Legislature(2021 - 2022)ADAMS 519
03/14/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB322 | |
| HB395 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 322 | TELECONFERENCED | |
| *+ | HB 395 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 395
"An Act relating to the Alaska marine highway system
fund and the Alaska marine highway system vessel
replacement fund; establishing the Alaska marine
highway system fund and the Alaska marine highway
system vessel replacement fund outside the general
fund; authorizing the commissioner of transportation
and public facilities to expend money from the Alaska
marine highway system fund and the Alaska marine
highway system vessel replacement fund; and providing
for an effective date."
1:40:08 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced HB 395 and explained
that it removed the Alaska Marine Highway System (AMHS)
fund from being subject to the Constitutional Budget
Reserve (CBR) sweep provisions of the constitution. The
first way the bill addressed the applicability of the sweep
to the AMHS was by removing the AMHS fund and the vessel
replacement fund from the general fund and into its own
external fund. This was to address the first test of
"sweepability," which was tested whether a fund or account
was part of the general fund. Second, the bill allowed for
expenditures from the AMHS fund without further
appropriation. This was to ensure that the AMHS fund and
the vessel replacement fund also met the second test of
sweepability, which tested whether funds were available for
appropriation. It was important to safeguard the structural
stability of the fund so that, if one of the tests were
interpreted differently in the future, the fund would still
meet the other test. Ensuring this stability was key
because the funds were constructed to allow AMHS to operate
into the future.
Mr. Steininger emphasized that the state had a financial
opportunity to utilize significant federal funding that
would allow the continuation of AMHS, and would allow the
state to save farebox recovery funds earned by AMHS for
future use. If the AMHS fund was subject to the CBR sweep,
it would be more difficult to rely on the farebox recovery
receipts in five years should the federal program expire.
He stressed that utmost security of the AMHS operating plan
was important to avoid problems like this and the
administration envisioned providing that stability in
future years.
1:43:21 PM
Representative LeBon shared his understanding that the
deposited money generated by AMHS would be placed into a
designated account. He wondered what he should call the
account.
Mr. Steininger responded that it should be called a fund or
an account. He explained that designated general funds in
the state budget referred to flows of revenue made by
statute into a fund. He stated that the AMHS fund was
structured in this manner. The farebox recovery funds
flowed into the fund, which were then appropriated by the
legislature. The bill restructured the system and required
that, rather than revenues automatically flowing into the
fund, revenues needed to be appropriated by the legislature
into the fund. This was because the constitution included a
designated funds clause specifying that no state revenue
was dedicated for an exact purpose. Therefore, the money
would not flow automatically into the fund because it
required that the commissioner could not spend without
further appropriation. In order to ensure the fund was set
up legally, either the money that flowed into the fund
needed to receive appropriation, or the money that flowed
out of the fund needed to receive legislative
appropriation. It defined when the money was considered to
have been spent for purposes of the state budget. Under the
bill, the money was considered spent at the time it was
transferred into the fund.
Representative LeBon asked a clarifying question about the
different account and the means to remove money from the
fund.
Mr. Steininger referred to Section 2 of the bill, which
illustrated the way in which money would leave the fund.
The legislature appropriated the farebox recovery revenue
into the fund, then the commissioner of DOT expended from
the fund without further appropriation. However, there
would be certain boundaries and rules. The funds would
still be subject to the program and financial review
provisions of the budget, which required transparency to
the public, understanding by the legislature, and continued
fiscal constraint in the operations of AMHS. The
commissioner of AMHS would also submit the management plan
budget to OMB, which dictated the proposed fund designation
for the following fiscal year. The commissioner was also
required to submit change records to OMB during the
governor's budget production cycle and speak to the change
records and the operational plan during the committee
process with the legislature. While it was an expenditure
with additional appropriation, it would still appear in the
budget under the "other" funds category rather than
designated general funds. Other state entities that
operated off large funds functioned in a similar way. For
example, the Alaska Gasline Development Corporation (AGDC)
and the eligibility for the Permanent Fund Dividend (PFD)
operated under the same rules.
1:47:49 PM
Representative LeBon suggested that the final decision on
how the AMHS money was spent was made by either OMB, the
DOT commissioner, or in partnership with both entities to
ensure the money was spent in a way that had been
established in law. He asked for clarification and noted
sidebars were put into place.
Mr. Steininger agreed and added that the decision was made
through partnership with the legislature. He noted that the
bill specified the operating function that was allowed to
be used from the fund. There were specific boundaries that
dictated the ways in which the money was spent. It also
required that the spending be in accordance with the plan
submitted through the standard budget process. Ultimately,
the requirements included in the budget reports acted as
further restrictions on the potential allocations of the
money. It required coordination from all entities regarding
the operational plan. He emphasized that there was still
room for input from the legislature, however that point in
the process was not when the funds would be considered
expended. The money was considered spent when it was
deposited into the funds for fund capitalization.
Representative LeBon supported the intent of the
legislation. However, he expressed concerns about checks
and balances not being in place.
1:50:34 PM
Vice-Chair Ortiz supported the notion of trying to protect
two funds from being deemed sweepable. He referred to
Section 2 of HB 395, which outlined how the money would be
used. He asked if the funds had been used properly in the
past and whether the bill changed the ways in which the
funds were used in the past.
Mr. Steininger responded that the intent was not to change
how the funds were used in terms of the operation of AMHS.
He clarified that it intended to mimic how the funds were
currently used for operation of AMHS. There was no intent
to expand the use of AMHS funds.
Vice-Chair Ortiz wondered why the added language was
necessary. He thought it looked as though the bill was
granting greater authority to OMB or to the DOT
commissioner. He asked whether the same parameters were a
product of the previous funds as the funds were
constructed.
Mr. Steininger responded that the fund was currently
constructed as a designated fund and followed the
designated uses already in statute that allowed for
guidance through the legislature. He reiterated that it
was attempting to mimic those designations, but treated the
designations as legal boundaries on potential
recommendations the commissioner made for the funds. It was
slightly more restricted because the designation that would
be given to the legislature was a suggestion. While the
legislature always maintained the power to appropriate and
could take money from the fund, the commissioner would not
be able to do that and would be constrained to specific
purposes.
1:53:44 PM
Vice-Chair Ortiz noted that the history of the fund dated
back before the creation of AMHOB. He wondered if the bill
recognized the creation of the new board and the nature of
the board. He asked whether the board as it was constructed
had any say in appropriation or use of resources.
Mr. Steininger replied that the intention of the bill was
simply to fix the discrete problem of sweepability and the
resulting long-term impacts. There was no intention to
curtail any energy or enthusiasm about AMHOB. The bill
intended to ensure that there would still be money
available should federal funding expire. It provided some
security for current and ongoing discussions.
1:55:55 PM
Vice-Chair Ortiz reiterated he supported the intent of the
bill. He wondered what would prevent the construction of a
bill that strictly addressed the sweepability of the funds
and not the appropriation process. If the goal was simply
to make the fund unsweepable, it made sense to focus the
intent of the bill.
Mr. Steininger reiterated that there were two tests that
determined whether funds were available for appropriation:
whether a fund was in the general fund, and whether a fund
was available for appropriation. The determination of
sweepability was simply a statute that said a fund was
outside the general fund. He explained that was a very
recent change in the determination of sweepability and came
out of a superior court decision. However, superior court
decisions were not binding. The non-binding decision was
not a strong enough foundation to build the fund that was
required for the operations of AMHS. The intent was to
ensure that AMHS would remain outside of the bounds of
sweepability. If a fund was validly appropriated by the
legislature in the past without further appropriation, then
those funds would not be deemed sweepable because the funds
were accessible without further appropriation. Every fund
was set up a little differently, but the intent was to
ensure that the funds met the tests that determined whether
the funds were available for appropriation.
1:59:37 PM
Representative LeBon relayed his understanding that if
money flowed into a designated account, then it would be
considered part of the general fund for the duration of the
time the money was in the designated account. Additionally,
if the legislature appropriated money out of the designated
account into another account, it would no longer be subject
to appropriation by the legislature and would be under the
control of the commissioner as outlined in Section 2 of the
bill. The state would be transferring the ability to spend
the money to the DOT commissioner, OMB, or another agency
in order to protect it from being swept back into the CBR.
He asked if he had made a true statement.
Mr. Steininger responded that he was correct.
2:00:56 PM
Representative Carpenter provided a scenario where the
legislature appropriated money into the AMHS fund. He asked
whether the legislature would have the ability to remove
the money from the fund in the future if it chose to do so.
Mr. Steininger responded in the affirmative and explained
that the money could be reappropriated if it had not been
expended.
Representative Carpenter asked what was stopping the
legislature from appropriating a sum of money into AMHS
fund that would cover the operations of the department for
several years in the future.
Mr. Steininger indicated it would simply increase the
balance of the fund and it would still be subject to the
sweep. The legislature would be able to deposit a large sum
of money into the fund for that purpose if the bill passed.
Representative Carpenter thought the constitution should be
changed rather than skirting requirements as set forth in
the constitution.
2:03:35 PM
Representative LeBon asked if the same logic could be
attached to the Alaska Performance Scholarship and other
higher education funds. He wondered whether the
sweepability requirement would be removed if money was
appropriated out of the higher education funds and into a
student loan corporation fund.
Mr. Steininger responded that if a fund was established
that was spendable by a corporation without further
appropriation, the structure would look similar to the
structure of AMHS funds. It was effectively a savings
account that required further appropriation by the
legislature.
Representative LeBon suggested that if the state was
protecting the AMHS vessel replacement fund, then the
legislature should appropriate a balance out of that
account into the "sub-account" to disqualify it from
sweepability. He thought the process should be done on a
yearly basis as money flowed into the account to protect
the monies from the reverse sweep. The higher education
fund balance had built up since the fund's inception;
therefore, the legislature would have to transfer all the
money into something like a student loan program in order
to protect it.
2:06:11 PM
Mr. Steininger thought Representative LeBon described the
issue accurately. If the bill passed, the legislature would
be required on an annual basis to appropriate the farebox
recovery revenues and any other desired funds into the AMHS
fund to continue capitalizing upon it. The higher education
fund was different because the AMHS fund consisted of funds
generated by AMHS activity. The ability to save revenues to
support future activities was an important aspect of the
process. He explained that the balance in the higher
education fund was not tied to the operations of the
scholarship. He relayed that AMHS was set up differently
and was examined more closely to ensure that AMHS could
continue to rely on the fund to operate, whereas the
scholarships would continue to be supported by the
unrestricted general fund.
2:07:44 PM
Representative Carpenter thought it would be more accurate
to say that if the farebox recovery funds were intended to
be spent by AMHS, an appropriation would have to be made.
He pointed out that AMHS did not have to conduct operations
off of the specific funds. He highlighted that the
legislature could make a multiyear appropriation of any sum
from any account into the AMHS fund.
Mr. Steininger responded in the affirmative. The
legislature would always retain the ability to redivert the
farebox recovery funds as they were state general revenues
coming into the state. It was up to each legislature to
determine how to use the revenues.
Representative Carpenter shared his understanding that a
legislature was able to appropriate a sum of money into the
AMHS fund, which would eliminate the need for the following
legislature to appropriate additional money into the fund
to forward-fund the account.
Mr. Steininger responded, "Yes." It would be similar to the
way in which the higher education fund had been forward
funded in the past. The legislature had the opportunity to
place a larger balance in the supported operations for a
longer period. A similar mechanism could be utilized if
AMHS was removed from subjectivity to the sweep.
Co-Chair Merrick asked Mr. Steininger to review the fiscal
notes.
Mr. Steininger responded in the positive.
2:10:48 PM
AT EASE
2:11:14 PM
RECONVENED
Mr. Steininger reviewed FN 1 with the control code aFote.
He explained that it referred to OMB component 3064 and was
a supplemental fiscal note for $18.5 million. It consisted
of a supplemental fund capitalization from the general fund
to the vessel replacement fund. It would reconstitute the
amount that was swept from the vessel replacement fund back
into the fund under the new construction that made the
money not subject to the sweep.
Mr. Steininger continued to FN 2 with the control code
XGaKs. It referred to OMB component 3122 and would cost
$53.3 million in FY 23 and $53.4 million in FY 22. He
explained that the fund capitalizations from FY 22 and FY
23 farebox recovery would go to the AMHS fund.
2:12:40 PM
Mr. Steininger continued to FN 3 with the control code
sCmtQ. It referred to OMB component 2604 which reflected a
fund change for an amount currently included in the FY 23
budget. He reported that $5 million of the AMHS fund in FY
23 would be utilized to cover costs that would be
unallowable under the new rural ferry system program that
resulted from the [federal] Infrastructure Investment and
Jobs Act. This would change the fund source on the
appropriation from the current AMHS designated general fund
to what would be a new fund code for the other funds. He
explained that this represented the duplicated spending out
of the AMHS fund. The bill would require deposits into the
funds appropriated in the fund capitalization section and
the operating budget for DOT would include a tracking code
that showed how the administration intended to use the
funds.
Co-Chair Merrick invited Mr. Painter to the table to
discuss the significant differences between HB 322 and
HB 395.
2:14:36 PM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
spoke of the differences between HB 322 and HB 395. He
explained that the two bills took two different approaches
to solve the same problem, which was the sweepability of
the AMHS fund. He echoed Mr. Steininger's comments that
there were two tests to determine sweepability. The first
test, which was to determine whether the fund was in the
general fund, was addressed by both bills. He explained
that both bills addressed it in a functionally similar way:
HB 322 addressed it by moving the AMHS fund outside of the
general fund and into the state treasury, and HB 395 simply
dictated that the AMHS fund was outside of the general fund
and did not establish it in the treasury. For a fund to be
sweepable, however, a fund had to satisfy both tests. He
noted that HB 322 did not address the second test, which
was whether the funds were available for appropriation,
while HB 395 did address it by making the fund available to
DOT to spend without further appropriation. It essentially
provided additional flexibility to DOT to determine the
amounts that were spent each year rather than that
responsibility being subject to the legislature's power. He
surmised that HB 395 was stronger in terms of protecting
the sweep because it allowed the fund to be spent without
further appropriation. Conversely, it gave up some
legislative control by allowing the commissioner to spend
without appropriations given by the legislature. There was
nothing in HB 395 that would prevent the farebox recovery
funds to be spent all in one year. He noted that was not
the plan, but that it would be possible.
2:17:39 PM
Representative LeBon thought a form of checks and balances
would be the annual appropriation that the legislature
needed to make to prevent the money from being swept. He
offered that if any "bad behavior" was uncovered during the
prior fiscal year, the legislature would be asked every
year to move money from the designated account to protect
it from the future sweep. He asked whether his
understanding was correct.
Mr. Painter responded in the affirmative, and added that if
the legislature was unhappy with the administration's use
of the fund, the legislature could refrain from placing
money into the fund the following year.
Co-Chair Merrick concluded the agenda for the meeting.
HB 395 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 322 Leg Finance Fund Source Report--AMHS Vessel Replacement Fund 02.16.2022.pdf |
HFIN 3/14/2022 1:30:00 PM |
HB 322 |
| HB 322 Leg Finance Fund Source Report--Marine Highway System Fund 02.16.2022.pdf |
HFIN 3/14/2022 1:30:00 PM |
HB 322 |
| HB 322 Sectional Analysis Version B 3.3.2022.pdf |
HFIN 3/14/2022 1:30:00 PM |
HB 322 |
| HB 322 Sponsor Statement 03.03.2022.pdf |
HFIN 3/14/2022 1:30:00 PM |
HB 322 |
| HB 395 Trasmittal Letter 030822.pdf |
HFIN 3/14/2022 1:30:00 PM |
HB 395 |
| HB 395 - Sectional Analysis.pdf |
HFIN 3/14/2022 1:30:00 PM |
HB 395 |