Legislature(2023 - 2024)SENATE FINANCE 532
01/23/2024 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB186 || SB187 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | SB 186 | ||
| = | SB 187 | ||
| + | TELECONFERENCED |
SENATE BILL NO. 186
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making capital appropriations; making
supplemental appropriations; making reappropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
SENATE BILL NO. 187
"An Act making appropriations, including capital
appropriations and other appropriations; making
reappropriations; making appropriations to capitalize
funds; and providing for an effective date."
9:03:24 AM
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced herself and corrected a
statement made the previous day during the presentation.
She clarified that she had quoted a number as $900 million,
when it should have been $900,000. Additionally, she had
received clarification from the Department of Public Safety
(DPS) on the prior slide regarding funding for four
positions related to the Missing and Murdered Indigenous
Persons. The funding for the positions was not non-
permanent as she had stated on the record, but rather full-
time commissioned investigators.
Ms. Sanders continued a presentation given the previous
day, entitled "Overview of the FY2025 Governor's Budget"
(copy on file). She turned to slide 15, "Capital Budget
Significant Highlights Additional":
Department of Administration
•$2,050.0 UGF to Expand and Complete Digitization of
Payroll Services and Recruitment
Department of Commerce, Community, and Economic
Development
•$1,012,139.6 Federal Receipts for Broadband Equity
Access and Development Program
•$5,000.0 UGF FY2024 Supplemental for Wrangell Dam
Safety and Stabilization Improvements
•$2,500.0 UGF for a grant to Alaska Travel Industry
Association
•$1,500.0 DGF for Regulatory Commission of Alaska
Case Management System Replacement
Department of Fish and Game
•$7,500.0 UGF for Replacement Research Vessel for the
Gulf and Bering Sea
•$2,000.0 UGF for Stock Identification of Salmon
Harvested in South Peninsula Fisheries
•$1,300.0 UGF for continued funding for the Alaska
Marine Salmon Program
Ms. Sanders explained that the slide highlighted notable
items as a continuation of a review of the capital budget.
She cited that the item to improve payroll processing was
in the second year as a continued investment to improve
payroll processing. She identified that there was a
typographical error (typo) on the bullet for items listed
under the Department of Commerce, Community and Economic
Development (DCCED) wherein the Broadband Equity Access and
Deployment (BEAD) Program was listed with the word
Development instead of Deployment. She continued to
address items listed on the slide.
Ms. Sanders spoke to items within the Department of Fish
and Game (DFG). She noted that the research vessel
replacement would take the place of the research vessel
that had been deemed unseaworthy and disposed of. She
discussed the two salmon research projects, one of which
was a continuation of a project that ended in 2009 and one
of which was a continuation from the previous year in
research for the Bering Sea and the Gulf of Alaska.
9:07:40 AM
Senator Wilson asked about the first bullet under the
Department of Administration (DOA), which would expand
payroll systems and recruitment. He understood that the
project was done five years previously. He asked if the
department was still doing paper time sheets and if the
state was still one year short of missing payroll.
Ms. Sanders was not familiar with the reference to five
years.
Senator Wilson understood that the state had started the
digitization of the payroll process in FY 16 or FY 17 and
that it had not been completed. He wondered how the state
would expand upon something that had not been completed.
Ms. Sanders agreed to follow up with the information at a
later time. She affirmed that the administration was
working closely with payroll services and using
supplemental payroll runs to ensure that no payroll was
missed. She noted that the Division of Finance was running
supplemental payroll runs to address any problems.
9:09:06 AM
Senator Kiehl asked if the project would get the Integrated
Resource Information System (IRIS) into the cloud so that
employees could do their own timesheets.
Ms. Sanders deferred the question to the Administrative
Services Director for DOA. She agreed to follow up with the
information at a later time.
Co-Chair Stedman referenced grants to the Alaska Travel
Industry Association (ATIA) for the tourism industry and
asked about assistance to the Alaska Seafood Marketing
Institute (ASMI) for fisheries. He mentioned economic
turmoil in the fishing industry. He asked if the
administration was giving thought to assisting ASMI in
penetrating the U.S. market and getting into China.
Ms. Sanders identified that there were not additional
general gunds provided to ASMI in the FY 25 budget. She
noted that ASMI had received $10 million in the current
fiscal year and there was no additional funding planned for
the next year.
Co-Chair Stedman suggested that the administration consider
ASMI when contemplating proposed amendments to the budget.
He emphasized that the severity of the financial
implications in the fishing industry was not yet known. He
referenced forthcoming meetings regarding potential
assistance to the industry, which affected the states
entire cost.
Co-Chair Stedman discussed a vessel liquidation and
replacement in DFG. He asked about the proceeds and
whereabouts of the previous vessel and asked about the life
expectancy of the new ship.
Ms. Sanders deferred the question to the department. She
did not recall if the vessel was disposed of or sold.
9:12:35 AM
BONNIE JENSEN, ADMIN SERVICES DIRECTOR, DEPARTMENT OF FISH
AND GAME (via teleconference), relayed that there was
capital surplus language in the budget. She would need to
communicate with the Division of Commercial Fisheries to
get the exact monetary figures.
Co-Chair Stedman shared concerns about the targeted life
expectancy of the new ship, and shared concerns of a
possible truncated life span of the previous vessel,
perhaps due to maintenance issues rather than design
issues.
Co-Chair Hoffman followed up on Co-Chair Stedman's comments
about the disastrous state of fisheries in the state. He
asked if Ms. Jensen to comment on the departments position
on the issue and if she would concur with Co-Chair
Stedman's statement.
Ms. Jensen affirmed that DFG was looking into the salmon
downturn all over the state. She mentioned the Alaska
Marine Salmon Program, and other federally-funded disaster
projects.
Co-Chair Hoffman noted that he represented one of the
largest fishing districts in the state, if not the country,
and emphasized that the current situation was the most
disastrous in the last 30 years. He hoped the department
could get up to speed on the issue. He referenced the $2.5
million for the tourism industry and queried whether the
industry was in distress like the fisheries industry.
Ms. Sanders relayed that she would not categorize grant
funding for tourism as a disaster for fisheries.
Co-Chair Hoffman asked if the previous year was one of the
top tourism destinations for Alaska.
Ms. Sanders thought Co-Chair Hoffman had made an accurate
statement.
Co-Chair Hoffman asked if Ms. Sanders recalled the level of
funding for ATIA the previous year, and if it was $2
million.
Ms. Sanders recalled that the amount was higher than $2
million.
Co-Chair Hoffman relayed that he would be looking into the
matter since he facilitated the capital budget and DFG
budget. He hoped the legislature could address the disaster
situation in fisheries. He thought the chairman could agree
that the fishing industry needed much more assistance than
the tourism industry, which was already moving forward.
9:16:31 AM
Co-Chair Stedman asked Ms. Sanders to provide information
pertaining to state fishing loans and related areas in
fisheries. He was concerned about late payments within the
industry. He understood that there were late payments going
to processors. He thought there were many citizens that had
borrowed capital through state-backed loans. He wanted to
learn the scope of the problem in the following months.
Ms. Sanders made note of Co-Chair Stedman's request.
Ms. Sanders considered slide 16, "Capital Budget
Significant Highlights Additional":
Department of Natural Resources
•$3,575.0 UGF for Silviculture Treatments and
Precommercial Thinning
Department of Transportation and Public Facilities
•$115,983.0 Federal Receipts for Rural Ferry Grants
•$23,196.6 Toll Credits for Match
•$92,786.4 for M/V Tustumena Replacement Vessel
•$4,250.0 UGF for Copper River Highway Wood Canyon
Bridges and Trails
•$2,666.6 UGF for Williamsport Iliamna Intermodal
Connector
•$2,533.3 UGF for Statewide Per-and Polyfluoroalkyl
Substances (PFAS): Fleetwide Foam Replacement
Ms. Sanders discussed projects listed on the slide.
9:19:28 AM
Senator Kiehl asked Ms. Sanders for a breakdown of the
truck replacements for the fleetwide foam replacement. He
understood that the Federal Aviation Administration (FAA)
would participate in truck replacement for this purpose.
Ms. Sanders agreed to follow up with the information.
Co-Chair Stedman asked for more information related to the
Alaska Marine Highway System (AMHS) and toll credits,
specifically for FY 24. He understood that the state had
not received the federal funds the department was
anticipating, and there may be a shortfall. He asked for a
synopsis.
Ms. Sanders was not aware of a shortfall in federal
authority, and thought the Administrative Services Director
for DOT could address the question.
Co-Chair Stedman thought the concern was related to the
current year's cash flow. He understood that one of the
other territories had picked up some federal funds that
Alaska had been counting on. He asked for the update to
consider the implemented schedule in light of cash flow
needs. He thought there might be less ships funded and
running than anticipated.
Ms. Sanders agreed to follow up with the information.
Ms. Sanders displayed slide 17, "Operational Challenges
Vacancy," which showed a table of vacant Position Control
Numbers (PCNs) and a line graph. She noted that the
committee had requested the graph be updated from the
previous year. The graph offered a historical look and
showed vacancies as of 2023. Notably, the positions had
gone from over 89 percent filled to just above 83 percent
filled which resulted in a significant number of vacancies.
The state was seeing an upward trajectory, but not to the
desired level. She referenced use of tools such as letters
of agreement to address critical life-health-safety
positions and attracting and maintaining the position as
filled to ensure services were provided. She noted that DOA
had solicited and entered into a contract for a statewide
salary survey that would culminate in a report delivered in
June 2024. She thought the information could help determine
where salary adjustments needed to be made.
9:23:34 AM
Senator Wilson asked if the state was looking into
workforce culture. He referenced toxic work environments
and hazing in the workplace.
Ms. Sanders affirmed that there were conversations
happening to look at ways to improve workforce culture at
the direction of the governors office, which included
several agencies and OMB. The goal was to find ways to
incentivize working for the state, promote a positive
workforce culture, and to identify work-life balance and
healthy culture.
Co-Chair Stedman asked if the analysis would compare Alaska
with other states.
Ms. Sanders did not recall that the contract required
comparison to other states but believed it would.
Co-Chair Stedman asked if Ms. Sanders would check on the
information. He understood that many states were in a
similar position with regard to vacancies. He asked if
Senator Wilson wanted to offer comment.
Senator Wilson thought he would wait until another hearing
to offer his remarks.
Co-Chair Stedman mentioned a concern that the vacancy
structure was nation-wide. He thought that state salaries
were lower for entry-level positions. He considered that
the lower end of the salary schedule might need to be
increased to recruit and retain employees. He suggested
looking into the education system and wage comparison. He
asked when the data might be available to factor into
committee discussions.
Ms. Sanders stated that the report was expected at the end
of the fiscal year.
Co-Chair Stedman asked if the legislature would take up the
topic the following winter.
Ms. Sanders anticipated that the results would be the
subject of discussion for the upcoming budget coming out in
the following year.
9:27:17 AM
Co-Chair Olson shared concerns about keeping airports open,
particularly in Northeastern Alaska. He observed a vacancy
rate of 17 percent to 18 percent. He asked about potential
incentives for recruiting and retaining heavy equipment
operators. He thought there was an issue with having enough
operators to maintain runways. He thought the matter was a
health and safety issue.
Ms. Sanders knew that there were conversations across many
agencies about finding incentives to ensure that critical
life/health/safety items were addressed, including the
operation of airports. She did not have a specific letter
of agreement to reference but agreed to follow up with the
committee with additional information.
Co-Chair Stedman asked Ms. Sanders to discuss the reasoning
behind authorization of additional hires when the state was
unable to hire for the positions that were already there.
Ms. Sanders acknowledged that agencies had significant
vacancies. She shared that in the budget process, the
administration had urged agencies to continually evaluate
services for positions that had not been filled for a long
time. She used the example of the Department of Labor and
Workforce Development (DLWF), which had repurposed several
positions for Citizenship Assistants. She referenced
transfers and reclassifications to meet the needs of an
agency that had vacant positions. She relayed that the
administration did not want to repurpose positions such as
troopers, which needed to be filled, while adding new
positions to fill functions that were going to be expanded
upon.
9:31:09 AM
Co-Chair Stedman commented on the vacancy rates in the
teens up to twenty percent. He pondered what had happened
to the authorized funding that went toward salary and
benefits for positions that were not filled. He noted that
DCCED had a vacancy rate of almost 19 percent. He asked for
Ms. Sanders to answer the question in layman's terms.
Ms. Sanders noted that the legislature did not fully fund
every single position, and each agency's budget had a
"vacancy buffer," in the anticipation that not every
position will be filled in every budget. She continued that
in many areas, the state was entering into letters of
agreement to temporarily address where it was having
shortfalls or needed to retain or recruit employees. Some
of the funding that was not being used for vacant positions
would be used to cover the letters of agreement until
positions were filled.
Co-Chair Stedman summarized that Ms. Sanders had indicated
the legislature authorized one number of positions but
funded at a lower number.
Ms. Sanders agreed.
Senator Wilson asked for DOA or OMB to provide further
detail about vacant positions being skilled or entry-level
positions. He referenced an article from the National
Conference of State Legislatures (NCSL) which indicated
that states were looking at getting rid of some degree and
education requirements for positions.
Ms. Sanders agreed to follow up with DOA to get the
requested information.
9:34:27 AM
Co-Chair Stedman thought there was a point of confusion
regarding the vacancies resulting in potential surplus
funding, which could be cut from the budget. He commented
that if the solution had been so simple it would have been
done already.
Ms. Sanders highlighted slide 18, "10-Year Fiscal Outlook,"
which showed a table. She cited that AS 37.07.020(b)
required the governor to publish a 10-year fiscal outlook
which balanced revenues with the uses of funds while
providing essential state services and protecting the
economic stability of the state. The slide represented a
condensed version of the plan, which was released on
December 14, 2024. She noted that the full plan was posted
on OMBs website. She expanded that the current reports
approach was to present a status quo 10-year outlook. The
report showed fund sources, reserves, and draws. She cited
that in 2024 and 2025, reserves and draws aligned with the
fiscal summary presented in committee the previous day.
Ms. Sanders pointed out reserve balances at the bottom of
the table on the slide, which showed the balances at the
end of each fiscal year. She cited that there was a
statutory dividend reflected for each year from 2025
through 2034. She pointed out that the operating budget
used a 1.5 percent inflation assumption but thought the
number could be adjusted. She noted that OMB used DOR's
fall forecast for revenue projections into the future, and
used sources such as debt tables or projected public
education funds for items that had projections. She noted
that the status quo was clearly unsustainable, with savings
being depleted in 2027.
Ms. Sanders continued that the governor acknowledged that a
combination of revenue measures or reductions in spending
needed to occur before the savings accounts were depleted,
and that policymakers in the state would need to continue
to address structural issues. She added that the governor
was willing to have the conversations going forward, in
recognition that the situation was not sustainable.
9:38:04 AM
Co-Chair Hoffman suggested that if the governor believed
cuts need to be made or that revenue measures needed to be
considered, the revenues took time to be implemented. He
asked if the legislature could expect any form revenue
measures to be implemented by the administration to address
the structural deficit, even though the plan included a
full dividend.
Ms. Sanders relayed that the governor did not have any
proposed revenue measures at the current time but was
willing to have conversation, as there were legislators
that wanted to work toward implementing the measures.
Co-Chair Stedman relayed that he asked Ms. Sanders to
adjust the table after submission of the governor's
amendments, which were due February 14. He thought the
committee should consider a shortening of the time frame to
2027 or 2028 and begin to consider cash flow. He thought it
would be unacceptable to pass the next administration no
flexibility and no cushion (a liquidated Constitutional
Budget Reserve [CBR]) in volatile oil prices. He noted that
the Permanent Fund was constrained by the capital markets
and asset allocation as to how much income it could
deliver. He considered that running out of cash flows was
unacceptable. He shared concerns about increasing the
states debt and reversing the goal of trying to increase
the financial rating of the state.
Co-Chair Stedman commented that when the committee ran the
numbers it would change the dividend amount, which was a
large portion of the picture. He considered that zero
dividends were as unacceptable as a dividend that
bankrupted the state. He thought that there were some
things that were not included in the summary that would
even make the numbers even look worse. He commented that a
statutory dividend that was created 40 years previously was
not fit the current structure for the financial times of
the state nor the Permanent Fund.
9:42:00 AM
Co-Chair Hoffman wanted to revisit the disastrous position
of the fishing industry. He thought that the administration
would take a second look at the situation for FY 25. He
thought the situation was so dire that the administration
should consider a supplemental item as well.
Ms. Sanders commented that it was only a few days into the
legislative session, and she was new to her role. She
looked forward to working with the members and urged them
to contact her with any questions.
Co-Chair Stedman thanked Ms. Sanders for the 10-year plan
and using numbers that were real.
Co-Chair Stedman thanked OMB budget staff and support
staff.
Co-Chair Stedman discussed the agenda for the afternoon
meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012424 OMB Senate Finance FY2025 Budget Overview Corrected.pdf |
SFIN 1/23/2024 9:00:00 AM |
OMB FY25 Budgt Overview |