Legislature(2025 - 2026)ANCH LIO DENALI Rm
11/19/2025 10:00 AM House LEGISLATIVE BUDGET & AUDIT
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| Audio | Topic |
|---|---|
| Start | |
| Approval of Agenda | |
| Approval of Minutes | |
| Top Audit Issues | |
| Contract Approval | |
| Revised Program – Legislative (rpls) | |
| Overview of Dor Division of Treasury's Non-routine Investments Policy | |
| Executive Session | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
November 19, 2025
Anchorage, Alaska
10:03 a.m.
MEMBERS PRESENT
Senator Elvi Gray-Jackson, Chair
Senator Bert Stedman
Senator Cathy Giessel
Senator Bill Wielechowski (via teleconference)
Representative Andy Josephson
Representative Chuck Kopp
Representative Bryce Edgmon (alternate)
OTHER LEGISLATORS PRESENT
Representative Mike Prax (via teleconference)
Representative Julie Coulombe
MEMBERS ABSENT
Representative Zack Fields, Vice Chair
Senator Lyman Hoffman
Representative Neal Foster
Senator Scott Kawasaki (alternate)
COMMITTEE CALENDAR
APPROVAL OF AGENDA
APPROVAL OF MINUTES
TOP AUDIT ISSUES
CONTRACT APPROVAL
REVISED PROGRAM LEGISLATIVE (RPLs)
OVERVIEW OF DOR DIVISION OF TREASURY'S NON-ROUTINE INVESTMENTS
POLICY
EXECUTIVE SESSION
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KRIS CURTIS, Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Anchorage, Alaska
POSITION STATEMENT: Gave a presentation on FY 25 top audit
issues; gave an overview of the Division of Treasury's non-
routine investments policy.
ALEXEI PAINTER, Director
Legislative Finance Division
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided information on RPL 16-2026-0154
and RPL 09-2026-0098.
HEIDI HEDBERG, Commissioner
Department of Health
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint question on the Rural
Health Transformation Program during the discussion of RPL 16-
2026-0154.
LACEY SANDERS, Administrative Director
Office of Management & Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
RPL 16-2026-0154.
MEGAN WALLACE, Chief Counsel
Legislative Legal Services
Legislative Affairs Agency
POSITION STATEMENT: Answered questions during the discussion of
RPL 16-2026-0154.
ACTION NARRATIVE
10:03:11 AM
CHAIR ELVI GRAY-JACKSON called the Legislative Budget and Audit
Committee meeting to order at 10:03 a.m. Representatives Kopp,
Josephson, Tilton, and Edgmon (alternate) and Senators Giessel,
Stedman, Wielechowski (via teleconference), and Gray-Jackson
were present at the call to order. Also present were
Representatives Coulombe and Prax (via teleconference).
[Due to technical difficulties, portions of the audio are
indiscernible throughout.]
^APPROVAL OF AGENDA
APPROVAL OF AGENDA
10:04:31 AM
CHAIR GRAY-JACKSON announced that the first order of business
would be the approval of the agenda.
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee approve the agenda. There being no objection,
the agenda was approved.
^APPROVAL OF MINUTES
APPROVAL OF MINUTES
10:04:47 AM
CHAIR GRAY-JACKSON announced that the next order of business
would be the approval of minutes.
REPRESENTATIVE EDGMON moved to approve the minutes for the
September 12, 2025 meeting. There being no objection, the
minutes were approved.
^TOP AUDIT ISSUES
TOP AUDIT ISSUES
10:05:04 AM
CHAIR GRAY-JACKSON announced that the next order of business
would be an overview of top audit issues. She shared the
following remarks:
Before you begin, Ms. Curtis, on behalf of the
committee, the Legislature, and all Alaskans, I want
to thank you and your team for your hard work and
dedication. I want to let the general public know that
the Division of Legislative Audit serves as one of the
Legislature's most significant checks in the balance
of powers with the executive and judicial branches of
government. The Division's primary responsibilities
are to provide transparency and hold state agencies
accountable to state and federal laws. Audits inform
the Legislature and the public about government
operations.
10:05:55 AM
KRIS CURTIS, Legislative Auditor, Division of Legislative Audit
(DLA), Alaska State Legislature, directed attention to a
PowerPoint presentation, titled "LB&A Oversight Top Audit
Issues" [hard copy included in the committee file]. She stated
that four years ago, the Legislative Budget and Audit Committee
developed a new audit oversight process to encourage corrective
action. She summarized the oversight process on slide 2, "Audit
Oversight Process," which read as follows [original punctuation
provided]:
Focus
Identify top audit findings in terms of fiscal or
societal impact and degree of difficulty in addressing
findings.
Communicate
Work with Auditees to identify corrective action for
top audit findings.
Evaluate
Determine whether action requires legislative action.
Refer to legislative committee for consideration.
Measure
Examine progress through legislative finance
committees or other legislative committees as
relevant.
Repeat
Once the Single Audit is released repeat. Process
covers all reports issued over a fiscal year.
MS. CURTIS described the 12 audit issues from fiscal year 2025
(FY 25), beginning with the first one on slide 3, "Commercial
Passenger Vessen Environmental Compliance (CPVEC)," which read
as follows [original punctuation provided]:
The fund balance of the CPVEC general fund subfund was
misclassified in the FY 24 financial statements.
•Both CPVEC funding sources (environmental compliance
fees and ocean ranger program fees) are subject to the
federal tonnage clause; therefore, the fund balance
should be restricted and not swept into the CBR fund.
Department of Law disagreed leading to financial
statement misstatements in multiple accounts and
footnote No. 2. Unless resolved, misstatements will
continue in future years.
Single Audit Finding (Reference)
•2024-002, 2024-016
10:07:41 AM
MS. CURTIS described the second audit issue on slide 4,
"Disclaimed Opinion Lack of Evidence for Medicaid System,"
which read as follows [original punctuation provided]:
Department of Health (DOH) failed to obtain a report
on internal controls over its Medicaid System.
•Division of Health Care Services historically
contracted with a service organization to manage its
Medicaid system and process claims. During FY 24, DOH
contracted with two separate organizations, one to
manage its Medicaid system and one to process claims.
•Because of challenges transitioning to the new
contractor, Medicaid system internal control reports
were not obtained for FY 24. The system is responsible
for processing $2.4 billion in FY 24 claims. The lack
of internal control reports was considered a material
internal control weakness.
•Auditors could not provide an opinion regarding
several accounts because of the lack of evidence.
Single Audit Finding (Reference)
•2024-048
MS. CURTIS described the third audit issue on slide 5,
"Department of Health (DOH) Accounts Receivable Unsupported,"
which read as follows [original punctuation provided]:
Department of Health and Social Services did not
collect or liquidate two federal receivables totaling
$26.6 million in a timely manner.
•The receivables were first recorded during FY 17 to
correct for errors in the billing process related to
several federal programs. During the FY 19 Single
Audit, DHSS staff were unable to provide support for
the receivables.
•Limited staff resources and the complexity of the
reconciliation process was blamed for DOH's inability
to identify the federal programs and collect the
funds.
Single Audit Finding (Reference)
•2024-049
10:09:39 AM
MS. CURTIS described the fourth audit issue on slide 6, "Opioid
Settlement Revenues," which read as follows [original
punctuation provided]:
Opioid settlement funds were misreported in the draft
FY 24 financial statements.
•During 2021 and 2022, nationwide settlements were
reached involving the production, distribution, and
sales of opioids. Alaska is a party to the
settlements. The revenues must be spent in accordance
with the settlements.
•No accounting structures were set up to adequately
track and report the FY 24 opioid revenues.
•We recommend the Office of Management and Budget work
with the legislature to create a separate subfund to
account for the opioid settlement revenues.
Single Audit Findings (Reference)
•2024-001, 2024-015
MS. CURTIS described the fifth audit issue on slide 7, "High
Error Rate Procurement Testing," which read as follows
[original punctuation provided]:
Statewide testing found significant errors in the
procurement process.
•33 percent of the procurements tested had
insufficient documentation.
•Trainings were not sufficient to ensure all
procurement regulations were met.
•We recommend that DOA's chief procurement officer
conduct additional training for statewide procurement
officers.
Single Audit Findings (Reference)
•2024-020
10:11:14 AM
MS. CURTIS described the sixth audit issue on slide 8, "Not
Billing Federal Government for Approximately $279.8 Million
Related to FEMA Disaster Grants," which read as follows
[original punctuation provided]:
The state incurred $279.8 million of expenditures
associated with a federal grant but did not request
reimbursement.
•Department of Military and Veterans Affairs (DMVA)
was the recipient of COVID-related FEMA disaster
grants and passed through the grants to Department of
Health and Social Services (DHSS). DHSS incurred the
COVID-related costs but did not bill DMVA timely.
•The Department of Health claimed billing delays were
caused by a number of factors including the
reorganization of DHSS, working with federal agencies,
turnover in key financial and grant personnel, time
intensive documentation requirements, and competing
priorities.
•The state lost out on millions of investment earnings
by not billing the federal government in a timely
manner.
Single Audit Findings (Reference)
•2024-068
MS. CURTIS described the seventh audit issue on slide 9,
"Department of Corrections (DOC) Overspent FY 24 Budget," which
read as follows [original punctuation provided]:
DOC's FY 24 population management operating budget was
overspent.
•DOC payroll expenditures were unable to post in the
state accounting system due to a lack of funding.
•DOC internal controls were insufficient to identify
the funding deficiency so corrective actions could be
taken.
•Unauthorized general funds were expended
($8,037,023).
Single Audit Finding (Reference)
•2024-073
10:13:10 AM
MS. CURTIS described the eighth audit issue on slide 10,
"Unaddressed Shortfalls," which read as follows [original
punctuation provided]:
Several departments did not address shortfalls in a
timely manner.
•Seven Department of Law (LAW) appropriations were in
shortfall as of February 2025.
•Ten Department of Natural Resources (DNR)
appropriations were in shortfall as of February 2025.
•Four Department of Health (DOH) appropriations were
in shortfall as of February 2025.
Single Audit Finding (Reference)
•LAW 2024-022
•DNR 2024-042
•DOH 2024-071
MS. CURTIS described the ninth audit issue on slide 11, "AIA's
FY 24 Audit was not Completed Timely for Inclusion in the
State's Financial Statement," which read as follows [original
punctuation provided]:
For several years, the Alaska International Airports
(AIA) has not completed their financial statements in
a timely manner, which has delayed their audit.
•According to AIA's controller, the FY 24 audit was
not completed timely due to late trial balances
provided by the Division of Finance, audit team
reassignments, and errors identified during the audit.
Single Audit Finding (Reference)
•2024-074
10:15:23 AM
MS. CURTIS described the tenth audit issue on slide 12,
"Division of Public Assistance Federal Program Findings," which
read as follows [original punctuation provided]:
The division has struggled with staffing shortages,
lack of staff experience, poor training, and lack of
adequate internal controls.
Material noncompliance with federal laws and material
weaknesses in internal controls over the following
federal programs:
•Medicaid
•CHIP
•SNAP (Food Stamps)
•Temporary Assistance for Needy Families
•Child Care Development Fund
Single Audit Finding (Reference)
•2024-052, 2024-053, 2024-054, 2024-055, 2024-056,
2024-057, 2024-058, 2024-059, 2024-060, 2024-061,
2024-062, 2024-063, 2024-064, 2024-065, 2024-066,
2024-067
MS. CURTIS described the eleventh audit issue on slide 13,
"Parole Board," which read as follows [original punctuation
provided]:
The 2024 sunset audit made three recommendations.
1.The board chair should work with Department of
Correction's (DOC) commissioner to ensure all hearings
are conducted in a confidential manner.
2.DOC's commissioner should ensure fiscal notes for
pending legislation properly reflect decreases, as
appropriate.
3.The board chair and DOC's commissioner should ensure
regulations are updated in a timely manner.
Audit Control Number: 20-20139-24
MS. CURTIS described the twelfth audit issue on slide 14,
"Office of Children's Services (OCS) Compliance with Foster Care
Reform," which read as follows [original punctuation provided]:
The 2024 performance audit made six recommendations.
1.OCS's director should implement procedures to ensure
the annual staffing report is accurate.
2.OCS's director should implement procedures to ensure
the annual recruitment and retention report is
accurate and prepared in compliance with state law.
3.OCS's director should consider implementing a more
comprehensive training program that is grounded in
practical applications.
4.OCS's director should continue to implement hiring
best practices.
5.OCS's director should consider enhancing data to
align with best practices and make recruitment and
retention efforts more meaningful.
6.OCS's director should develop a forward-looking plan
for addressing recruitment and retention challenges.
Audit Control Number: 26-30097-25
MS. CURTIS concluded on slide 15, "Next Steps LB&A Oversight,"
which read as follows [original punctuation provided]:
Legislative Auditor sends letters on behalf of the
LB&A committee to the auditees asking for the status
of corrective action. A summary of the responses will
be presented at the next LB&A meeting. For those audit
findings that warrant consideration by other
legislative committees, the findings may be forwarded
to the appropriate committees for consideration during
the 2026 legislative session.
10:18:25 AM
SENATOR STEDMAN asked whether there are any corrective actions
on appropriations from the COVID-19 funding and whether the
federal government is looking at that.
MS. CURTIS said she's unaware of any action that the federal
government is taking on COVID-19 money. There was a federal
desk review, but nothing has come from it.
10:19:30 AM
REPRESENTATIVE KOPP observed a theme of lack of staff resources,
lack of training, and errors committed as a result of both. He
asked whether these errors are typical.
MS. CURTIS explained that there has been degradation within the
departments internal controls, which resulted from a lack of
documented and written procedures. There's also a lack of
experience at the agencies, resulting from the difficulty of
hiring and retaining staff. She further noted the vacancies and
poor training, especially within the Division of Public
Assistance due to inexperience. She added that these issues
have gotten progressively worse, explaining that the number of
findings has grown from 30 to 90 over the years.
10:21:40 AM
REPRESENTATIVE JOSEPHSON referred to item 12 and asked why it
was included on the list.
MS. CURTIS said this process looks back at top audits issued
during FY 25 with the idea of asking a department where they are
with their corrective action findings. There is not another
mechanism for following up on and evaluating the status of
recommendations for performance audits. For sunset audits,
certain types of recommendations are followed up on every year.
10:23:26 AM
REPRESENTATIVE TILTON asked where the opioid funds are currently
located.
MS. CURTIS said she's not sure what raised DLA's attention to
their inaccurate recording. She reported that there was $23
million for FY 24, which must be used for remediation tasks.
REPRESENTATIVE TILTON asked which account they came through or
which department.
MS. CURTIS responded that they were recorded in the General Fund
(GF); however, they were not identified as opioid funds, so they
got mixed up with everything else. She emphasized that these
are important to track because compliance must be shown with the
settlement.
^CONTRACT APPROVAL
CONTRACT APPROVAL
10:25:20 AM
CHAIR GRAY-JACKSON announced that the next order of business
would be approval for the DataSnipper contract.
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee authorize the legislative auditor to enter into
a contract with DataSnipper for the purchase of audit software
for an amount not to exceed $60,000, to be paid from existing
funds.
CHAIR GRAY-JACKSON objected for purposes of discussion.
10:25:58 AM
MS. CURTIS referred to a memo [included in the committee file]
asking for the committee's consideration and approval for a
contract with DataSnipper for audit software not to exceed
$60,000. She said she learned about the tool at the National
State Auditors Association Conference in June of 2025, and it
came highly recommended by other auditors. She explained that
DataSnipper is an add-on to Excel that's used for testing
details, walkthroughs, and other audit procedures. It helps
staff document and review audit evidence more efficiently.
Further, it allows for the use of DocuMine which is an AI
powered solution within DataSnipper that eliminates manual
searches through lengthy documents. Staff can ask specific
questions of multiple documents and receive precise answers.
The division staff conducted tests on reports and board minutes
and agreed to try it out for a year to see whether it makes them
more efficient and effective. She said it's the first step
towards automating audit procedures. It's not a competitive
procurement, as it would qualify as an unsolicited offer within
the procurement code. Further, the amount would not exceed
$60,000 and the division can accommodate that within its
existing budget.
10:28:45 AM
CHAIR GRAY-JACKSON removed her objection. There being no further
objection, the contract was approved.
^REVISED PROGRAM LEGISLATIVE (RPLs)
REVISED PROGRAM LEGISLATIVE (RPLs)
10:28:55 AM
CHAIR GRAY-JACKSON announced that the next order of business
would be Revised Program - Legislative (RPLs).
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee approve RPL 16-2026-0154, Rural Health
Transformation Program, for $200 million.
CHAIR GRAY-JACKSON objected for purposes of discussion.
10:29:59 AM
ALEXEI PAINTER, Director, Legislative Finance Division (LFD),
Alaska State Legislature, explained that RPL 16-2026-0154 for
the Department of Health (DOH) is within the Departmental
Support Services appropriation within the Administrative Support
Services allocation and totals $200 million of federal receipts
in fund code 1002. It provides federal receipt authority for
the Rural Health Transformation Program (RHTP), which was
established under H.R. 1, the One Big Beautiful Bill Act. The
RHTP is a completely new program that would provide an estimated
$200 million per year over the next five years. DOH submitted
Alaska's application for this program on November 5, 2025, and
the federal government must issue a decision on awarding these
funds by December 31, 2025. He added that it's a timely RPL
because the funds may be delivered to the state before the
legislature convenes again. Each year's funding is available
for a two-year expenditure window, so there's interest in
getting funds out the door quickly. Further, the department
stated that having the federal authority earlier would ensure
that they could accept the award and execute awards on schedule
to meet that timeframe. There's no matching requirement for
this grant, and there's existing federal authority in this
allocation of just under $4 million, which would be increased to
$204 million. Essentially, given the timeliness of the RPL and
the limited ability for the legislature to influence how the
funds would be spent, the policy calls for the Legislative
Budget and Audit Committee to evaluate the risk against the
benefit of having timely distribution of this funding.
10:33:24 AM
HEIDI HEDBERG, Commissioner, Department of Health (DOH), gave a
PowerPoint presentation, titled "Rural Health Transformation
Program" [hard copy included in the committee file]. She began
on slide 2, "Rural Health Transformation Program (RHTP)," which
read as follows [original punctuation provided]:
Five-year, $50 billion federal initiative to transform
rural health care delivery and improve access and
health outcomes.
Half of the funds will be distributed across states
based on rural health needs, the other half will be
split evenly.
Alaska's rural nature positions us well to receive a
substantial federal investment in annual allotments.
COMMISSIONER HEDBERG continued to slide 3, explaining that DOH
has been working closely with its healthcare partners with
regard to the Request for Information (RFI), creating an
advisory committee and holding over 30 different meetings with
providers to understand RHTP, its challenges, and how they can
work together. Through that dialogue, three goals were created,
as illustrated on slide 4, "RHTP Goals and Initiatives," which
read as follows [original punctuation provided]:
Goal 1: Promote Lifelong Health and Wellbeing for
Alaskans
Healthy Beginnings
Health Care Access
Healthy Communities
Goal 2: Build Sustainable Outcomes Driven Health
Systems
Pay for Value: Fiscal Sustainability
Goal 3: Drive Workforce and Technology Innovation
Strengthen Workforce
Spark Technology & Innovation
COMMISSIONER HEDBERG turned to slide 5, "RHTP Unallowable
Funding Uses," which read as follows [original punctuation
provided]:
Funding cannot be used for:
• Construction of new facilities
• Funding clinical services already
reimbursable by insurance or other
coverage
• Using more than 10% for administrative
costs
• Using more than 20% on capital
expenditures
• Supplanting state contribution to Medicaid
match
• Supplanting existing funding
COMMISSIONER HEDBERG outlined the aggressive RHTP funding
timeline on slide 6. She explained that the annual distributions
are based on the federal fiscal year (FFY). Next week, DOH
anticipates receiving the notice of grant award, which "starts
the clock." She added that in year 1, the costs need to be
appropriately allocated and incurred, and there are two years to
spend each allocation. Claw-backs/redistributions begin March
31, 2028, for unspent prior-year funds, which will be
reallocated to other states. Final reallocated funds must be
spent by the end of FFY 2032. She emphasized the importance of
DOH's close working relationship with healthcare providers
across the state to set up a system for appropriately allocating
funds based on the six initiatives in 2026 and position Alaska
to be a state that can receive unspent funds from other states.
10:39:52 AM
REPRESENTATIVE EDGMON asked whether there is any discretion on
the state side in terms of where these dollars are applied.
MS. HEDBERG explained that eligibility is outlined in H.R. 1 and
the list is extensive; nonetheless, all healthcare entities in
Alaska are eligible. She explained that RHTP is a federal grant
and a cooperative agreement that DOH had to apply for in a short
amount of time. She explained that the first year would require
a lot of planning to ensure the one-time funding is sustainable.
REPRESENTATIVE EDGMON pointed out that this program started as a
budget line that was constructed after the fact. He said he was
still unclear on the state's role in this and contrasted rural
Alaska with that of a larger hospital in Anchorage, for example,
which is still considered rural by definition.
10:45:05 AM
MS. HEDBERG said DOH is still waiting on the Centers for
Medicare & Medicaid Services (CMS) to provide guidelines and
parameters. Currently, the advisory committee is helping to
craft the scoring matrix to rank community applications and
determine their needs. She reiterated that one of the key
initiatives in the grant is strengthening the workforce, and DOH
wants to ensure that everyone has equal access to apply. She
added that the department is in the development phase right now
with that process and plans to post developments on their
website.
REPRESENTATIVE EDGMON stated that while he's not in opposition,
he's trying to figure out the discovery process and what kind of
"blank check authority" is being granted to the administration.
LACEY SANDERS, Administrative Director, Office of Management &
Budget (OMB), Office of the Governor, clarified that DOH would
be back before the House and Senate Finance Committees in the
future to address the level of funding determined by CMS and to
provide updates on RHTP.
10:49:50 AM
REPRESENTATIVE JOSEPHSON presumed that as DOH has not been
awarded the $200 million, there have been no decisions on how
the money would be spent.
MS. HEDBERG confirmed that is correct. Based on the federal
language, every state would be guaranteed (indisc.). The second
tranche of funding is dependent on how rural the state is and
the type of healthcare system it has. Further, Alaska does not
have state directed payments or provider taxes, which sets it
apart from other states. In agreement with Ms. Sanders, she
anticipated that DOH would be back before the legislature to ask
for additional federal authority, and there would be more work
to present to flesh out the process and intent behind the
development of the RHTP.
REPRESENTATIVE JOSEPHSON sought to confirm that DOH would be
selecting the awardees and questioned how they would be
identified in the budget.
MS. SANDERS said it's a conversation that could be had during
the legislative process, but it would definitely be outlined as
a separate component.
10:53:59 AM
SENATOR STEDMAN sought to confirm that the state would have to
wait 7 months until the money is in Alaska's economy.
MS. SANDERS confirmed that currently, the RPL process is the
only available tool to bring the item before the legislature and
that it would be brought to the legislature for consideration on
an annual basis through the budget process.
SENATOR STEDMAN cautioned the legislature from creating a system
where it becomes automatic. Further, he recommended that DOH
create a way to easily communicate the selection process to
avoid involving politics in the decision.
MS. HEDBERG said DOH intends to have a dashboard that reflects
who is receiving funds and what they're being used for. In
addition, she said they would be having virtual meetings to
educate communities on how to apply for the funds. She noted
that the funds are not intended to be used for one-offs.
SENATOR STEDMAN emphasized that this is five-year money, and the
recipients should not expect the state to backfill the funding.
11:00:04 AM
SENATOR GIESSEL agreed with the sustainability aspect expressed
by Senator Stedman. Further, she referenced the Single Audit,
which extensively called out accounting problems within DOH;
consequently, she expressed concern about the accounting
capabilities of the department. She added that it would have
been informative to include the November 7 public release of
RHTP initiatives, which extensively described each aspect of the
transformation and would have answered some questions about
rural Alaska. She said she would not oppose the RPL but
suggested that the money should be tracked appropriately.
11:01:48 AM
REPRESENTATIVE KOPP observed that the care coordination system
is the heart of a state health authority's role. He asked
whether any of these funds could be used as a soft launch of
that idea, potentially within DOH; or whether there's room in
the subject areas for standing up the federal backbone as part
of RHTP support in looking at moving towards a state health
authority.
MS. HEDBERG said currently, all ideas are on the table.
11:04:39 AM
The committee took a brief at-ease at 11:04 a.m.
11:05:53 AM
REPRESENTATIVE JOSEPHSON recalled that the legislature
effectively left Juneau on March 28, 2020, returned around May
17, 2020, and ratified RPLs through resolution. He asked
whether ratifying RPLs through resolution is something Ms.
Wallace would recommend that the legislature does in January
2026.
MEGAN WALLACE, Chief Counsel, Legislative Legal Services, said
the 2020 ratification was the result of a lawsuit that was
filed. She said her recommendation would depend on whether
there is action related approval of these RPLs, but it's not an
uncommon budgetary practice for the Finance co-chairs to ratify
certain expenditures, whether its disaster expenditures or RPL
ratification. To ensure that there's no issue with the approval
of this RPL, she recommended that the item be placed in the
operating or capital budget next session.
REPRESENTATIVE JOSEPHSON asked whether this issue should be
taken up in the budget bill that the legislature takes action on
early in the session.
MS. WALLACE answered yes, it would increase assurance of the
appropriateness of the RPL.
11:08:57 AM
CHAIR GRAY-JACKSON removed her objection. There being no
further objection, RPL #16-2026-0154 for the Rural Health
Transformation Program was approved.
11:09:19 AM
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee approve RPL #09-2026-0098, Construction of
Certified Veterans Cemetery in Fairbanks, for $3,600,000.
CHAIR GRAY-JACKSON objected for purposes of discussion.
11:10:18 AM
MR. PAINTER explained that RPL #09-2026-0098 is a capital
project with the subject titled, "Construction of Certified
Veterans Cemetery in Fairbanks" for $3.6 million in federal
receipts using fund code 1002. The legislature has made
numerous appropriations of both federal and matching GF funds
for this project dating back to FY 11 with appropriations
totaling $4.5 million in GF and $14 million in federal funds.
The Department of Military & Veterans' Affairs (DMVA) just
received a federal grant totaling $16.7 million. He noted that
RPL #09-2026-0098 would bring the total amount of federal
receipt authority to $17.6 million, because additional federal
reimbursement beyond the grant amount is anticipated for the
cost of the project. He stated that because the GF match has
already been appropriated, no other state funds are needed at
this time. Once the capital project is completed, there will be
a GF cost of an estimated $1.3 million to operate and maintain
the cemetery, which may require GF funds in the future.
11:12:08 AM
CHAIR GRAY-JACKSON removed her objection. There being no further
objection, RPL #16-2026-0154, Construction of Certified Veterans
Cemetery in Fairbanks, was approved.
^OVERVIEW of DOR DIVISION OF TREASURY'S NON-ROUTINE INVESTMENTS
POLICY
OVERVIEW of DOR DIVISION OF TREASURY'S NON-ROUTINE INVESTMENTS
POLICY
11:12:16 AM
CHAIR GRAY-JACKSON announced that the next order of business
would be an overview of the Division of Treasury's non-routine
investments policy. She shared the following background
information [original punctuation provided]:
1. First, a letter dated September 3, 2025, from the
acting commissioner of the Department of Revenue to
the State Auditor, Kris Curtis, titled, "Fiduciary
Reallocation of a Portion of the Constitutional Budget
Reserve (CBR) into the Subaccount."
2. Second, the Presiding Officers sent an inquiry to
the governor, dated October 14, seeking additional
information, and noting that "the Legislature has an
obligation to actively examine the circumstances of
this [financial] commitment and its implications for
Alaska's finances."
3. Third, the governor replied on October 22,
providing additional information, and reiterating that
he has requested an independent third-party review of
the transaction.
We understand that the third-party review being
conducted by the national law firm WilmerHale is
underway. We appreciate that effort and look forward
to the outcome, which, according to press reports, is
due before the beginning of the regular legislative
session.
At the same time, our own due diligence has led us to
the Division of Treasury's "Non-Routine Investment"
policy. With this committee's oversight
responsibility, I want to raise awareness and
understanding about this policy. Today, we will keep
the discussion at a high-level with the focus on
understanding the policy, without getting into an
examination of what actions the former Commissioner
did or did not take; however, the Legislative Budget &
Audit Committee does maintain our responsibility and
authority to take action in the future, if and when it
is appropriate.
11:14:30 AM
MS. CURTIS gave overview of changes made by the Department of
Revenue (DOR) to its investment policies as a result of DLA's
audit of the department's loan to Mustang Operations Center 1
LLC (MOC 1). The investment policies for non-routine
investments that were created because of the MOC 1 audit are
irrelevant to recent concerns over DOR Commissioner Crumb's
investment in DigitalBridge. She explained that Recommendation
4 of the MOC 1 audit included that Commissioner Crumb's decision
to loan up to $22.5 million to MOC 1 under the authority of the
department's investment statutes was legal. However, the
decision was not appropriate when compared with the behavior
that a prudent person would consider reasonable. The audit
proceeded to list seven actions that supported that conclusion.
In addition, DOR did not argue the validity of that conclusion.
Furthermore, the audit asserted that a lack of procedures
governing non-routine investments and a lack of formal oversight
of the commissioner's investment function contributed to the
deficiencies. In contrast, the state's pension funds are
subject to oversight by the Alaska Retirement Management (ARM)
Board. This oversight function provides transparency and
assurance over the propriety of pension investments. The MOC 1
audit recommended the legislature consider enhancing oversight
over DOR's investment function. In response, former DOR
Commissioner Mahoney agreed that procedures should be improved
and stated that she was planning on establishing a non-
political, external investment commission to advise the
department. When the Legislative Budget and Audit Committee
established its new audit oversight process at the end of 2021,
Ms. Curtis recalled that Recommendation 4 from the MOC 1 audit
was a top audit issue. The commissioner's response [included in
the committee file] to the division's request for a status
update stated that DOR had instituted investment procedures
governing non-routine investments as a result of the MOC 1
audit. The new procedures are as follows:
1. Document the investment opportunity and determine
if it merits further diligence and/or if it
is more suitable for other funding sources.
2. Seek legal advice on DOR eligibility.
3. Seek guidance from external auditors.
4. Use an impartial external expert to evaluate the
opportunity and to provide an opinion on
the investment.
5. Seek advice from the Investment Advisory Council.
6. Notify the Office of Management and Budget.
7. Complete diligence and investment documentation.
8. Inform the Chairs of the Senate and House Finance
Committees of any decision to move
forward with an investment.
MS. CURTIS noted that the policies are publicly available on
DOR's website. Further, with regard to the concern over
Commissioner Crumb's investment in DigitalBridge, she pointed
out that the policies and procedures that addressed the findings
in the MOC 1 audit already existed at the time of the
commissioner's investment.
11:19:49 AM
SENATOR STEDMAN reminded the committee that this is the third
incident involving DOR. He acknowledged that in each situation,
the commissioner had the broad authority to act, but each one
was different. He opined that the MOC 1 investment was well
intended but misguided. He further recalled the incident under
the Walker Administration involving $1 billion from the
Constitutional Budget Reserve (CBR) that ended up in "someone
else's pocket," as well as the liquidation of the subaccount due
to ample concern that the funds would need to be drawn on. In
the last few years, he spoke to significant concern and
disagreement between the legislature and the administration
regarding the appropriate balance of the CBR. He shared that
the Senate Finance Committee would like to see an account
balance that's higher than $3 billion. During last year's
budget process, there were significant discussions about the
need for liquidity, and it was agreed that they would not draw
from the CBR to account for the need for liquidity and
substantial draws from the CBR over the next 2-3 years, which
would potentially liquidate the account. He reported that of
the $3 billion in the account, the administration had proposed a
$1.5 billion CBR draw, which he described as an incompetence
issue in combination with the $200 million for RPL 16-2026-0154.
He characterized the $1 billion loss under the Walker
Administration as inexperience; the MOC 1 investment as well
intended but poorly reviewed; and the potential liquidation of
the CBR as gross incompetence.
11:25:52 AM
REPRESENTATIVE EDGMON asked whether Legislative Audit Division
was consulted on the third-party review of investments.
MS. CURTIS answered no. She explained that this issue is being
looked at as part of the ongoing FY 25 Single Audit, which is
confidential. Today's overview was intended to raise awareness
of the policies governing the specific type of investment
entered into by Commissioner Crumb.
REPRESENTATIVE EDGMON clarified that he was trying to ascertain
whether the division had any involvement in (indisc.).
11:28:04 AM
REPRESENTATIVE JOSEPHSON asked whether Commissioner Crumb could
assert that the investment in dispute was routine and within the
scope of the existing investment profile.
MS. CURTIS declined to comment, as the audit is ongoing.
11:29:07 AM
SENATOR STEDMAN recalled that under Governor Murkowski's
administration, the DOR commissioner relied on support staff to
counsel his decisions via quarterly meetings. As the
administration changed, these meetings stopped and MOC 1
surfaced. He recalled that under Governor Walker's
administration, when the $1 billion "went out the door," APFC's
consultants were asked if they were counseled on these decisions
and they "did everything but run out the door" because it was so
egregious. He said this winter, he's looking forward to asking
the consultants what they're doing to counsel state employees
and commissioners. He opined that there's a gross level of
incompetence that's beyond belief, regardless of the number of
high paid consultants that are hired. He spoke to the necessity
of high-liquidity investments with regard to the state's savings
account. He reiterated that when DOR's commissioner was holding
regular meetings to create a sounding board and justify his
decisions, these issues weren't present. Further, he expressed
an interest in when the governor and the attorney general were
given this information, how far the information went, and
whether outside counsel was used. He said he had also been
approached by lobbyists who purported to have been contacted to
lobby for more contracts signed with other firms and declined
due to its egregiousness.
^EXECUTIVE SESSION
EXECUTIVE SESSION
11:34:29 AM
CHAIR GRAY-JACKSON announced that the next order of business
would be executive session.
11:35:09 AM
The committee took an at-ease from 11:35 a.m. to 11:38 a.m.
11:38:42 AM
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee go into executive session under Uniform Rule
22(b)(1) for the discussion of matters, the immediate knowledge
of which would adversely affect the finances of a government
unit, and Uniform Rule 22(b)(3) for the discussion of matters
that may, by law, be required to be confidential. He asked that
the following persons remain in the room or online: Kris Curtis,
legislative auditor, and necessary staff; Emily Nauman and Megan
Wallace, Legislative Legal Services; JC Kestel, procurement
officer; any legislators not on the committee; and staff of
legislators on the committee. There being no objection, it was
so ordered.
11:39:40 AM
The committee took an at-ease from 11:39 a.m. to 12:26 p.m. for
the purpose of executive session.
12:26:23 PM
CHAIR ELVI GRAY-JACKSON called the Legislative Budget and Audit
Committee meeting back to order at 12:26 p.m. Representatives
Kopp, Josephson, Tilton, and Edgmon (alternate) and Senators
Giessel, Stedman, Wielechowski (via teleconference), and Gray-
Jackson were present at the call to order. Also present were
Representatives Coulombe and Prax (via teleconference).
12:26:57 PM
CHAIR GRAY-JACKSON asked Ms. Curtis to share a summary of the
contract extension related to IRIS/ALDER.
12:27:04 PM
MS. CURTIS explained that she asked the Legislative Budget and
Audit Committee for its consideration and approval of a contract
extension with BDMP Assurance, the contractor that's used to
test the general and application controls for the state's
financial accounting system, IRIS, and its financial accounting
reporting system, ALDER. The work is needed to support the
division's FY 26 audit opinion, and the FY 26 Single Audit.
This is the third and last one-year extension that's allowed
under the 2022 procurement of this contract. The amount is not
to exceed $176,000, and the cost of the work is in budget.
12:28:05 PM
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee authorize the legislative auditor to amend the
current contract with BDMP Assurance, LLP for information
technology expertise, to extend the contract for the review of
the FY 26 general and application controls of the state's
accounting and reporting systems for an additional amount not to
exceed $176,000 to be paid (indisc.) There being no objection,
it was so ordered.
12:28:39 PM
CHAIR GRAY-JACKSON asked Ms. Curtis to share a summary of the
lease extension for the Division of Legislative Audit's
Anchorage office space.
12:28:51 PM
MS. CURTIS explained that the division did a competitive
procurement for Anchorage office space, but the Request for
Proposals (RFP) was not successful in generating any reasonable
offers. So, DLA plans on going out for another competitive
procurement, which would leave the division without office space
for six months. Consequently, she requested the committee's
approval of a written justification for a noncompetitive short-
term lease at a rate of $4,992.52 per month for a period not to
exceed six months for a total of $29,997.12. This would allow
DLA to complete the competitive procurement process for a long-
term lease.
12:30:41 PM
REPRESENTATIVE EDGMON moved that the Legislative Budget and
Audit Committee, under section AS 36.30.040(b) of the
Legislative Procurement Code, approve an amendment to the
Division of Legislative Audit's Anchorage office space lease and
extend the lease to six months for a total amount of $29,997.12
(indisc.). There being no objection, it was so ordered.
12:31:18 PM
REPRESENTATIVE EDGMON moved that the Legislative Budget & Audit
Committee release the following audits as final audit reports:
the Board of Marital and Family Therapy, and the Board of
Psychologist and Psychological Associate Examiners. There being
no objection, it was so ordered.
12:31:43 PM
CHAIR GRAY-JACKSON stated that while in Executive Session, the
committee received a brief legal update on the special audit
titled "Oil and Gas Production Tax Audit Process." Per statute,
the audit process is confidential, and she reminded the public
that neither she nor any members of the committee are permitted
to comment publicly at this stage. She expressed appreciation
for the public's patience and understanding as this work
proceeds.
12:32:20 PM
CHAIR GRAY-JACKSON offered the following closing remarks
[original punctuation provided]:
Some of you may be familiar with the Levin Center for
Oversight and Democracy, as they are regular
presenters at NCSL, CSG and other legislative
conferences.
The Levin Center's objectives include: (1) Improving
the practice of oversight in state legislatures across
the country via trainings and events with lawmakers
and staff; and (2) Increasing the visibility of
legislative oversight as an essential legislative
function.
I am excited to share that we are working to bring a
couple members of their staff to Juneau to conduct
trainings during the beginning of the legislative
session. Initial planning is underway, and we will be
sharing more information in the coming weeks.
Have a good lunch and we'll see you back here at 1:30
PM for presentations on the AK LNG project from
GaffneyCline, AGDC, and Glenfarne Alaska LNG.
12:33:45 PM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
12:33 p.m.