
| SB 129- Sectional.pdf |
SCRA 4/1/2025 1:30:00 PM |
SB 129 |
| SB129 Fiscal Notes 3.31.2025.pdf |
SCRA 4/1/2025 1:30:00 PM |
SB 129 |
| SB129 Public Testimony - Thread 3.19.25.pdf |
SCRA 4/1/2025 1:30:00 PM |
SB 129 |
| SB129 Public Testimony - ACT 3.31.25.pdf |
SCRA 4/1/2025 1:30:00 PM |
SB 129 |
| SB129 Fiscal Note DCCED-DAS-03-28-25.pdf |
SCRA 4/1/2025 1:30:00 PM |
SB 129 |
| HJR 5 – SCRA presentation 04.01.2025 PDF.pdf |
SCRA 4/1/2025 1:30:00 PM |
HJR 5 |