Legislature(2019 - 2020)ADAMS ROOM 519
07/20/2019 01:00 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB2002 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB2002 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 2002(FIN)
"An Act making appropriations, including capital
appropriations, supplemental appropriations,
reappropriations, and other appropriations; amending
appropriations; making appropriations to capitalize
funds; making appropriations for the capital expenses
of the state's integrated comprehensive mental health
program; 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."
3:18:52 PM
Vice-Chair Johnston summarized the bill saying that it
provided critical funding for safety, infrastructure, and
maintenance projects across Alaska. It allowed the state to
capture and leverage federal funds for airports and
highways and funded HB 49, the omnibus crime bill
[Legislation passed in 2019]. It also included the reverse
sweep that would fund programs such as the Power Cost
Equalization (PCE) and the Alaska Performance Scholarship.
She counseled that if the legislature chose not to pass the
bill before the end of July, programs would be shut down or
would end, and the crime bill passed earlier in the year
would be left unfunded. She further commented that if the
priority of the legislature was to make Alaska's roads and
communities safer, allow Alaskans to heat their homes, and
give children an opportunity to seek an education, the
legislature needed to pass the bill before July 31st.
3:20:00 PM
ROBERT IRVINE, STAFF, REPRESENTATIVE JENNIFER JOHNSTON,
reviewed the bill noting that though the Capital Budget
passed by a wide margin, many of the items were funded by
the Constitutional Budget Reserve (CBR) requiring a three-
quarter vote of the legislature which failed. As a result,
a large portion of the bill was not funded including
critical appropriations seated for federal match for state
highways and airports. He went on to say that other
appropriations in the capital budget were vetoed by the
governor including Alaska Housing Finance Corporation
grants and funds for the Alaska Marine Highway System
(AMHS).
Mr. Irvine continued that the bill before the committee was
essentially the capital budget bill that both bodies passed
in June without the items that were enacted, including
federal funds. He meant that the bill included the items in
the capital budget that passed but were lost by veto or not
maintained due to the failure of the three-quarter CBR
vote. The primary source of funding for the bill was the
CBR. There were a few items funded by other sources which
he would highlight. The bill also included language for the
CBR reverse sweep. He noted that since items in the bill
should be familiar to members, he would describe the
sections briefly. He also mentioned that provisions in the
bill were very similar to the capital appropriations
section of HB 2001 [the House companion bill] heard the
previous Monday.
Mr. Irvine provided a sectional analysis. He began with
Section 1, page 2 which contained the agencies' capital
projects passed in SB 19 [Capital budget legislation passed
in 2019] minus enacted items including $10 million for
statewide addiction treatment facility matching grants and
$7.42 million for the Alaska Travel Industry Association.
Mr. Irvine continued to page 3, line 14 which contained the
Marine Exchange of Alaska funding by the commercial
passenger vessel excise tax. The funding source for the
appropriation was different than the CBR.
Mr. Irvine moved to page 6, line 23 which showed an
appropriation of $73.3 million for the Department of
Transportation and Public Facilities highways and airports
to receive a federal match.
Mr. Irvine highlighted page 7, line 5 showing $2.5 million
for the University of Alaska deferred maintenance. He noted
$5 million had already been enacted.
Mr. Irvine advanced to Section 1 and Section 2 which
encompassed the funding sources for the departments which
totaled $161,431,629 from the CBR. He reported that
Section 4, page 11 contained the supplemental
appropriations for the Department of Corrections (DOC) and
the Department of Health and Social Services.
Mr. Irvine relayed that Section 5 and Section 6 on page 12
outlined the funding sources for the supplemental agency
funding which totaled $3,220,200.
Mr. Irvine reported that Section 7, page 14 showed the
Alaska Mental Health Trust capital appropriations.
Section 8 and Section 9 defined the funding sources for the
Alaska Mental health Trust capital appropriations totaling
$11,700,000 from the CBR.
Mr. Irvine continued to Section 10, page 17 which contained
ratifications. It was a technical addition granting
authority to the administration to true-up prior years'
expenditures. Section 11(a) was an appropriation of
$200,000 of Exxon Valdez Oil Spill (EVOS) earnings to
Prince William Sound for the Science Center.
Mr. Irvine moved to Section 11(b), page 17 showing an
appropriation of $2 million to the Northwest Artic Bureau
for school construction major maintenance. The funding
source was Alaska Industrial Development and Export
Authority (AIDEA) receipts. Section 11(c), page 18
contained an appropriation of $4 million for the
construction and expansion of the liquified natural gas
storage facility in North Pole, AK. The fund source was the
AIDEA Sustainable Energy and Supply Development Fund. The
language was originally in the number section of SB 19 but
was moved to the language section to accommodate for the
different fund source.
3:24:08 PM
Mr. Irvine advanced to Section 12, line 18 containing
intent language for the Department of Education and Early
Development relating to the proceeds of the sale of land.
It specified that the proceeds went to Mt. Edgecumbe for
school maintenance.
Mr. Irvine relayed that Section 13, page 18 contained a
reappropriation of $34,577 for the Flat Top Mountain Trail
Cleanup Pilot Project. Section 14(a), page 18 was intent
language for AMHS stating that proceeds of the sale of AMHS
vessels needed to to go to the vessel replacement fund.
Mr. Irvine reported that Section 14(b), page 19 was a
reappropriation of $1.6 million to the harbor facility
grant fund for harbor facility matching grants. Section 15,
page contained a scope change for the Ketchikan Moorage
Facility Project. In Section 16 on page 19 there were
legislative reappropriations of past capital projects to
the Alaska Housing Capital Corporation.
Mr. Irvine continued to Section 17(a) which contained the
reverse sweep. Section 17(b), page 24 encompassed
traditional deficit filling language. If revenues came in
lower than projected for all the appropriation bills, the
CBR would be used to balance the budget.
Mr. Irvine moved to Section 17(c), page 25 which provided
headroom so that if there were budget supplementals, the
legislature could use up to $250 million from the CBR. It
did not obligate the money without further legislative
appropriation. Section 17(d) made the appropriations from
the CBR.
Mr. Irvine advanced to Section 18 repealing the population
triggers that were enacted for opening the Palmer
Correctional Facility. Section 19, page 25 contained the
lapsed provisions.
Mr. Irvine reported that Section 20, page 26 reflected the
retroactivity of the bill. Section 21 contained the
contingency language regarding the reverse sweep and
Section 22 was the immediate effective date.
Representative Tilton asked Mr. Irvine to please explain
what would be accomplished in Section 17(b) on page 24. She
read a portion of the section:
"If the unrestricted state revenue available for
appropriation in fiscal year 2020 is insufficient to
cover the general fund appropriations that take effect
in fiscal year 2020 that are made in this Act, as
passed by the Thirty-First Alaska State Legislature in
the Second Special Session and enacted into law, the
general fund appropriations that take effect in fiscal
year 2020 that are made in ch. 1, FSSLA 2019, as
passed by the Thirty-First Alaska State Legislature in
the First Special Session and enacted into law, the
general fund appropriations that take effect in fiscal
year 2020 that are made in ch. 2, FSSLA 2019, as
passed by the Thirty-First Alaska State Legislature in
the First Special Session and enacted into law, the
general fund appropriations that take effect in fiscal
year 2020 that are made in ch. 3, FSSLA 2019, as
passed by the Thirty-First Alaska State Legislature in
the First Special Session and enacted into law, the
general fund appropriations that take effect in fiscal
year 2020 that are made in a version of HB 2001 or a
similar bill, as passed by the Thirty-First Alaska
State Legislature and enacted into law, and the
general fund appropriations made in ch. 6, SLA 2018?"
Representative Tilton indicated that the section continued,
and she would not read it in its entirety. She wanted to
better understand the meaning of Section 17(b).
3:28:43 PM
PAUL LABOLLE, STAFF, REPRESENTATIVE NEAL FOSTER, responded
that the section was deficit filling language that was used
in almost every appropriations bill. The language needed to
appear in one bill referencing every appropriations bill
rather than being in multiple pieces of legislation.
Otherwise, if there was a deficit and the associated
appropriations bill was not listed, appropriations from the
bill could not be filled with CBR funds.
Representative Tilton asked if the language would apply to
any appropriation bill that was brought forward in any
timeframe. Mr. Labolle responded that, based on
conversations with Legislative Legal Services, the bill had
to be substantively similar to the bill that passed or was
introduced. He clarified he was speaking of the dividend
bill that was introduced. By including the language, if a
dividend bill passed and there was a deficit, money from
the CBR could be used to pay part of the deficit that would
would go to fund the remaining portion of the dividend.
Representative Tilton asked if the language captured any
similar appropriation bill in the future. She suggested the
language would allow funds to be used from the CBR without
the legislature necessarily knowing the bill. Mr. Labolle
deferred to Legislative Legal Services but offered the
reason for its inclusion. He stated the language was
specifically included to capture the dividend legislation
that was before the body in the current special session.
Representative Tilton asked why language would not be
included in the dividend bill rather than the bill before
the committee. Paul Labolle responded that the bill was
created with standard structure which was to put all
deficit filling language in one vehicle and reference all
appropriation bills that would be affected.
Representative Tilton asked to here from Legislative Legal
Services regarding the deficit language. Co-Chair Johnston
stated that Mr. Teal could respond while the committee
attempted to get someone from Legislative Legal Services
online. Representative Tilton was fine with hearing from
Mr. Teal but wanted to hear from Legislative Legal Services
as well.
3:32:27 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
indicated there could be language that specified a date to
narrow the application of the deficit language. He
acknowledged the complexity of the section and provided a
simpler explanation. He relayed that the language restated
the name of each bill twice. It could just as easily read,
"All bills passed by the 31st Legislature before August 1st
are covered." He went on to explain that the reason for
such a sideboard was to limit the possible scenario
Representative Tilton referenced. If a supplemental bill
passed in January 2020 and applied to 2020, the current
language would capture the deficit language, and any
deficits would be funded with CBR monies. He reiterated his
suggestion to include a date which provided a protection.
Specific bills had to be identified to avoid the problem of
future bills creating much larger draws.
Representative Tilton referred to the headroom of $250
million in Section 17(c). She thought the amount was larger
than in previous bills. She wanted to better understand why
headroom was needed as well as deficit fill.
Co-Chair Johnston responded that the amount was included
for several reasons. The first reason had to do with the
fire season Alaska experienced in the current year. The
second reason was that it appeared the inventory of
earthquake damage had not been completed. She also brought
up the question of whether the state could obtain waivers
from the federal government for Medicaid cuts. She wanted
to make sure that the funds were available in case the
waivers could not be obtained. She detailed that holding up
a supplemental placed many small businesses at risk of not
getting paid. Therefore, the committee decided to make the
amount larger in the current year.
Representative Tilton noted that both the headroom
provision in Section 17(c) and the deficit fill in Section
17(b). She did not recall ever seeing both in one bill. She
thought it was a policy call. She wanted to better
understand the difference between them. Co-Chair Johnston
replied that one had to do with cash management, and the
other was to address the supplemental bill. She invited Mr.
Labolle to comment.
Mr. Labolle concurred with Co-Chair Johnston's explanation.
He added that the deficit filling language in Section 17(b)
had to do with appropriations the legislature made. It was
written tightly and referenced only appropriations bills
that the section would affect. He continued that the
headroom was for things the legislature was unaware of for
future bills that would be passed by the legislature. He
noted that the deficit filling language would take affect
automatically. The headroom in Section 17(c) required an
appropriation.
Co-Chair Johnston asked Representative Tilton to repeat her
question for Legislative Legal Services, as someone was
online to answer questions. She indicated Representative
Gabrielle LeDoux had joined the meeting.
Representative Tilton indicated her question had to do with
Section 17(b) on page 24. She wanted to understand the
language and how it would affect future funding. It was her
understanding from listening to Mr. Teal that the language
would allow the funding of any future bills. She wanted
Legislative Legal Services to weigh in on the issue.
3:38:16 PM
MEGAN MEGAN WALLACE, DIRECTOR, LEGISLATIVE LEGAL SERVICES,
explained she was cut off and missed Mr. Teal's
perspective. However, she heard Mr. Labolle's explanation
regarding the deficit filling language and the headroom
provision.
3:38:56 PM
AT EASE
3:39:50 PM
RECONVENED
Ms. Wallace explained that the deficit filling language
would cover the appropriations already made by the
Legislature in the operating, mental health, capital, and
education funding bill passed in 2018 along with HB 2001 or
a similar bill that was passed by the legislature
presumably anytime before the 31st Legislature concluded.
She offered that any other additional bills passed by the
legislature that had appropriations that took effect in
FY 20 would be funded through the headroom section,
Section 17(c).
Representative Tilton noted the reference to HB 2001 or a
similar bill. She wondered if a similar bill was a
committee substitute of HB 2001 or whether it could be any
appropriation bill throughout the 31st Legislative Session.
Ms. Wallace responded that the language stated it was a
version of HB 2001 or a similar bill. The language would
allow for any committee substitute that was introduced or a
similar appropriation bill that was compatible or
comparable to the appropriation in a version of HB 2001.
She reported there being versions of HB 2001 that were
general appropriation bills. A future appropriation bill
would fit within the subject.
Representative Josephson understood that the headroom
appropriation was as much as $500 million in other years.
He asked if the state had experienced headroom in such a
large sum.
Mr. David Teal responded that the headroom was an estimate.
It had been as low as $100 million and as high as $500
million depending on what leadership believed the risk of
supplemental funding might be. Similarly, what was
currently Section (b) did not list any bills. It stated
that if there was a deficit, it would be filled. Section
17(b) referred to appropriations that had already passed or
would pass soon (as in the case of HB 2001). It assumed
that the budget was balanced at the time. It covered the
possibility of revenue being less than expected putting the
state into a deficit - it was the reason the language
contained, "If revenue is less than appropriated". He was
aware that it used to apply when the bill was passed.
Presently, it did not, and the deficit would automatically
be filled from the CBR. The headroom was for unforeseen
circumstances. The state expected to have supplemental
needs, although it was difficult to know what the the
amount would be.
3:44:44 PM
Representative Merrick stated she was confused, noting the
co-chair's comments that the bill was essentially the same
bill that was voted on in the prior month - a bill that
failed to pass because the CBR vote did not pass. She asked
why the legislature was reconvened to take up the same
failed bill. Co-Chair Johnston responded that it was a
policy call. Some legislators were concerned about the CBR
sweep, public safety, education, highways, and airports.
Representative Merrick responded that she came to Juneau to
work on a compromise, but she did not view offering the
same piece of legislation as a compromise.
Sullivan Leonard echoed the sentiments of Representative
Merrick. She also came to Juneau to work on a compromise.
However, she did not see the current bill as a compromise.
She responded to comments about the bill being critical
legislation but noted there were pieces of the bill that
funded carpet repair and swimming pools. She felt the
legislature was going backwards. She echoed her colleague's
comments regarding the deficit filling language in
Section 17. She surmised the passing of the bill would bind
a CBR vote in some future appropriation bill. She concluded
that members were being forced to vote one way based on a
bill that might come before the legislature. She was
disgruntled with the bill.
Representative Knopp stated that no one was bound to any
vote. He further clarified that what failed last time was a
funding source vote, rather than the individual items in
the bill. He indicated the governor's crime package was in
the bill. If members chose not to support the bill, the
crime package would not be funded. He referred to
Section 18, line 27 on page 25. He asked if the section
contained repeal language for the population trigger for
the Palmer Correctional Facility. Mr. Irvine responded
affirmatively.
Representative Knopp commented that the repeal language was
in the original capital budget bill [SB 19]. However, the
language was not in the governor's bill when he introduced
the last version, SB 2002. He questioned why the repeal
language was in the bill.
Paul Labolle stated there was a structural difference
between the capital budget appropriations that were put out
by the governor and the repealers from what passed in
SB 19. The Governor repealed the sections of language that
addressed the crime bill and reenacted them in the numbers
section. The Senate left the structure intact from SB 19
that reopened the Palmer Correctional Facility limiting the
funding to only its reopening. Also, only the population
triggers were removed based on population at points of
time.
3:49:48 PM
Co-Chair Foster responded to earlier comments about hearing
the bill again. He stated that Alaskans had spoken loud and
clear that they wanted to leverage federal funds for roads
and highways. They did not want to leave $1 billion dollars
on the table for other states to access. He mentioned $12
million for village safe water that would leverage $52
million in federal funds. He also had a question regarding
the reverse sweep. He specified that if the legislature
were to achieve the reverse sweep, it would restore funding
to the PCE Program and the Higher Education Fund. He
continued that without the reverse sweep thousands of
Alaskan students across the state would not receive their
scholarships.
Co-Chair Foster also noted the PCE fund would not be
recapitalized without the reverse sweep. He was aware of
other options such as funding the program for 1 year
through undesignated general funds (UGF). He was concerned
that if the state did not recapitalize the fund it would
not be available in the following year. The Power Cost
Equalization Program was created to bring a level of
equality to rural communities in terms of energy costs.
Currently, the proposal being considered was to strip away
the entire fund of $1 billion. He asked what other funds
would be affected by the lack of a reverse sweep that might
compromise communities. He was aware of the AMHS being
affected along with other items. He asked Mr. Labolle to
comment.
Mr. Labolle responded that he recently learned the Division
of Occupational Licensing carried a balance every year to
keep their yearly fees at a flat rate rather than having to
fluctuate them based on the number of cases in any given
year. If the balance was not swept, fees would change
yearly. He suggested that not only were there anticipated
problems without the reverse sweep, there would be
unanticipated problems which he thought should be cause for
concern. The legislature would not know the dollar amounts
or the demand and would not have the information until
after FY 20.
Co-Chair Foster was looking for other examples of things
that would be lost if the reverse sweep was not achieved.
He mentioned the PCE Fund, the Higher Education Fund, the
Marine Highway Fund, and the Vessel Replacement Fund. He
noted that the PCE Fund had never been swept before. It
would be a major policy change that would affect 84,000
rural Alaskans. He emphasized how important the bill was to
him and the importance of taking another look at the bill.
3:54:58 PM
Representative Josephson thought there had been a
significant amount of education provided in the prior 30
days regarding the reverse sweep issue. He heard from the
Office of Management and Budget (OMB) one of the benefits
of sweeping $2 billion was that the state paid down the CBR
debt. He reported never receiving a communication
indicating any anxiety about the sweep. He thought it was a
legal duty, but not an interest-bearing duty. He also saw
that the concern over the loss of matching funds had
changed. He wondered if someone could speak to the issue of
population management. The prior language was designed to
steer the administration towards refilling the Palmer
Correctional Center and receiving money for that purpose.
He reported some anxiety about sending Alaskan prisoners to
other states to contract prisons. He asked someone to
comment on potential obstacles.
Mr. Labolle stated that the funding was specifically
delineated for opening the Palmer Correctional Center. The
structure set forth in SB 21 [Legislation passed in 2018
regarding the mental health budget appropriation] was
removed in the governor's original version of the bill
[SB 2002]. He suggested the original version would have
allowed for the funds to be used for population management
and provided full authority to send Alaskan prisoners out
of state.
Representative Josephson asked how the absence of the
language did the opposite and kept prisoners in Alaska. Mr.
Labolle responded that it was because the language was in
existing law with the passage of SB 18 [SB 19]. The
portions containing the language were not vetoed. The only
item remaining in question in SB 18 [SB 19] was the fund
source since the funds came from the PCE Fund. However, the
reverse sweep in the current bill would fix the issue from
SB 19.
Representative Tilton referenced discussions regarding
funding for the Higher Education Fund and Washington,
Wyoming, Alaska, Montana, and Idaho (WWAMI). She thought
the original version of SB 2002 had already addressed
funding for both items. She asked if she was correct. Paul
Labolle asked Representative Tilton to restate her
question. Representative Tilton reported that the original
version of SB 2002 was funded entirely with general funds.
She believed the issue of paying out the Higher Education
Fund, the WWAMI fund, and the PCE payments were taken care
of in SB 2002 using general funds.
3:59:16 PM
Paul Labolle replied, "The answer to that is, kind of." The
bill contained language stipulating that funds that would
have been funded by fund sources that were swept would be
replaced with general funds. However, the bill, as written,
created a deficit of about $100 million. Although it
provided a paper payment of funds, the bill contained a
budget hole.
Representative Tilton asked if there could have been an
opportunity to amend SB 2002 to fill the hole with another
account allowing the programs to be funded. Mr. Labolle
replied that the bill reflected the amendments agreed to by
the Senate to address the deficit.
Co-Chair Foster thought the issue was that the governor
submitted the original version of SB 2002, although it paid
for PCE for 1 year with UGF, without the reverse sweep. He
explained that normally the PCE program was funded from the
earnings of the $1 billion PCE Fund. He was concerned that
if the fund was no longer there, there would be no funding
for the program the following year and into the future. The
Power Cost Equalization Fund had been in existence since
the '80s. He was concerned for the future existence of the
fund.
Representative LeBon asked Mr. Teal to discuss the concept
of the reverse sweep and the time sensitivity of the
legislature acting. He thought the issue was reason enough
to be in Juneau. He mentioned hearing that 3 to 4 dozen
accounts would be affected by not enacting the reverse
sweep with an impact of about $2 billion.
Mr. Teal thought it would be easiest to address
Representative LeBon's question in the context of timing.
He used the Vaccine Assessment Fund as an example. He
suggested that although not doing the reverse sweep
immediately might not be an issue currently, access to
money would be imperative if there were a measles outbreak.
Some of the funds that were swept might not become problems
until the end of the fiscal year. He mentioned the
Department of Labor and Workforce Development' Worker's
Safety Fund which used the balance and was spending at an
unsustainable rate. By sweeping away the balance in the
current year, they would have to reduce expenditures. Some
of the effects could be long-term, some were hypothetical,
some were certain, and some could happen very early.
Mr. Teal continued that some people were deciding not to
attend college because of the lack of a reverse sweep and
the negative impact on the Higher Education Fund. He
recommended acting quickly to reverse the sweep. He thought
there could be retroactive payments for the PCE Fund unlike
people immediately having to decide whether to go to
college. There were several unanswered questions regarding
the sweep. He thought the Higher Education Fund was the
best example of a reason to reverse the sweep as quickly as
possible due to the monetary impact, the number of people
affected, and timing being critical.
4:05:37 PM
Representative Merrick asked if there were projects in the
committee substitute that were funded from the CBR that
were traditionally funded from the general fund. Mr. Irvine
responded, "Yes."
Representative Merrick asked for a list of projects and
their dollar amounts. Mr. Labolle responded that all the
appropriations were funded with the CBR apart from the
projects Mr. Irvine noted were funded otherwise. He
suggested looking at the roll-up portion of each section of
the bill. He pointed to the projects listed in Section 1,
items which would be receiving legislative appropriations.
He indicated the roll-up section began on Section 2, page
8. Section 2 listed the funding per department for the
projects. Most of the projects would be funded via the CBR.
Page 9 contained the second part of Section 2 which
provided the total agency budget totaling about $161
million.
Representative Merrick was trying to get an idea of what
was traditionally funded through UGF that was presently
being changed to CBR funding.
Representative Tilton wanted to ask about details regarding
some of the projects. She referred to page 4, line 5 under
DOC. She pointed to the Lemon Creek Correctional Center.
The wording in the current bill was different from what was
in the capital bill. She explained that the language in the
capital bill made the appropriation contingent on the
implementation of a prison industry laundry program. She
queried the change. Mr. Labolle stated the Senate chose to
remove the language and the targets.
Representative Tilton referred to page 7, line 5 under the
University of Alaska. She noted a $2.5 million
appropriation for maintenance, renovation, and repair. She
asked if the amount was in addition to the amount in SB 19.
She asked for the total appropriation. Mr. Labolle replied
that the amount in the CS for SB 2002 was an identical
amount to the amount that was vetoed in SB 19.
Representative Tilton appreciated the clarification.
4:10:17 PM
Representative Josephson had a comment on something Mr.
Teal mentioned about hypothetical and actual harm that
could be caused by the failure of a reverse sweep. He
indicated that the State University of New York was
advertising and directing a campaign to Alaskan students to
attend school in New York. Alaskans could not use their
Alaska Performance Scholarships because the monies had to
be used in Alaska. He thought the dominos were falling and
the process was competitive. He opined that the legislature
was trying to keep the dominos from falling, part of the
importance of the reverse sweep.
Representative Knopp asked Mr. Teal about a discrepancy in
the available funding when the governor's budget was rolled
out. He recalled the Legislative Finance Division (LFD)
reporting a discrepancy of about $100 million. The Office
of Management and Budget was still working on numbers. He
asked about the amount of vetoes restored in the Senate's
version of the budget. He referred to the total agency
funding on page 8. He asked if the amount reflected the
amount of the draw from the CBR. He asked for the total for
the entire bill. Mr. Irvine responded that the total
funding of the bill from the CBR was $178,951,800.
Representative Wool asked for the non-CBR funding total.
Mr. Irvine replied that it was $4 million.
Representative Wool surmised the total was roughly $180
million similar to HB 2002 which totaled approximately $170
million. He spoke of discovering new funds daily that would
be negatively impacted without a reverse sweep. He thought
it was reflected in the large difference between current
and previous discussions. He wondered about a figure
related to the reverse sweep. He mentioned the Occupational
Licensing Fund and other various funds. He also mentioned
the PCE Fund which had a balance of close to $1 billion. He
asked Mr. Teal how he accounted for the unknowns. He
requested an amount for the reverse sweep funds.
4:14:26 PM
Mr. Teal responded that LFD put some spreadsheets together
on the topic Representative Wool was asking about. He
reported that the number was not firm. He explained that
when the number was put together there were various
categories such as PCE funded by an endowment. The fund ran
off earnings. He argued that if the PCE portfolio was taken
away sweeping the balance of the fund, the earnings of the
fund during FY 20 would be zero. There would be no money
for PCE, and money could not be recovered. The same
circumstance applied to the Higher Education Fund. There
would be no interest earnings on a zero balance portfolio.
Mr. Teal continued that other funds collected money during
the year such as Occupational Business Licensing, or Spill
Prevention and Response. Many could be affected by taking
their balance. However, the funds including the Tobacco
Fund, the Alcohol Fund, and the Marijuana Fund regenerated
new money during the year. A fund might generate more money
that it spent. In which case, there would be no harm in
sweeping such a fund.
Mr. Teal continued that many of the funds spent more than
they would take in. The real impact of the sweep would be
in the last few months of a fiscal year when funds ran out
of money. He was uncertain when the fund would run out and
by how much. The Legislative Finance Division made some
guesses and came up with just over $120 million. The Office
of Management and Budget went through a similar exercise
and derived $115 million as they testified in the Senate
Finance Committee. He concluded, "Close enough." He
remarked the [reverse sweep] amount was substantial. He
reported that $85 million of the impact was from the PCE
Fund and the Higher Education Fund. He told of the Vaccine
Fund being swept for $21 million. It was difficult to know
how much money might be needed for vaccines, and the amount
was an educated guess. He was comfortable with an estimate
of $115 million since LFD and OMB calculated their numbers
independently and were within $5 million to $10 million of
each other.
Representative Wool referred to the endowment funds. He
wondered about the effects of paying for PCE ($30 million)
out of the general fund. He suggested more pressure would
be placed on the general fund because of the lack of an
endowment income. He asked if he was accurate.
Mr. Teal responded that regarding the PCE Fund, as long as
there was an endowment, there would be a certain funding
stream. The Power Cost Equalization Program would be
competing for general funds without an endowment. It would
be difficult to know if the program would last being funded
with UGF. He thought Co-Chair Foster could speak to the
reason there was a PCE endowment. It had to do with urban
and rural subsidies.
Representative Wool referenced the impact of jeopardizing
the Higher Education Fund. He received a call earlier in
the day from the local Fairbanks newspaper asking when he
thought the issue would be resolved. The newspaper reported
students wanting to go to school which was starting in a
month. He spoke to the negative ripple effect of not
resolving the issue. He underlined the time sensitivity of
resolving the reverse sweep question.
4:20:43 PM
Co-Chair Foster relayed that the prior governor's version
of HB 2002, now SB 2002, proposed funding PCE with UGF. He
did not believe the same was true for the higher education
scholarships. He asked for clarification. He suggested that
if it was not the case, it would negatively affect the
WWAMI Program, the program that helped students in Alaska
to pursue a medical degree.
Mr. Labolle's understanding was that the general fund would
backfill any fund that was swept for one year. He noted
that if PCE was swept into the CBR, the CBR's investment
portfolio would change. He informed members that the CBR
was managed for liquidity. It was expected to be spent and
could not be invested at a higher level. He thought the
percentage was between 2 to 3 percent. The PCE Fund, the
balance of which was not expected to be spent, could be
invested at a higher rate - between 5 and 7 percent.
Co-Chair Foster suggested that the programs could be
financed in the current year with UGF, but a problem
remained. If the Higher Education Fund was swept and went
away, the correlating programs would be put at risk. He
shared the same concern for the PCE Fund as he had for the
Higher Education Fund.
Representative Merrick asked if it was possible to fund the
essential programs with time constraints with UGF and to do
the reverse swept later with legislation. Co-Chair Johnston
responded that the longer the legislature delayed dealing
with the matter, the more complicated the accounting would
become. She also pointed out that the PCE Fund would return
less earnings. Mr. Labolle agreed with Co-Chair Johnston.
Representative Merrick thought her suggestion could be a
solution in the short-term.
4:25:24 PM
Representative Tilton referred to Section 12 on page 18
regarding the funding for Mt. Edgecombe boarding school
maintenance and operations. She asked what the funding was
for. Mr. Irvine replied that the provision, added by the
Senate, stated that if Mt. Edgecombe was going to sell off
any of its lands, the proceeds would be used for the
maintenance and operations of the school.
Representative Tilton mentioned the pool and wanted to
clarify the use of the funds. She moved on to Section 13
containing a reappropriation for the Flat Top Mountain
Trail Cleanup Pilot Project. The appropriation was coming
from the Department of Military and Veterans Affairs'
deferred maintenance project: Military Youth Academy
deferred maintenance renewal and replacement. She wondered
if it was important for the Military Youth Academy to have
the funds reappropriated back to them. She asked if the
funding started as UGF. She also wanted to more information
on the project being funded. Mr. Labolle responded that the
money was being reappropriated from a closed project, the
balance of which was lapsing.
Representative Tilton asked Mr. Labolle to better explain
the Flat Top Mountain Trail Cleanup Pilot Project. She was
concerned about the project being a pilot project and
future funding to maintain it. Mr. Irvine explained that
the project encompassed placing receptacles on Flat Top
Mountain so that individuals that were hiking had a place
to deposit their dog's poop. Kids would be employed to pick
up the trash in the receptacles. There was concern that
fecal matter was getting into streams creating pollution.
Representative Tilton questioned whether any consideration
had been given to future funding of the project since it
was currently a pilot project. Co-Chair Johnston replied
that the Senate had indicated that if the project was
successful and seemed worthy, they would be considering it
for future years. She thought the Senate had benchmarks for
measuring the success of the program.
Representative Tilton referred to Section 16 regarding the
Alaska Housing Finance Corporation fund balances for the
listed projects. The balances were being appropriated to a
parking garage for future use and to be appropriated in a
future session. She wondered why the monies were not being
placed into the CBR to be used for funding some of the
state's current deficit.
4:30:01 PM
Co-Chair Johnston thought the issue was a policy call. It
was a common practice used for the past several years,
because of the state's limited funds. Matching funds for
the following year would be a consideration. She spoke of
an issue in the current year of getting funds out of the
CBR. She thought any federal matching funds that could be
reappropriated should be saved.
Representative Tilton appreciated wanting to make sure that
the state had funds available for reappropriations for
federal highways. She wondered why the funds weren't being
used with the state's current deficit.
Representative Josephson offered a comment relative to the
PCE Fund and the Higher Education Fund. He suggested that,
although the funds were not technically dedicated funds,
they could be used for any purpose by any legislature. The
dedicated funds the state had were from the territorial
period. He surmised the funds were an expression of the
continued belief the programs were worthy and did not
believe they should be used for any other purpose.
Representative Merrick referred to Section 13 on page 18.
She queried the number of receptacles the state would be
receiving at a cost of nearly $35,000. Mr. Irvine would
have to get back to the committee with the information.
Representative Wool asked how long the reverse sweep had
been in place. Mr. Teal replied, "The sweep has been going
on since the creation of the Constitutional Budget Reserve
Fund in 1991." He added that the sweep did not occur every
year. The sweep only occurred when the state owed money to
the CBR. He reported that the state owed money most every
year until the last round of high oil revenues when the CBR
was completely reimbursed. He reported there being no sweep
in 2014, 2015, and 2016. The state currently had a
liability to the CBR of about $12 billion with $2 billion
cash that remained in the fund. He explained that when an
accountant was asked for the balance of the CBR, they would
respond with a figure of $14 billion: $2 billion in cash
and $12 billion in what the state owed itself. Every year
the state had an outstanding liability to the CBR, there
was a sweep. Every year a sweep occurred there was also a
reverse sweep.
Representative Wool clarified there had never not been a
reverse sweep when the CBR had been swept.
Sullivan Leonard relayed that in most of her experience
with local and state entity budgets, the general fund
accounts was used to pay for all appropriations first. She
asked Mr. Teal why the state would pull from its savings
account first as opposed to paying the budget from the
general fund.
4:35:06 PM
Mr. Teal replied that it could be done either way. It was a
policy call. Generally, that legislature did not spend
directly from the CBR. The legislature spent general funds.
Due to the provisions in Section 13(b), if the state spent
more general funds than it had, money would automatically
be drawn from the CBR. However, the draw would be counted
as general fund spending. He continued that when there was
a direct appropriation from the CBR (like the $3 billion
that was placed in the retirement system) it would not show
as a general fund appropriation. In effect, spending
general funds which created a deficit situation was
spending from the CBR. It did not matter whether the money
was spent before being forced to draw from the CBR or
whether it was spent directly from the fund. If revenue did
not support the state budget, the money would come from the
CBR.
Representative Merrick understood the concept Mr. Teal was
explaining. She asked for the current balances of the
general fund and the CBR. Mr. Teal replied that the general
fund balance was zero. It had to be zero. The language
regarding the deficit filling draw in Section 13(b)
directed the state to draw the necessary amount of money to
fill the deficit. The state had not had an end-of-year
general fund balance for years. As long as there was a
sweep and a deficit filling measure was used, the end
balance of the general fund had to be zero. The end balance
of the CBR was slightly over $2 billion in cash and
slightly over $14 billion of state-owed dollars.
Co-Chair Johnston added that, with the vetoes and the
structured draw, the governor transferred $1 billion back
to the Earnings Reserve Account. The total revenues dropped
presenting a problem with the budget.
Representative Wool asked how to get the CBR balance down
in nominal terms. He wondered if the fund was always a
continually growing fund, or if it got smaller.
4:39:01 PM
Mr. Teal indicated Representative Wool had described what
happened accurately. He explained that once money was in
the CBR, the fund would never go below that balance
including the amount the state owed. The state was required
to repay what it drew from the fund. The issue that would
always arise was whether the CBR had to be repaid. He
indicated the answer was, "No." The constitution envisioned
paying the money back with sweeping funds at the end of the
year. The state went from owing a substantial amount in the
mid-2000s to repaying it after a spike in oil revenues. The
amount was fully repaid to the CBR. At the time, there was
a decision made to put surplus funds into the Statutory
Budget Reserve (SBR) rather than the CBR. He explained that
any money taken from the CBR would be owed again. He
reported a current SBR balance of $172 million.
Co-Chair Foster returned to the idea of funding items
affected by the reverse sweep with UGF and returning to do
the reverse sweep later. He contemplated why he would allow
the sweep to occur when he was aware of the intent of the
administration to drain the PCE Fund and the Higher
Education Fund. He did not see any potential of dealing
with the reverse sweep later.
Representative Merrick noted she was not the
administration. Co-Chair Foster was aware Representative
Merrick was not the administration. However, he knew full-
well it was the intention of the administration to drain
the funds, which he would not support.
Rep Ortiz MOVED to report CSSB 2002(FIN) out of Committee
with individual recommendations.
Representative Sullivan-Leonard objected.
Representative Sullivan-Leonard spoke to her objection. She
thought an opportunity to offer amendments should be
provided. There were things in the bill she thought
contained significant fluff. She had heard there were
mission critical pieces to the bill which she could
appreciate and support. However, there several pieces she
could not support. She reiterated wanting a chance to offer
and debate amendments.
Representative Sullivan-Leonard MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Josephson, Knopp, LeBon, Ortiz, Wool, Johnston,
Foster
OPPOSED: Tilton, Merrick, Sullivan-Leonard
The MOTION PASSED (7/3).
CSSB 2002(FIN) was REPORTED out of committee with with
seven "do pass" recommendations, one "do not pass"
recommendation, and two "amend" recommendations.
Co-Chair Johnston thanked the people involved in the budget
process. She reported the agenda for the following day.
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