Legislature(2017 - 2018)SENATE FINANCE 532

07/27/2017 01:00 PM FREE CONFERENCE COMMITTEE ON SB 23

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Audio Topic
01:04:08 PM Start
01:32:56 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 23 APPROP: CAPITAL BUDGET TELECONFERENCED
Moved FCCS SB 23 Out of Committee
**Streamed live on AKL.tv**
CS FOR SENATE BILL NO. 23(FIN) am                                                                                             
                                                                                                                                
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and  other appropriations;  amending                                                                    
     appropriations;  making  appropriations  to  capitalize                                                                    
     funds; and providing for an effective date."                                                                               
                                                                                                                                
HCS CSSB23(FIN)AMH(BRFSUPMAJFLDH)(EFDFLDH)                                                                                    
                                                                                                                                
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and  other appropriations;  amending                                                                    
     appropriations;    and    making   appropriations    to                                                                    
     capitalize funds."                                                                                                         
                                                                                                                                
1:04:33 PM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon announced  the Senate  committee members                                                                    
present at the meeting.                                                                                                         
                                                                                                                                
Co-Chair  Foster  announced   the  House  committee  members                                                                    
present at the meeting.                                                                                                         
                                                                                                                                
Co-Chair  MacKinnon  announced that  the  goal  of the  free                                                                    
conference   committee  was   to   agree   on  a   committee                                                                    
substitute, and  recommend it  to the  representative bodies                                                                    
for  approval. She  stated  that there  would  be no  public                                                                    
testimony. She announced that, pursuant  to Uniform Rule 42,                                                                    
the free  conference was  appointed the  current day  by the                                                                    
Senate at  11:23am and by  the House at 12:25pm.  She shared                                                                    
that adoption  of the  conference committee  report required                                                                    
an  affirmative vote  by  a majority  of  members from  each                                                                    
body.                                                                                                                           
                                                                                                                                
Co-Chair Foster  MOVED to ADOPT the  proposed free committee                                                                    
substitute  for  CSSB   23(FIN)am,  Work  Draft  30-GS1854\Y                                                                    
(Martin, 7/19/17).                                                                                                              
                                                                                                                                
Chair MacKinnon OBJECTED for discussion.                                                                                        
                                                                                                                                
1:05:39 PM                                                                                                                    
                                                                                                                                
LAURA CRAMER,  STAFF, SENATOR ANNA MACKINNON,  discussed the                                                                    
Summary of Changes (copy on file):                                                                                              
                                                                                                                                
     Does not include the following:                                                                                            
                                                                                                                                
          o Supplemental  Items that were approved  in HB 57                                                                    
            Operating Budget                                                                                                    
                                                                                                                                
          o  Reappropriation of  Alaska Gasline  Development                                                                    
          Corporation Funds                                                                                                     
                                                                                                                                
          o Additional appropriation  for the Permanent Fund                                                                    
          Dividend                                                                                                              
                                                                                                                                
          o FY 18 Operating Budget                                                                                              
                                                                                                                                
     Addition:                                                                                                                  
                                                                                                                                
          Section 11  Reappropriation of $55,000 from  SB 74                                                                    
          (2016  Medicaid   Reform)  for  the   Health  Care                                                                    
         Authority efforts (page 16, lines 20-28)                                                                               
                                                                                                                                
     Changes:                                                                                                                   
                                                                                                                                
          Fund  source   for  the  capital   budget,  unless                                                                    
          otherwise noted, is the Statutory Budget Reserve                                                                      
                                                                                                                                
          Section   6   Oil   and  gas   tax   credit   fund                                                                    
          appropriation  of $20  million to  pay tax  credit                                                                    
          liabilities   -  brings   FY18   funding  to   the                                                                    
          statutory  calculation of  $77 million  (including                                                                    
          the  operating  budget  appropriation)  (page  15,                                                                    
          lines 12-14)                                                                                                          
                                                                                                                                
          Section  20 Revised  fiscal note  funding for  the                                                                    
          implementation  of HB  111 to  $1.35 million  from                                                                    
          $1.2 million (page 23, lines 3-5)                                                                                     
                                                                                                                                
     Inclusions:                                                                                                                
                                                                                                                                
          Section  1  Fully   fund  Alaska  Housing  Finance                                                                    
          Corporation  programs  at   requested  FY18  level                                                                    
          (page 7, lines 19-22)                                                                                                 
                                                                                                                                
          Section   1  Intent   language  relating   to  the                                                                    
          replacement of  the F/V  Tustumena (page  7, lines                                                                    
          31-33 through page 8, lines 3-7)                                                                                      
                                                                                                                                
          Section  1 $1  million  for  Public and  Community                                                                    
         Transportation State Match (page 8, line                                                                               
          12)                                                                                                                   
                                                                                                                                
          Section 11 Fiscal note  for implementation of Real                                                                    
          ID $1.5 million (page 16, lines 15-19)                                                                                
          Section  14 Reappropriation  of  $4.43 million  of                                                                    
          the Juneau  Access project  for the  Kivalina K-12                                                                    
          replacement school  (page 19, lines  24-31 through                                                                    
          page 20, lines 1-7)                                                                                                   
                                                                                                                                
          Section  14 Reappropriation  of  $2.18 of  various                                                                    
          Department  of  Military   and  Veterans'  Affairs                                                                    
          projects for the  Kivalina K-12 replacement school                                                                    
          (page 20, lines 8-17)                                                                                                 
                                                                                                                                
          Section  14  Reappropriation  of $500,000  of  the                                                                    
          Knik  Arm  Bridge   and  Toll  Authority  (KABATA)                                                                    
          Funding for  the Kivalina K-12  replacement school                                                                    
          (page 20, lines 18-27)                                                                                                
                                                                                                                                
          Section   14   Backstop    language:   If   KABATA                                                                    
          reappropriations are  short for the  Kivalina K-12                                                                    
          replacement  school, general  funds would  be used                                                                    
          to fully  fund (page 20, lines  28-31 through page                                                                    
          21, lines 1-2)                                                                                                        
                                                                                                                                
          Section  18 Land  purchase for  Interior Veterans'                                                                    
          Cemetery (page 22, lines 11-14)                                                                                       
                                                                                                                                
          Section 19  Reappropriations of $7.3  million from                                                                    
          DOT,  DNR,  and  ARRC  for  the  Arctic  Strategic                                                                    
          Transportation   and  Resources   (ASTAR)  project                                                                    
          (page 22, lines 21-31 through page 23, lines 1-2)                                                                     
                                                                                                                                
          Section 21 Reappropriation  of $21,285,000 million                                                                    
          of the  Juneau Access  project to remain  with the                                                                    
          Juneau Access project (page 23, lines 23-26)                                                                          
                                                                                                                                
          Section 21 Reappropriation  of $21,285,000 million                                                                    
          of the Juneau Access  project for capital projects                                                                    
          in  the greater  Lynn Canal  area (page  23, lines                                                                    
          27-31 through page 24, lines 1-10)                                                                                    
                                                                                                                                
          Section  21  Reappropriation   of  $1  million  of                                                                    
          KABATA  funding for  Alaska Marine  Highway Vessel                                                                    
          Overhaul (page 24, lines 14-23)                                                                                       
                                                                                                                                
          Section 21  Reappropriation of  $1 million  of the                                                                    
          KABATA  funding for  Federal  Highway Match  (page                                                                    
          24, lines 24-31 through page 25, lines 1-2)                                                                           
                                                                                                                                
          Section  21 Reappropriation  of $1.2  million from                                                                    
          Art on  Alaska Class  ferries to the  Alaska Class                                                                    
          Ferries for Equipment (page 41, lines 20-27)                                                                          
                                                                                                                                
          Section 21 Backstop  language: If reappropriations                                                                    
          are short  for Federal-aid highway  match, general                                                                    
          funds would be  used to fully fund  (page 41 lines                                                                    
          28-31 through page 42, line 1)                                                                                        
                                                                                                                                
          Section 22 $8 million  to fully fund the Community                                                                    
          Assistance Program (page 42, lines 5-8)                                                                               
                                                                                                                                
1:14:25 PM                                                                                                                    
                                                                                                                                
Ms.  Cramer stated  that  there  was retroactivity  language                                                                    
added  on   page  45,  line   18,  which  stated   that  any                                                                    
reappropriations or  projects that  were scheduled  to lapse                                                                    
at the end of FY 17  would not lapse. Instead, they would be                                                                    
directed in the CS as such.                                                                                                     
                                                                                                                                
Senator Hoffman wondered whether  there was a revised fiscal                                                                    
note  for  HB 111.  Ms.  Cramer  replied  that there  was  a                                                                    
revised fiscal  note, FN 4,  which was an  implementation by                                                                    
the  Department  of  Revenue  (DOR) for  HB  111  for  $1.35                                                                    
million.  She  stated that  it  was  an increase  from  $1.2                                                                    
million in the House fiscal note.                                                                                               
                                                                                                                                
Senator Olson  looked at page  45, and wondered  whether the                                                                    
lapsed  retroactivity would  be a  large amount.  Ms. Cramer                                                                    
wondered  whether  the  question  was  regarding  the  total                                                                    
reappropriation amount in the budget.                                                                                           
                                                                                                                                
Senator  Olson clarified  that he  queried  the amount  that                                                                    
would have lapsed,  and would have been in  danger of losing                                                                    
without  the language.  Ms. Cramer  replied  that the  total                                                                    
reappropriations  were  approximately  $20  million  to  $25                                                                    
million, but she did not have the exact number.                                                                                 
                                                                                                                                
Co-Chair  MacKinnon REMOVED  her OBJECTION.  There being  NO                                                                    
further  OBJECTION, the  proposed  committee substitute  was                                                                    
adopted.                                                                                                                        
                                                                                                                                
Representative  Pruitt MOVED  to adopt  Conceptual Amendment                                                                    
1. He  apologized that the  amendments were not  in writing.                                                                    
He stated  that the  amendment would be  to Section  6, page                                                                    
15, line  12. He moved  that $20 million be  substituted for                                                                    
$40 million.                                                                                                                    
                                                                                                                                
Chair MacKinnon OBJECTED.                                                                                                       
                                                                                                                                
1:17:46 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt explained  the  amendment. He  stated                                                                    
that the  amendment referred to  the Oil and Gas  Tax Credit                                                                    
Fund.  He stated  that was  a strong  possibility that  some                                                                    
financial  institutions  could  foreclose  on  some  of  the                                                                    
companies that were expecting the  tax credits, if the state                                                                    
did not provide  the $95 million range. He felt  that it was                                                                    
prudent  to  be  cognizant  of the  legislature's  word.  He                                                                    
remarked  that part  of  the downgrade  was  related to  the                                                                    
decision making and  process for how to  fund government. He                                                                    
also  asserted  that  the  downgrade   was  related  to  the                                                                    
legislature's  willingness and  ability to  pay for  certain                                                                    
commitments.  He  wanted  to   prevent  the  foreclosure  of                                                                    
certain  assets. He  understood that  the $40  million would                                                                    
suffice in assuring the avoidance of foreclosure.                                                                               
                                                                                                                                
Senator  Olson wondered  where  the  additional $20  million                                                                    
would  come from.  Representative  Pruitt  believed that  it                                                                    
would come  from the  Statutory Budget  Reserve (SBR)  as an                                                                    
additional amount.                                                                                                              
                                                                                                                                
Co-Chair  Foster commented  that the  House Majority  Caucus                                                                    
wanted the  oil tax credit  number to be zero.  He furthered                                                                    
that the House  added $57 million into  the Operating Budget                                                                    
and another $20 million into  the Capital Budget. He did not                                                                    
support the amendment.                                                                                                          
                                                                                                                                
Representative Seaton  remarked that current amount  was the                                                                    
statutorily calculated amount, so  companies should be aware                                                                    
of statutes and the potential  obligations of the state. The                                                                    
change would increase above the  statutory limit. He opposed                                                                    
the amendment.                                                                                                                  
                                                                                                                                
Co-Chair  MacKinnon wanted  to  support  the amendment,  but                                                                    
stated  that  the bill  was  a  compromise between  the  two                                                                    
bodies. He stated that the  Senate had proposed $288 million                                                                    
to pay one-third of the  state's obligation, and shared with                                                                    
the House the  risk of not funding at the  higher level. She                                                                    
stated that the  House had made other  compromises. She felt                                                                    
that  the   CS  was  not   ideal,  but  she   supported  the                                                                    
compromise.                                                                                                                     
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Pruitt                                                                                                                
OPPOSED: Hoffman, Seaton, MacKinnon, Foster, Olson                                                                              
                                                                                                                                
The MOTION to adopt Conceptual Amendment 1 FAILED (5/1).                                                                        
                                                                                                                                
1:21:59 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt MOVED  to ADOPT  Conceptual Amendment                                                                    
2. He stated that the amendment  was on Section 21, page 23,                                                                    
lines 23-26, which reappropriated  $21.285 million to Juneau                                                                    
Access.  He  stated that  the  number  would be  changed  to                                                                    
$42.57   million.    The   amendment   would    strike   the                                                                    
reappropriation language, "to the greater Lynn Canal area."                                                                     
                                                                                                                                
Co-Chair  MacKinnon surmised  that the  amendment would  not                                                                    
use any reappropriation from the Juneau Access Project.                                                                         
                                                                                                                                
Representative  Pruitt clarified  that  the Kivalina  School                                                                    
money  would not  be  addressed. He  only  was referring  to                                                                    
money that was reappropriated to the Lynn Canal.                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Pruitt                                                                                                                
OPPOSED: Hoffman, Seaton, MacKinnon, Foster, Olson                                                                              
                                                                                                                                
The MOTION to adopt Conceptual Amendment 2 FAILED (5/1).                                                                        
                                                                                                                                
Representative  Pruitt MOVED  to ADOPT  Conceptual Amendment                                                                    
3. The  amendment was for Section  21, page 24, lines  14 to                                                                    
23. He remarked that  there was reference to reappropriating                                                                    
$1  million from  the  Knik Arm  Bridge  and Toll  Authority                                                                    
(KABATA)  to  the Marine  Highway  Fund.  He furthered  that                                                                    
there was  also a reappropriation  of $1 million  for KABATA                                                                    
for federal highway match. The  amendment would leave the $2                                                                    
million with KABATA.                                                                                                            
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Pruitt                                                                                                                
OPPOSED: Hoffman, Seaton, MacKinnon, Foster, Olson                                                                              
                                                                                                                                
The MOTION to adopt Conceptual Amendment 3 FAILED (5/1).                                                                        
                                                                                                                                
1:25:32 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt MOVED  to ADOPT  Conceptual Amendment                                                                    
4. He  explained that the  amendment would be to  Section 45                                                                    
of  HB 57.  He announced  that it  would replace  the Budget                                                                    
Reserve  language with  Earnings  Reserve to  the amount  of                                                                    
$1.7  billion.   He  wanted   Legislative  Legal   to  apply                                                                    
conforming language.                                                                                                            
                                                                                                                                
Co-Chair MacKinnon OBJECTED. She queried the page number.                                                                       
                                                                                                                                
Representative  Pruitt  announced  that there  was  no  page                                                                    
number.  He  explained  that  it was  in  reference  to  the                                                                    
already passed  budget. The amendment would  substitute $1.7                                                                    
billion  from   the  Earnings  Reserve  to   pay  for  state                                                                    
government operations.  He stressed that the  state had been                                                                    
downgraded  because it  had  not been  able  to address  its                                                                    
current  budget challenges.  He  remarked  that many  people                                                                    
were  able  to  attend the  Anchorage  Economic  Development                                                                    
luncheon, and  spoke to the legislature  not addressing some                                                                    
of  the challenges.  The  amendment  would replace  language                                                                    
that  had already  passed with  the utilization  of Earnings                                                                    
Reserve money in place of  the Constitutional Budget Reserve                                                                    
(CBR) money as indicated in the budget.                                                                                         
                                                                                                                                
Senator Olson  queried the  impact of  the amendment  on the                                                                    
state's credit rating.                                                                                                          
                                                                                                                                
Representative  Pruitt felt  that  the  willingness for  the                                                                    
state  to use  all  of  its assets  with  the fortitude  and                                                                    
strength to  make the decisions  would speak volumes  to the                                                                    
creditors. He  stated that Alaska  was third in  the country                                                                    
in terms of  credit ratings. He shared that  he had recently                                                                    
visited  New Jersey,  which  was in  a  much greater  budget                                                                    
deficit. He  felt that the  budget situation was  because of                                                                    
political  willpower and  an  unwillingness  to pay  certain                                                                    
commitments, resulting in a downgraded credit rating.                                                                           
                                                                                                                                
Senator Olson understood that the  reason for the downgraded                                                                    
credit rating was  not because of where the  funds came from                                                                    
for funding government,  rather it was because  there was no                                                                    
plan for new revenue.                                                                                                           
                                                                                                                                
Representative  Pruitt agreed  with Senator  Olson. He  felt                                                                    
that showing that Alaska could  make a huge statement, would                                                                    
"speak volumes to those credit agency ratings."                                                                                 
                                                                                                                                
Co-Chair   MacKinnon  remarked   that  the   Permanent  Fund                                                                    
Earnings  Reserve account  was drawing  16 percent  interest                                                                    
and the  CBR was drawing between  2 and 3 percent.  She felt                                                                    
that the  amendment would  be an  unwise move.  She remarked                                                                    
that there  was a conversation  about moving a  large amount                                                                    
from  the  Earnings Reserve  with  a  potential loss  of  $4                                                                    
million  of   interest.  She  opposed  the   amendment.  She                                                                    
announced to  credit raters that  the legislature  knew that                                                                    
all  of its  assets were  available. She  stressed that  the                                                                    
Earnings Reserve  was spent  with a  simple majority,  and a                                                                    
court ruling  had supported that  function. She  shared that                                                                    
the reserve  had historically not been  accessed, rather, it                                                                    
was  protected for  payments to  Alaskans  for the  dividend                                                                    
program.                                                                                                                        
                                                                                                                                
Representative  Seaton remarked  that the  House and  Senate                                                                    
had  been working  toward a  comprehensive fiscal  plan, and                                                                    
the amendment was an unstructured  draw from the account. He                                                                    
felt  that   it  would  circumvent  the   process  that  the                                                                    
legislature  was  attempting  to  get its  fiscal  house  in                                                                    
order. He opposed the amendment.                                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Pruitt                                                                                                                
OPPOSED: Hoffman, Seaton, MacKinnon, Foster, Olson                                                                              
                                                                                                                                
The MOTION to adopt Conceptual Amendment 4 FAILED (5/1).                                                                        
                                                                                                                                
Co-Chair Foster  MOVED that the  House and Senate  adopt the                                                                    
FCCS  SB 23  from the  Free Conference  Committee, and  that                                                                    
Legislative  Finance and  Legislative Legal  be directed  to                                                                    
make appropriate conforming and technical changes.                                                                              
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
FCC SB  23 was REPORTED  out of  committee with a  "do pass"                                                                    
recommendation.                                                                                                                 
                                                                                                                                

Document Name Date/Time Subjects
SB 23 Cap Budget_CC Spreadsheet.pdf JSB23 7/27/2017 1:00:00 PM
SB 23
SB 23 CSSB 23 v. Y Summary of Changes by Section.pdf JSB23 7/27/2017 1:00:00 PM
SB 23
SB 23 work draft version Y.pdf JSB23 7/27/2017 1:00:00 PM
SB 23