Legislature(2015 - 2016)HOUSE FINANCE 519

04/29/2015 10:30 AM House FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
10:38:19 AM Start
10:38:36 AM HB1001
11:25:54 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 1001                                                                                                           
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations,  making  capital appropriations,  and                                                                    
     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."                                                                                                        
10:38:56 AM                                                                                                                   
Co-Chair Neuman relayed  that he did not plan  to report the                                                                    
bill from committee that day.                                                                                                   
Co-Chair  Thompson MOVED  to  ADOPT  the proposed  committee                                                                    
substitute  for HB  1001, Work  Draft 29-GH1318\W  (Wallace,                                                                    
4/28/15). There being NO OBJECTION, it was so ordered.                                                                          
10:39:33 AM                                                                                                                   
PETE ECKLUND,  STAFF, REPRESENTATIVE MARK  NEUMAN, explained                                                                    
the   changes  in   the   Committee   Substitute  (CS).   He                                                                    
communicated that  the Work Draft  was a  simplified version                                                                    
of the governor's  bill. He explained that  the CS reflected                                                                    
the  differences   and  additions  between   the  conference                                                                    
committee operating  budget bill  passed by  the legislature                                                                    
and the  bill introduced by  the governor the  previous day.                                                                    
He  pointed to  two  one-page reports  from the  Legislative                                                                    
Finance Division (LFD) titled  "2015 Legislature - Operating                                                                    
Budget Agency Summary - FY16  Conference Structure" (copy on                                                                    
file). The  first report  pertained to  unrestricted general                                                                    
funds (UGF);  the first column titled  "GovSpecial T" showed                                                                    
that the governor's bill was  $54,954,500 UGF different from                                                                    
the conference committee bill. He  furthered that the totals                                                                    
in column  4 matched  the totals in  column 1,  meaning that                                                                    
the CS before  the committee included all  of the governor's                                                                    
changes  from the  conference committee  bill. Section  1 of                                                                    
the CS  contained the majority  of the differences  from the                                                                    
governor's bill.                                                                                                                
Co-Chair Neuman noted that  Representative Pruitt had joined                                                                    
the meeting.                                                                                                                    
Mr. Ecklund continued to speak to  the changes in the CS. He                                                                    
explained  that Section  1 included  various additions  from                                                                    
recently passed conference  committee substitute. There were                                                                    
various  additions  in  different  departments,  which  were                                                                    
listed in  the first four pages  of the bill. He  pointed to                                                                    
pages 3  and 4 and  noted that the governor's  intention was                                                                    
to  fund the  2.5 percent  increase  to the  cost of  living                                                                    
allowance (COLA) for unionized employees  on July 1, but not                                                                    
for non-unionized  employees. He  looked at pages  5 through                                                                    
11  that  included  "fund  roll-ups"  (all  of  the  various                                                                    
funding sources for Section 1 of the bill).                                                                                     
10:43:09 AM                                                                                                                   
Mr. Ecklund  pointed to page  12, Section 4,  which included                                                                    
all  transactions the  governor wanted  to see  for Medicaid                                                                    
expansion.  Pages  13  and 14  included  fund  roll-ups  for                                                                    
Section 4.  The language section  of the bill began  on page                                                                    
15  of the  bill. He  detailed that  the governor  wanted to                                                                    
fully fund  the Base  Student Allocation (BSA),  which would                                                                    
be a  $16.5 million  increase from the  conference committee                                                                    
bill. Additionally, the governor  wanted to use $118 million                                                                    
from  the Instate  Natural Gas  Pipeline Fund  to help  fund                                                                    
public   education;   however,  the   conference   committee                                                                    
substitute  used  $157  million  from  the  fund.  Page  15,                                                                    
Section   8  addressed   salary  and   benefit  adjustments,                                                                    
including   employee  contracts   and  COLA   for  unionized                                                                    
employees. Page 16, Section 9  included a new Constitutional                                                                    
Budget  Reserve  (CBR)  provisions that  would  include  CBR                                                                    
access votes for FY 15 and FY 16.                                                                                               
10:45:07 AM                                                                                                                   
Co-Chair  Neuman noted  that Vice-Chair  Saddler had  joined                                                                    
the meeting.                                                                                                                    
Representative Gara  commented that the governor  was trying                                                                    
to  move the  legislature forward  to achieve  a budget.  He                                                                    
believed some of  the items included in  the governor's bill                                                                    
represented  placeholders that  the governor  understood the                                                                    
legislature  may move  around.  He believed  it  was a  good                                                                    
effort on the governor's part.                                                                                                  
Co-Chair Neuman remarked that the  CS looked better than the                                                                    
original version  of the  bill due  to its  shortened length                                                                    
(18  pages down  from  77).  He wanted  to  ensure that  the                                                                    
document was clear for the public.                                                                                              
Representative  Gattis noted  that  she  had been  receiving                                                                    
many emails  related to fully  funding education.  She asked                                                                    
for clarity on what full funding would look like.                                                                               
Mr. Ecklund  answered that the  statutory BSA for FY  16 was                                                                    
$5,880.  He  detailed  that  when  projections  for  student                                                                    
counts  were  multiplied  by  the  formula,  the  conference                                                                    
committee  report  had  been $16.5  million  less  than  the                                                                    
projected amount. The  CS would fund the BSA  at 100 percent                                                                    
of the projected amount.                                                                                                        
Representative  Gattis remarked  that  people had  different                                                                    
views  on what  fully funding  education meant.  She thanked                                                                    
Mr. Ecklund for the clarification.                                                                                              
Representative Wilson  asked about  Section 7.  She remarked                                                                    
on  the  fund transfer  change  from  $157 million  to  $118                                                                    
million  from the  Instate Natural  Gas  Pipeline Fund.  She                                                                    
wondered if the remainder would come from general funds.                                                                        
Mr. Ecklund  replied in  the affirmative.  He pointed  to an                                                                    
estimated $1,006,027,900  that would  come from  the general                                                                    
fund  (page 15,  line 8).  He  noted that  the general  fund                                                                    
figure   in  the   conference   committee   bill  had   been                                                                    
approximately $95 million.                                                                                                      
Representative  Wilson  referred  to Section  8  related  to                                                                    
salary and  benefit adjustments. She asked  for verification                                                                    
that  the COLA  costs  would come  from  general funds.  Mr.                                                                    
Ecklund replied  in the affirmative;  the dollar  amount was                                                                    
included on page 4 of the CS.                                                                                                   
10:48:43 AM                                                                                                                   
Mr. Ecklund clarified that the  total dollar amount it would                                                                    
take  to  fund  the  unionized  and  nonunionized  COLA  was                                                                    
$56,386,100   (page  4,   line   6).  The   cost  to   cover                                                                    
nonunionized  employees was  $21,018,500 (page  4, line  8).                                                                    
The cost  to cover  unionized employees could  be calculated                                                                    
by  subtracting  the  nonunionized figure  from  the  total,                                                                    
which was  roughly $35  million in  total funds.  He pointed                                                                    
page  5, line  28 that  included the  UGF portion  needed to                                                                    
fund the union contracts [$16,122,600].                                                                                         
Representative Wilson  remarked that she had  been receiving                                                                    
emails asking the legislature to  fund the operating budget.                                                                    
She noted that  Section 9 addressed the CBR  and other funds                                                                    
that  were not  dedicated,  but may  have  been created  for                                                                    
specific purposes  (e.g. Higher Education  Investment Fund).                                                                    
She wondered how  much funding was available  in these other                                                                    
funds for  the legislature  to use  towards the  budget (not                                                                    
counting  Alaska Permanent  Fund reserves)  if it  could not                                                                    
access the CBR.                                                                                                                 
Mr.  Ecklund  asked for  clarification  on  the fiscal  year                                                                    
Representative Wilson was speaking to.                                                                                          
Representative  Wilson clarified  she was  interested in  FY                                                                    
16. She believed that forward  funds for education had taken                                                                    
care of FY 15  and that a CBR vote only  pertained to FY 16.                                                                    
She reiterated her previous question.                                                                                           
Mr.  Ecklund replied  that  the FY  16  spring forecast  was                                                                    
somewhere around  $2.2 billion. He deferred  the question to                                                                    
Mr. Teal.                                                                                                                       
DAVID TEAL, DIRECTOR,  LEGISLATIVE FINANCE DIVISION, replied                                                                    
that there was approximately $2.2  billion in revenue for FY                                                                    
16  with a  $3.2  billion deficit.  He  detailed funds  that                                                                    
could  be used  including the  Power Cost  Equalization Fund                                                                    
(approximately   $1  billion)   and  the   Higher  Education                                                                    
Investment   Fund  (approximately   $450  million   to  $460                                                                    
million). He  continued that the other  remaining funds each                                                                    
included less than $50 million  (compiled together the funds                                                                    
may  be  $200 million).  He  postulated  that there  may  be                                                                    
approximately  $1.6 billion  in various  funds and  accounts                                                                    
that  could  be  used,  which would  leave  a  $1.6  billion                                                                    
Representative  Wilson  noted   that  there  were  different                                                                    
options  for  funding. She  stated  taking  $1.6 billion  in                                                                    
addition  to what  had  already been  taken  was an  extreme                                                                    
amount.  However, she  wanted people  to understand  that it                                                                    
was an option.                                                                                                                  
10:53:13 AM                                                                                                                   
Representative  Gara stated  that the  governor had  filed a                                                                    
placeholder  budget  for  the legislature  to  work  on.  He                                                                    
believed the  governor's direction  was for  the legislature                                                                    
to work together to come up  with a budget that people could                                                                    
accept.  He noted  that it  would include  things that  some                                                                    
people may  not like  on one  side or  the other.  He stated                                                                    
that from  the Minority's  standpoint there was  no interest                                                                    
in  shutting down  government. He  emphasized that  the goal                                                                    
was  to work  together  to  move forward  on  a budget  that                                                                    
worked for  education and for  the public. He  stressed that                                                                    
he  was  not  interested  in  using  Alaska  Permanent  Fund                                                                    
Representative Edgmon  hoped the  meeting would be  the last                                                                    
one for  a while on  the current subject. He  wanted clarity                                                                    
on how much money was available  for the budget and how long                                                                    
state government could  be funded in the event  the CBR vote                                                                    
was not achieved.                                                                                                               
Mr. Teal stated that there  was $2.2 billion in revenue with                                                                    
a $3.2 billion deficit; there  was nowhere near enough money                                                                    
to get through  the year. He detailed that  the $2.2 billion                                                                    
was not available all at once  at the beginning of the year;                                                                    
it came in throughout the  year. The cash flow problem could                                                                    
be  somewhat  resolved to  some  extent  by issuing  revenue                                                                    
anticipation  notes or  borrowing. He  communicated that  it                                                                    
would  be difficult  to issue  notes exceeding  the expected                                                                    
$2.2 billion in revenue. He  relayed that any borrowed money                                                                    
would have to be repaid  fairly quickly; therefore, the real                                                                    
issue was cash  flow. According to his  discussions with the                                                                    
Department of Revenue (DOR) there  should be sufficient cash                                                                    
to  get  the  state   through  September  (possibly  through                                                                    
October  and  November   with  extraordinary  measures).  He                                                                    
believed September was a far as the funding would go.                                                                           
10:56:34 AM                                                                                                                   
Representative   Edgmon  referred   to   the  $1.6   billion                                                                    
available in  the various funds  including the PCE  Fund and                                                                    
the  Higher  Education  Investment Fund.  He  stressed  that                                                                    
draining the PCE  account would not happen if it  were up to                                                                    
him. He asked  for verification that use of  the funds would                                                                    
require appropriation authority.                                                                                                
Mr. Teal answered in the  affirmative. He elaborated that if                                                                    
the  legislature passed  an  appropriations  bill that  took                                                                    
money  from  the  Public  Education   Fund  and  the  Higher                                                                    
Education   Fund,   it   would   increase   cash   flow   by                                                                    
approximately  $1.5  billion,  which  would  get  the  state                                                                    
through  January  [2016] or  so.  He  believed DOR  and  the                                                                    
Department   of  Administration   (DOA)   were  working   on                                                                    
contingency plans  to see how  government would  be operated                                                                    
if a CBR vote was not obtained.                                                                                                 
Representative  Wilson  clarified  that  she  had  not  been                                                                    
speaking  about using  Alaska Permanent  Fund earnings.  She                                                                    
asked for  verification that the  legislature would  have to                                                                    
pass  legislation to  access  other funds  such  as the  PCE                                                                    
fund.  She  thought  all  funds could  be  tapped  with  the                                                                    
exception of the CBR and Alaska Permanent Fund reserves.                                                                        
Mr. Teal replied  that the funds (the  Alaska Permanent Fund                                                                    
Reserve Account,  the Higher Education Investment  Fund, and                                                                    
the  PCE Fund)  could be  tapped with  an appropriation.  He                                                                    
elaborated that  the money could  be accessed with  a simple                                                                    
majority vote, whereas access to the CBR required a super-                                                                      
majority vote  [three-quarters]. The funds would  provide an                                                                    
additional $1.5  billion or so.  He relayed that  the Alaska                                                                    
Permanent Fund account would also  require a simple majority                                                                    
vote and would completely fill the deficit.                                                                                     
10:59:24 AM                                                                                                                   
Representative  Wilson asked  for  clarification. She  asked                                                                    
for verification  that the  other non-dedicated  funds would                                                                    
be  available  for  funding  the  operating  budget  if  the                                                                    
legislature passed an operating  budget. She understood that                                                                    
the  funds  would not  be  sufficient  and would  leave  the                                                                    
budget approximately  $1.6 billion short. She  made it clear                                                                    
that the  funds could be  tapped if the legislature  did not                                                                    
come to an agreement.                                                                                                           
Mr.  Teal replied  that the  funds could  be tapped  with an                                                                    
appropriation;  the accounts  were not  dedicated, but  were                                                                    
considered restricted.  He detailed  that the  accounts were                                                                    
not swept into  the CBR at the end of  the year because they                                                                    
were classified  as the  PCE Endowment  Fund and  the Higher                                                                    
Education Endowment  Fund. Although  the accounts  were sub-                                                                    
funds  of   the  general  fund   they  were   classified  as                                                                    
restricted.   A  general   fund   appropriation  would   not                                                                    
necessarily  allow   spending  from  the  funds   without  a                                                                    
specific  appropriation  putting  the money  back  into  the                                                                    
general fund.                                                                                                                   
Co-Chair Neuman  rephrased that none  of the funds  could be                                                                    
appropriated unless the  legislature passed an appropriation                                                                    
bill that spent the funds.                                                                                                      
Mr. Teal  believed the statement  was correct.  However, DOR                                                                    
and  DOA were  working to  figure out  which funds  could be                                                                    
borrowed  from  and  spent   without  an  appropriation.  He                                                                    
clarified that  budgeting and accounting were  different. He                                                                    
noted   that  LFD   looked  at   funds   from  a   budgeting                                                                    
perspective,  whereas DOR  and DOA  came from  an accounting                                                                    
Representative Wilson pointed to pages  16 and 17 of the CS.                                                                    
She wondered  why the CBR  was in  Section 9 and  the Higher                                                                    
Education Investment  Fund was  in Section 10.  She wondered                                                                    
if the  bill intended  that the Higher  Education Investment                                                                    
Fund  would be  utilized in  addition  to the  CBR with  the                                                                    
three-quarter  vote  (and  that  no  other  funds  would  be                                                                    
considered).  She was  trying to  understand why  the Higher                                                                    
Education Investment Fund was  named in the legislation, but                                                                    
no other accounts were included.                                                                                                
Mr. Teal replied that the  language pertaining to the Higher                                                                    
Education  Investment   Fund  had   been  included   in  the                                                                    
conference committee budget  and only referred to  FY 15. He                                                                    
explained  that  the FY  15  budget  was approximately  $3.8                                                                    
billion; the  Statutory Budget Reserve  (SBR) of  about $2.8                                                                    
billion filled  all but roughly  $1 billion of  the deficit.                                                                    
By reducing the FY 15  deposit to the public education fund,                                                                    
the  remaining  $1  billion  deficit  would  be  filled  and                                                                    
theoretically eliminated  the need for a  supermajority vote                                                                    
to access CBR funds. However,  under the scenario, the state                                                                    
would still be within $50 million  of a deficit. He spoke to                                                                    
the volatility of oil prices  and that accounting books were                                                                    
not actually closed until months  after a year was complete.                                                                    
He did  not believe $50  million was a large  enough cushion                                                                    
to promise no  deficit in FY 15. Section 10  stated "if, and                                                                    
only  if"   there  were  insufficient  general   funds,  the                                                                    
remaining deficit  would be taken from  the Higher Education                                                                    
Investment Fund;  the option  would go  into effect  only if                                                                    
the CBR  vote failed to  ensure that  the state did  not run                                                                    
out of money in FY 15.                                                                                                          
11:04:19 AM                                                                                                                   
Representative Gara  stated that he  did not want  people to                                                                    
be  scaring the  public  with the  current conversation.  He                                                                    
reasoned that  everything would be  fine if  the legislature                                                                    
decided to  work across party  lines on developing  a budget                                                                    
by the  end of  special session.  He thought  it would  be a                                                                    
shame  if legislators  were not  able to  work together  and                                                                    
began to ask about getting to September.                                                                                        
Representative  Pruitt  interjected  his  distaste  for  the                                                                    
"political  statements." He  stated that  the committee  was                                                                    
trying to handle a budget.                                                                                                      
11:04:54 AM                                                                                                                   
AT EASE                                                                                                                         
11:05:11 AM                                                                                                                   
Representative Gara asked for  verification that to maintain                                                                    
a  budget through  September  and  possibly November,  there                                                                    
would  be no  need  to  touch the  PCE  Fund  or the  Alaska                                                                    
Permanent  Fund earnings  reserve. Mr.  Teal replied  in the                                                                    
Representative Pruitt  asked if there was  any mechanism the                                                                    
state could  employ to borrow  from itself in order  to help                                                                    
fund government. For instance,  borrowing from the PCE Fund,                                                                    
the Higher  Education Investment  Fund, or CBR.  He wondered                                                                    
if borrowing  the funds would  have to be authorized  by the                                                                    
Mr. Teal  replied that the  state could borrow  from itself.                                                                    
He believed DOR and DOA  were researching borrowing from the                                                                    
other funds.  The state  could also  borrow from  markets by                                                                    
issuing  revenue anticipation  notes,  which was  short-term                                                                    
borrowing based  on anticipated revenue  coming in  later in                                                                    
the year. He  pointed to Section 9(c) at the  top of page 17                                                                    
that talked  about using earnings  from the general  fund to                                                                    
pay  the  CBR; the  language  was  typical and  allowed  the                                                                    
legislature to  borrow money from  the CBR without  a three-                                                                    
quarter vote; it  would be required to be repaid  by the end                                                                    
of  the  year  or  it  became  a  draw.  Alternatively,  the                                                                    
legislature could choose to borrow  from the CBR and not run                                                                    
out  of money,  but at  some point  in the  fiscal year  the                                                                    
money  had  to  be  paid   back.  The  people  allowing  the                                                                    
borrowing would be  required to certify that  funds would be                                                                    
available to pay  the money back. He  communicated that with                                                                    
a deficit  there was  no guaranteed way  of paying  back the                                                                    
loans to  the CBR. He  stated that even though  Section 9(c)                                                                    
was a  simple-majority provision, it  would not do  any good                                                                    
unless the super-majority vote was obtained.                                                                                    
Representative Pruitt asked if  the legislature could borrow                                                                    
from the  subaccounts of  the general  fund (i.e.  PCE Fund,                                                                    
Higher Education Investment Fund, and others).                                                                                  
Mr. Teal  replied that  even if  the money  was appropriated                                                                    
there  would  still  be  a  $1.5  billion  to  $1.6  billion                                                                    
deficit. At that point there  would be no remaining funds to                                                                    
borrow from.                                                                                                                    
Representative  Pruitt   understood  the  situation   as  it                                                                    
related to  the next fiscal  year. He specified that  he was                                                                    
referring to  the discussion related  to the  current fiscal                                                                    
year where  the state could  be $50 million short.  He asked                                                                    
if there  would be a  potential to cover the  state expenses                                                                    
without going into the CBR by accessing the subaccounts.                                                                        
Mr.   Teal   replied   that   the   scenario   outlined   by                                                                    
Representative Pruitt  was exactly what Section  10 did. The                                                                    
section  would  take the  money  from  the Higher  Education                                                                    
Investment Fund  if the state  was short on funds.  It would                                                                    
have also  been feasible to  include the PCE Fund  or others                                                                    
in  the   language;  however,  the  remaining   deficit  was                                                                    
expected to be less than  $100 million; therefore, there was                                                                    
no need to dip into other funds.                                                                                                
11:10:24 AM                                                                                                                   
Co-Chair Neuman  noted that the  legislature would  not want                                                                    
to make the funds available if it did not have to.                                                                              
Representative  Pruitt  discussed  that if  the  legislature                                                                    
took  funds from  the Higher  Education Investment  Fund, it                                                                    
would impact the  fund, which would also be the  case if the                                                                    
PCE Fund or  other were used. He detailed  that the language                                                                    
in  the CS  was a  policy  call, which  specified the  money                                                                    
would be appropriated versus borrowed.                                                                                          
Mr. Teal replied that the  scenario was the same either way.                                                                    
He  elaborated that  the CS  included an  appropriation from                                                                    
the fund  and if the money  had to be taken  from the Higher                                                                    
Education  Investment Fund,  the  legislature  could opt  to                                                                    
replenish the money. He stated  that it was also possible to                                                                    
say that  the interest generated  by the fund was  more than                                                                    
sufficient to pay the scholarships  and grants it awarded; a                                                                    
balance  of $50  million  to $60  million  less would  still                                                                    
allow  payment  of  the  grants  and  scholarships.  If  the                                                                    
legislature  chose to  borrow the  funds, it  may choose  to                                                                    
repay or not repay the funds at some future date.                                                                               
11:12:14 AM                                                                                                                   
Vice-Chair Saddler referred to  the discussion about revenue                                                                    
anticipation  notes. He  was  interested  in further  detail                                                                    
including  potential   source,  interest  rate,   cost,  and                                                                    
authorization procedure.                                                                                                        
Mr. Teal  replied that  the scenario  would entail  going to                                                                    
the financial markets and issuing  short-term notes based on                                                                    
anticipated  revenue. The  interest  rate  should be  fairly                                                                    
low. For example, an issuance of  $2 billion in notes at a 2                                                                    
percent rate for  one year would be a  $40 million borrowing                                                                    
cost.  He stated  that  it  would be  much  easier to  issue                                                                    
taxable revenue anticipation notes  and state would run into                                                                    
problems with  the federal  government if  it tried  to make                                                                    
the  notes tax-free.  He explained  that the  notes did  not                                                                    
need  to be  tax-free; the  difference between  the tax-free                                                                    
and taxable interest rate was  quite small. He stressed that                                                                    
the  cost  of  issuing  the  notes  was  not  insignificant.                                                                    
However, issuing notes was not  an uncommon and it would not                                                                    
mean credit  raters would determine  Alaska was in  a "world                                                                    
of hurt."  He believed the Municipality  of Anchorage issued                                                                    
revenue anticipation  notes. Additionally, the  state issued                                                                    
the  short-term drinking  and  clean  water bonds  annually.                                                                    
There was nothing inherently wrong  about the use of revenue                                                                    
anticipation  notes. He  believed that  credit raters  would                                                                    
probably look at  a political impasse as an  indication of a                                                                    
greater   credit   risk    than   borrowing   with   revenue                                                                    
anticipation notes. He explained  that the credit raters saw                                                                    
Alaska's credit strength partially  in its ability to access                                                                    
reserves.  The raters  took many  things  into account  when                                                                    
determining a state's credit rating.                                                                                            
11:15:20 AM                                                                                                                   
Vice-Chair   Saddler  asked   for   verification  that   the                                                                    
inability for  the legislature  to obtain  the three-quarter                                                                    
vote  would  impair  the state's  credit  rating.  Mr.  Teal                                                                    
affirmed  that he  believed the  situation would  impact the                                                                    
credit raters' opinions.                                                                                                        
Vice-Chair Saddler  asked if  the revenue  anticipated notes                                                                    
were limited  to one-year lifespans.  Mr. Teal  replied that                                                                    
the notes were  issued in anticipation of  revenue coming in                                                                    
later and  must be  repaid within 18  months; the  notes did                                                                    
not have to be paid off exactly at the end of the year.                                                                         
Representative Guttenberg  spoke to the economic  and credit                                                                    
rating  risk related  to  the failure  to  achieve a  super-                                                                    
majority vote  [to access CBR  funds]. He wondered  if there                                                                    
were  other  things  at  risk  if  the  state's  funds  were                                                                    
inaccessible. He surmised  that the state would  not be able                                                                    
to issue  revenue anticipation bonds  given that it  did not                                                                    
expect  to  see sufficient  funds  coming  in the  following                                                                    
Mr. Teal replied that the  revenue anticipation could always                                                                    
be issued  as long as  incoming revenue was  anticipated. He                                                                    
did not know  of any other items at risk.  He qualified that                                                                    
there could be other risks he was not aware of.                                                                                 
Representative  Guttenberg speculated  that issuing  revenue                                                                    
anticipation bonds  would increase  the size of  the deficit                                                                    
the following  year. Mr. Teal  replied that  the anticipated                                                                    
revenue would be current-year revenue.  He affirmed that the                                                                    
interest would  increase the state's fiscal  problem because                                                                    
borrowing money  was not  free; it may  cost $20  million to                                                                    
$40 million.                                                                                                                    
Co-Chair Neuman surmised that the  state did not want to get                                                                    
into borrowing money.                                                                                                           
11:18:24 AM                                                                                                                   
Vice-Chair  Saddler  believed  Mr.   Teal  had  stated  that                                                                    
failing to  come to  an agreement on  using CBR  funds could                                                                    
potentially  hurt  the  state's   credit  rating.  Mr.  Teal                                                                    
affirmed  that he  believed  so. He  stated  there would  be                                                                    
another  opportunity  to  provide   funding  for  the  state                                                                    
outside of  the operating  budget bill.  He stated  that the                                                                    
issue was  more about  whether the  legislature was  able to                                                                    
work things  out, which  was probably  all that  mattered in                                                                    
the end.                                                                                                                        
Representative Edgmon asked for  the total drawdown from the                                                                    
state's savings  accounts given the $3.2  billion deficit in                                                                    
FY 16.  Additionally, the legislature had  used $2.8 billion                                                                    
from the  SBR, plus $1  billion from the education  fund. He                                                                    
wondered how much of the  savings accounts had been used. He                                                                    
stated that  sometimes he  saw savings  accounts as  the CBR                                                                    
and SBR fund.                                                                                                                   
Mr.  Teal replied  that the  deficit for  FY 15  was roughly                                                                    
$3.8  billion and  the deficit  for FY  16 was  roughly $3.2                                                                    
billion ($7  billion total for  the two years).  He detailed                                                                    
that funding included $2.8 billion  from the SBR, $1 billion                                                                    
from  the  public  education  fund,  and  theoretically  the                                                                    
remainder from the CBR.                                                                                                         
Representative Edgmon  asked what  the spending  would leave                                                                    
in savings. Mr.  Teal believed it was roughly  $6 billion in                                                                    
the CBR.  The public  education fund would  be empty  at the                                                                    
end of  FY 16 and the  SBR would be empty.  The only reserve                                                                    
account would be the supermajority access to the CBR.                                                                           
Representative Edgmon surmised  that available savings would                                                                    
be  the amount  from  the CBR  plus  the subaccounts,  which                                                                    
would be  somewhere close  to $8 billion.  He noted  that he                                                                    
would not  chose to use  earnings from the  Alaska Permanent                                                                    
Fund and did  not include it in his  estimation of available                                                                    
Mr.  Teal replied  that LFD  had looked  at the  reserves as                                                                    
those in  the SBR and CBR.  The LFD model showed  that after                                                                    
FY  16 the  CBR may  get the  state through  about two  more                                                                    
years and would be empty after FY 18.                                                                                           
Representative  Edgmon  asked  for verification  that  there                                                                    
were approximately  $7.6 billion in liquid  savings accounts                                                                    
going  forward.   Mr.  Teal  replied  in   the  affirmative,                                                                    
including the PCE Fund.                                                                                                         
11:23:18 AM                                                                                                                   
Representative Gara stated that  there had been roughly $100                                                                    
or so  million for the  Alaska Marine Highway  System (AMHS)                                                                    
in the conference committee budget.  He asked how the figure                                                                    
compared to the allocation in  the CS. Mr. Teal replied that                                                                    
an additional  $7 million  had been added  back to  the AMHS                                                                    
budget in the budget before the committee.                                                                                      
Co-Chair Neuman  remarked on  the total  AMHS appropriation.                                                                    
Mr.  Teal  stated that  the  appropriation  was around  $130                                                                    
Co-Chair  Neuman stated  that $130  million to  $140 million                                                                    
had  been the  total  appropriation to  AMHS.  The CS  added                                                                    
another $7 million.                                                                                                             
Representative  Gara stated  that  the conference  committee                                                                    
budget  had  included AMHS  fuel  trigger  money that  other                                                                    
agencies could not  use. He asked if the  fuel trigger money                                                                    
was also included in the  CS. He asked for verification that                                                                    
the difference between the budgets was $7 million.                                                                              
Mr. Ecklund replied  that there was roughly  $130 million to                                                                    
$140 million between the  marine highway fund (approximately                                                                    
one-third)  and UGF  (approximately  two-thirds).  In FY  15                                                                    
there  was roughly  $5 million  in fuel  trigger money  that                                                                    
could go to the marine highway  fund and could be used in FY                                                                    
Mr. Teal clarified  that the fuel trigger revenue  was FY 15                                                                    
money that would be carried  forward into FY 16. Separately,                                                                    
the CS contained an additional $7 million.                                                                                      
HB  1001  was  HEARD  and  HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB 1001 CS WORKDRAFT HFIN W VERSION.pdf HFIN 4/29/2015 10:30:00 AM
HB 1001 LFD Agency Summaries.pdf HFIN 4/29/2015 10:30:00 AM