Legislature(2019 - 2020)ADAMS ROOM 519

07/20/2019 01:00 PM House FINANCE

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03:17:56 PM Start
03:18:52 PM SB2002
04:45:31 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 3:15 p.m. Today --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSSB 2002(FIN) Out of Committee
Uniform Rule 23 Waived
                  HOUSE FINANCE COMMITTEE                                                                                       
                  SECOND SPECIAL SESSION                                                                                        
                       July 20, 2019                                                                                            
                         3:17 p.m.                                                                                              
3:17:56 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Johnston   called  the  House   Finance  Committee                                                                    
meeting to order at 3:17 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
Representative Ben Carpenter                                                                                                    
ALSO PRESENT                                                                                                                  
Representative   Steve   Thompson;   Representative   Tammie                                                                    
Wilson;  Representative Sara  Hannan; Representative  DeLena                                                                    
Johnson;  Representative Zack  Fields; Representative  Sarah                                                                    
Vance; Representative  David Eastman;  Representative Louise                                                                    
Stutes;  Representative  Gabrielle  LeDoux;  Robert  Irvine,                                                                    
Staff,  Representative  Jennifer   Johnston;  Paul  Labolle,                                                                    
Staff,  Representative Neal  Foster;  David Teal,  Director,                                                                    
Legislative Finance Division.                                                                                                   
PRESENT VIA TELECONFERENCE                                                                                                    
Megan Wallace, Director, Legislative Legal Services.                                                                            
SB 2002   APPROP: CAPITAL; SUPP; OTHER APPROP                                                                                   
     CSSB 2002(FIN) was REPORTED out  of committee with with                                                                    
     seven  "do pass"  recommendations,  one  "do not  pass"                                                                    
     recommendation, and two "amend" recommendations.                                                                           
Co-Chair Johnston reviewed the agenda for the meeting.                                                                          
CS FOR SENATE BILL NO. 2002(FIN)                                                                                              
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and  other appropriations;  amending                                                                    
     appropriations;  making  appropriations  to  capitalize                                                                    
     funds; making  appropriations for the  capital expenses                                                                    
     of the  state's integrated comprehensive  mental health                                                                    
     program;  making  appropriations  under art.  IX,  sec.                                                                    
     17(c), Constitution  of the State  of Alaska,  from the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
3:18:52 PM                                                                                                                    
Vice-Chair  Johnston  summarized  the bill  saying  that  it                                                                    
provided  critical funding  for safety,  infrastructure, and                                                                    
maintenance projects across Alaska.  It allowed the state to                                                                    
capture  and   leverage  federal  funds  for   airports  and                                                                    
highways  and   funded  HB  49,   the  omnibus   crime  bill                                                                    
[Legislation passed  in 2019]. It also  included the reverse                                                                    
sweep  that  would fund  programs  such  as the  Power  Cost                                                                    
Equalization (PCE)  and the Alaska  Performance Scholarship.                                                                    
She counseled that if the  legislature chose not to pass the                                                                    
bill before the end of July,  programs would be shut down or                                                                    
would end,  and the  crime bill passed  earlier in  the year                                                                    
would be  left unfunded. She  further commented that  if the                                                                    
priority of the  legislature was to make  Alaska's roads and                                                                    
communities safer,  allow Alaskans to heat  their homes, and                                                                    
give  children  an opportunity  to  seek  an education,  the                                                                    
legislature needed to pass the bill before July 31st.                                                                           
3:20:00 PM                                                                                                                    
ROBERT  IRVINE,  STAFF,  REPRESENTATIVE  JENNIFER  JOHNSTON,                                                                    
reviewed  the bill  noting that  though  the Capital  Budget                                                                    
passed by  a wide margin, many  of the items were  funded by                                                                    
the Constitutional  Budget Reserve (CBR) requiring  a three-                                                                    
quarter vote of  the legislature which failed.  As a result,                                                                    
a  large  portion  of  the bill  was  not  funded  including                                                                    
critical appropriations  seated for federal match  for state                                                                    
highways  and  airports.  He  went  on  to  say  that  other                                                                    
appropriations  in the  capital  budget were  vetoed by  the                                                                    
governor  including   Alaska  Housing   Finance  Corporation                                                                    
grants  and  funds  for the  Alaska  Marine  Highway  System                                                                    
Mr. Irvine continued that the  bill before the committee was                                                                    
essentially the capital budget bill  that both bodies passed                                                                    
in  June  without the  items  that  were enacted,  including                                                                    
federal funds. He meant that  the bill included the items in                                                                    
the capital budget that passed but  were lost by veto or not                                                                    
maintained  due  to the  failure  of  the three-quarter  CBR                                                                    
vote. The  primary source  of funding for  the bill  was the                                                                    
CBR. There  were a few  items funded by other  sources which                                                                    
he would highlight. The bill  also included language for the                                                                    
CBR reverse  sweep. He  noted that since  items in  the bill                                                                    
should  be  familiar  to  members,  he  would  describe  the                                                                    
sections briefly.  He also mentioned that  provisions in the                                                                    
bill  were  very  similar   to  the  capital  appropriations                                                                    
section  of HB  2001 [the  House companion  bill] heard  the                                                                    
previous Monday.                                                                                                              
Mr.  Irvine provided  a sectional  analysis.  He began  with                                                                    
Section  1, page  2 which  contained  the agencies'  capital                                                                    
projects passed in SB 19  [Capital budget legislation passed                                                                    
in  2019]  minus enacted  items  including  $10 million  for                                                                    
statewide addiction  treatment facility matching  grants and                                                                    
$7.42 million for the Alaska Travel Industry Association.                                                                       
Mr. Irvine continued to page  3, line 14 which contained the                                                                    
Marine  Exchange   of  Alaska  funding  by   the  commercial                                                                    
passenger  vessel excise  tax.  The funding  source for  the                                                                    
appropriation was different than the CBR.                                                                                       
Mr.  Irvine  moved  to  page  6, line  23  which  showed  an                                                                    
appropriation  of  $73.3  million   for  the  Department  of                                                                    
Transportation and  Public Facilities highways  and airports                                                                    
to receive a federal match.                                                                                                     
Mr. Irvine highlighted  page 7, line 5  showing $2.5 million                                                                    
for the University of Alaska  deferred maintenance. He noted                                                                    
$5 million had already been enacted.                                                                                            
Mr.  Irvine  advanced  to  Section 1  and  Section  2  which                                                                    
encompassed the  funding sources  for the  departments which                                                                    
totaled  $161,431,629   from  the  CBR.  He   reported  that                                                                    
Section 4,    page    11    contained    the    supplemental                                                                    
appropriations for  the Department of Corrections  (DOC) and                                                                    
the Department of Health and Social Services.                                                                                   
Mr. Irvine relayed  that Section 5 and Section 6  on page 12                                                                    
outlined  the funding  sources for  the supplemental  agency                                                                    
funding which totaled $3,220,200.                                                                                               
Mr.  Irvine reported  that  Section 7,  page  14 showed  the                                                                    
Alaska   Mental   Health   Trust   capital   appropriations.                                                                    
Section 8 and Section 9 defined  the funding sources for the                                                                    
Alaska Mental  health Trust capital  appropriations totaling                                                                    
$11,700,000 from the CBR.                                                                                                       
Mr. Irvine continued to Section  10, page 17 which contained                                                                    
ratifications.   It  was   a  technical   addition  granting                                                                    
authority  to the  administration  to  true-up prior  years'                                                                    
expenditures.   Section  11(a)   was  an   appropriation  of                                                                    
$200,000  of  Exxon  Valdez Oil  Spill  (EVOS)  earnings  to                                                                    
Prince William Sound for the Science Center.                                                                                    
Mr.  Irvine  moved to  Section  11(b),  page 17  showing  an                                                                    
appropriation of  $2 million to  the Northwest  Artic Bureau                                                                    
for  school  construction  major  maintenance.  The  funding                                                                    
source   was  Alaska   Industrial  Development   and  Export                                                                    
Authority   (AIDEA)  receipts.   Section   11(c),  page   18                                                                    
contained   an  appropriation   of   $4   million  for   the                                                                    
construction  and expansion  of  the  liquified natural  gas                                                                    
storage facility in North Pole,  AK. The fund source was the                                                                    
AIDEA Sustainable  Energy and  Supply Development  Fund. The                                                                    
language was originally  in the number section of  SB 19 but                                                                    
was moved  to the  language section  to accommodate  for the                                                                    
different fund source.                                                                                                          
3:24:08 PM                                                                                                                    
Mr.  Irvine  advanced  to Section  12,  line  18  containing                                                                    
intent language  for the Department  of Education  and Early                                                                    
Development relating  to the proceeds  of the sale  of land.                                                                    
It specified  that the  proceeds went  to Mt.  Edgecumbe for                                                                    
school maintenance.                                                                                                             
Mr.  Irvine relayed  that Section  13, page  18 contained  a                                                                    
reappropriation of  $34,577 for the Flat  Top Mountain Trail                                                                    
Cleanup  Pilot Project.  Section 14(a),  page 18  was intent                                                                    
language for AMHS stating that  proceeds of the sale of AMHS                                                                    
vessels needed to to go to the vessel replacement fund.                                                                         
Mr.  Irvine  reported that  Section  14(b),  page 19  was  a                                                                    
reappropriation  of  $1.6  million to  the  harbor  facility                                                                    
grant fund for harbor  facility matching grants. Section 15,                                                                    
page  contained a  scope change  for  the Ketchikan  Moorage                                                                    
Facility  Project.  In Section  16  on  page 19  there  were                                                                    
legislative  reappropriations of  past  capital projects  to                                                                    
the Alaska Housing Capital Corporation.                                                                                         
Mr. Irvine  continued to Section  17(a) which  contained the                                                                    
reverse   sweep.   Section   17(b),  page   24   encompassed                                                                    
traditional deficit  filling language.  If revenues  came in                                                                    
lower than  projected for all  the appropriation  bills, the                                                                    
CBR would be used to balance the budget.                                                                                        
Mr. Irvine  moved to Section  17(c), page 25  which provided                                                                    
headroom  so that  if there  were budget  supplementals, the                                                                    
legislature could  use up to  $250 million from the  CBR. It                                                                    
did  not  obligate  the money  without  further  legislative                                                                    
appropriation.  Section 17(d)  made the  appropriations from                                                                    
the CBR.                                                                                                                        
Mr. Irvine  advanced to Section 18  repealing the population                                                                    
triggers   that  were   enacted  for   opening  the   Palmer                                                                    
Correctional  Facility. Section  19, page  25 contained  the                                                                    
lapsed provisions.                                                                                                              
Mr. Irvine reported  that Section 20, page  26 reflected the                                                                    
retroactivity  of   the  bill.  Section  21   contained  the                                                                    
contingency  language   regarding  the  reverse   sweep  and                                                                    
Section 22 was the immediate effective date.                                                                                    
Representative  Tilton asked  Mr. Irvine  to please  explain                                                                    
what would be accomplished in  Section 17(b) on page 24. She                                                                    
read a portion of the section:                                                                                                  
     "If  the  unrestricted   state  revenue  available  for                                                                    
     appropriation in  fiscal year  2020 is  insufficient to                                                                    
     cover the general fund  appropriations that take effect                                                                    
     in  fiscal year  2020 that  are  made in  this Act,  as                                                                    
     passed by the Thirty-First  Alaska State Legislature in                                                                    
     the Second  Special Session and  enacted into  law, the                                                                    
     general fund appropriations that  take effect in fiscal                                                                    
     year  2020 that  are  made  in ch.  1,  FSSLA 2019,  as                                                                    
     passed by the Thirty-First  Alaska State Legislature in                                                                    
     the  First Special  Session and  enacted into  law, the                                                                    
     general fund appropriations that  take effect in fiscal                                                                    
     year  2020 that  are  made  in ch.  2,  FSSLA 2019,  as                                                                    
     passed by the Thirty-First  Alaska State Legislature in                                                                    
     the  First Special  Session and  enacted into  law, the                                                                    
     general fund appropriations that  take effect in fiscal                                                                    
     year  2020 that  are  made  in ch.  3,  FSSLA 2019,  as                                                                    
     passed by the Thirty-First  Alaska State Legislature in                                                                    
     the  First Special  Session and  enacted into  law, the                                                                    
     general fund appropriations that  take effect in fiscal                                                                    
     year 2020  that are made in  a version of HB  2001 or a                                                                    
     similar  bill, as  passed  by  the Thirty-First  Alaska                                                                    
     State  Legislature  and  enacted   into  law,  and  the                                                                    
     general fund appropriations made in ch. 6, SLA 2018?"                                                                      
Representative Tilton indicated  that the section continued,                                                                    
and she  would not read  it in  its entirety. She  wanted to                                                                    
better understand the meaning of Section 17(b).                                                                                 
3:28:43 PM                                                                                                                    
PAUL LABOLLE,  STAFF, REPRESENTATIVE NEAL  FOSTER, responded                                                                    
that the section was deficit  filling language that was used                                                                    
in almost every appropriations  bill. The language needed to                                                                    
appear  in one  bill referencing  every appropriations  bill                                                                    
rather  than  being  in   multiple  pieces  of  legislation.                                                                    
Otherwise,  if  there  was  a  deficit  and  the  associated                                                                    
appropriations bill was not  listed, appropriations from the                                                                    
bill could not be filled with CBR funds.                                                                                        
Representative Tilton  asked if the language  would apply to                                                                    
any  appropriation  bill that  was  brought  forward in  any                                                                    
timeframe.   Mr.   Labolle    responded   that,   based   on                                                                    
conversations with Legislative Legal  Services, the bill had                                                                    
to be substantively  similar to the bill that  passed or was                                                                    
introduced.  He clarified  he was  speaking of  the dividend                                                                    
bill that  was introduced. By  including the language,  if a                                                                    
dividend bill  passed and  there was  a deficit,  money from                                                                    
the CBR could be used to  pay part of the deficit that would                                                                    
would go to fund the remaining portion of the dividend.                                                                         
Representative  Tilton asked  if the  language captured  any                                                                    
similar appropriation bill in  the future. She suggested the                                                                    
language would allow  funds to be used from  the CBR without                                                                    
the legislature  necessarily knowing  the bill.  Mr. Labolle                                                                    
deferred  to  Legislative  Legal Services  but  offered  the                                                                    
reason  for  its  inclusion.  He  stated  the  language  was                                                                    
specifically  included to  capture the  dividend legislation                                                                    
that was before the body in the current special session.                                                                        
Representative  Tilton  asked  why  language  would  not  be                                                                    
included in  the dividend bill  rather than the  bill before                                                                    
the  committee. Paul  Labolle responded  that  the bill  was                                                                    
created  with  standard  structure  which  was  to  put  all                                                                    
deficit filling  language in one  vehicle and  reference all                                                                    
appropriation bills that would be affected.                                                                                     
Representative Tilton  asked to here from  Legislative Legal                                                                    
Services regarding  the deficit language.  Co-Chair Johnston                                                                    
stated  that  Mr. Teal  could  respond  while the  committee                                                                    
attempted  to get  someone from  Legislative Legal  Services                                                                    
online.  Representative Tilton  was fine  with hearing  from                                                                    
Mr. Teal but wanted to  hear from Legislative Legal Services                                                                    
as well.                                                                                                                        
3:32:27 PM                                                                                                                    
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
indicated there could  be language that specified  a date to                                                                    
narrow  the   application  of   the  deficit   language.  He                                                                    
acknowledged the  complexity of  the section and  provided a                                                                    
simpler explanation.  He relayed that the  language restated                                                                    
the name of  each bill twice. It could just  as easily read,                                                                    
"All bills passed by the  31st Legislature before August 1st                                                                    
are  covered." He  went on  to explain  that the  reason for                                                                    
such  a  sideboard  was  to   limit  the  possible  scenario                                                                    
Representative  Tilton referenced.  If  a supplemental  bill                                                                    
passed  in January  2020 and  applied to  2020, the  current                                                                    
language  would  capture  the   deficit  language,  and  any                                                                    
deficits would be funded with  CBR monies. He reiterated his                                                                    
suggestion to  include a date  which provided  a protection.                                                                    
Specific bills had to be  identified to avoid the problem of                                                                    
future bills creating much larger draws.                                                                                        
Representative  Tilton  referred  to the  headroom  of  $250                                                                    
million in Section 17(c). She  thought the amount was larger                                                                    
than in previous bills. She  wanted to better understand why                                                                    
headroom was needed as well as deficit fill.                                                                                    
Co-Chair  Johnston responded  that the  amount was  included                                                                    
for several  reasons. The  first reason had  to do  with the                                                                    
fire  season Alaska  experienced  in the  current year.  The                                                                    
second  reason  was  that  it   appeared  the  inventory  of                                                                    
earthquake damage  had not been completed.  She also brought                                                                    
up the  question of whether  the state could  obtain waivers                                                                    
from the  federal government for  Medicaid cuts.  She wanted                                                                    
to  make sure  that the  funds  were available  in case  the                                                                    
waivers could not be obtained.  She detailed that holding up                                                                    
a supplemental placed  many small businesses at  risk of not                                                                    
getting paid.  Therefore, the committee decided  to make the                                                                    
amount larger in the current year.                                                                                              
Representative   Tilton  noted   that   both  the   headroom                                                                    
provision in Section  17(c) and the deficit  fill in Section                                                                    
17(b). She did not recall ever  seeing both in one bill. She                                                                    
thought  it  was  a  policy   call.  She  wanted  to  better                                                                    
understand  the difference  between them.  Co-Chair Johnston                                                                    
replied that  one had  to do with  cash management,  and the                                                                    
other was to address the  supplemental bill. She invited Mr.                                                                    
Labolle to comment.                                                                                                             
Mr. Labolle concurred  with Co-Chair Johnston's explanation.                                                                    
He added that the deficit  filling language in Section 17(b)                                                                    
had to do  with appropriations the legislature  made. It was                                                                    
written  tightly and  referenced  only appropriations  bills                                                                    
that  the  section  would  affect.  He  continued  that  the                                                                    
headroom was for  things the legislature was  unaware of for                                                                    
future bills  that would  be passed  by the  legislature. He                                                                    
noted that  the deficit  filling language would  take affect                                                                    
automatically.  The headroom  in Section  17(c) required  an                                                                    
Co-Chair Johnston asked Representative  Tilton to repeat her                                                                    
question  for Legislative  Legal  Services,  as someone  was                                                                    
online  to answer  questions.  She indicated  Representative                                                                    
Gabrielle LeDoux had joined the meeting.                                                                                        
Representative Tilton indicated her  question had to do with                                                                    
Section  17(b) on  page  24. She  wanted  to understand  the                                                                    
language and how it would  affect future funding. It was her                                                                    
understanding from  listening to Mr. Teal  that the language                                                                    
would  allow the  funding of  any future  bills. She  wanted                                                                    
Legislative Legal Services to weigh in on the issue.                                                                            
3:38:16 PM                                                                                                                    
MEGAN MEGAN  WALLACE, DIRECTOR, LEGISLATIVE  LEGAL SERVICES,                                                                    
explained   she  was   cut  off   and   missed  Mr.   Teal's                                                                    
perspective.  However, she  heard Mr.  Labolle's explanation                                                                    
regarding  the deficit  filling  language  and the  headroom                                                                    
3:38:56 PM                                                                                                                    
AT EASE                                                                                                                         
3:39:50 PM                                                                                                                    
Ms.  Wallace explained  that  the  deficit filling  language                                                                    
would  cover   the  appropriations   already  made   by  the                                                                    
Legislature in  the operating,  mental health,  capital, and                                                                    
education funding bill passed in  2018 along with HB 2001 or                                                                    
a  similar   bill  that  was   passed  by   the  legislature                                                                    
presumably  anytime before  the 31st  Legislature concluded.                                                                    
She offered  that any other  additional bills passed  by the                                                                    
legislature  that had  appropriations  that  took effect  in                                                                    
FY 20  would   be  funded  through  the   headroom  section,                                                                    
Section 17(c).                                                                                                                  
Representative Tilton  noted the reference  to HB 2001  or a                                                                    
similar  bill.  She  wondered  if   a  similar  bill  was  a                                                                    
committee substitute of  HB 2001 or whether it  could be any                                                                    
appropriation bill throughout the 31st Legislative Session.                                                                     
Ms.  Wallace responded  that the  language stated  it was  a                                                                    
version of  HB 2001  or a similar  bill. The  language would                                                                    
allow for any committee substitute  that was introduced or a                                                                    
similar   appropriation   bill   that  was   compatible   or                                                                    
comparable to  the appropriation  in a  version of  HB 2001.                                                                    
She  reported there  being  versions of  HB  2001 that  were                                                                    
general  appropriation bills.  A  future appropriation  bill                                                                    
would fit within the subject.                                                                                                   
Representative  Josephson   understood  that   the  headroom                                                                    
appropriation was  as much as  $500 million in  other years.                                                                    
He asked  if the  state had experienced  headroom in  such a                                                                    
large sum.                                                                                                                      
Mr. David Teal responded that  the headroom was an estimate.                                                                    
It  had been  as low  as $100  million and  as high  as $500                                                                    
million depending  on what leadership  believed the  risk of                                                                    
supplemental   funding  might   be.   Similarly,  what   was                                                                    
currently  Section (b)  did not  list any  bills. It  stated                                                                    
that if  there was  a deficit, it  would be  filled. Section                                                                    
17(b) referred to appropriations  that had already passed or                                                                    
would pass  soon (as  in the  case of  HB 2001).  It assumed                                                                    
that the  budget was  balanced at the  time. It  covered the                                                                    
possibility of revenue being less  than expected putting the                                                                    
state  into a  deficit  -  it was  the  reason the  language                                                                    
contained, "If  revenue is less  than appropriated".  He was                                                                    
aware  that it  used  to  apply when  the  bill was  passed.                                                                    
Presently, it  did not, and the  deficit would automatically                                                                    
be  filled from  the CBR.  The headroom  was for  unforeseen                                                                    
circumstances.  The  state  expected  to  have  supplemental                                                                    
needs,  although  it was  difficult  to  know what  the  the                                                                    
amount would be.                                                                                                                
3:44:44 PM                                                                                                                    
Representative Merrick  stated she was confused,  noting the                                                                    
co-chair's comments  that the bill was  essentially the same                                                                    
bill that  was voted  on in  the prior month  - a  bill that                                                                    
failed to pass because the CBR  vote did not pass. She asked                                                                    
why  the legislature  was  reconvened to  take  up the  same                                                                    
failed  bill.  Co-Chair Johnston  responded  that  it was  a                                                                    
policy call.  Some legislators were concerned  about the CBR                                                                    
sweep, public safety, education, highways, and airports.                                                                        
Representative Merrick responded that  she came to Juneau to                                                                    
work  on a  compromise, but  she did  not view  offering the                                                                    
same piece of legislation as a compromise.                                                                                      
Sullivan  Leonard echoed  the  sentiments of  Representative                                                                    
Merrick. She  also came to  Juneau to work on  a compromise.                                                                    
However, she did  not see the current bill  as a compromise.                                                                    
She  responded to  comments about  the  bill being  critical                                                                    
legislation but  noted there  were pieces  of the  bill that                                                                    
funded  carpet  repair  and swimming  pools.  She  felt  the                                                                    
legislature was going backwards.  She echoed her colleague's                                                                    
comments   regarding  the   deficit   filling  language   in                                                                    
Section 17. She surmised the passing  of the bill would bind                                                                    
a CBR vote in some  future appropriation bill. She concluded                                                                    
that members  were being forced to  vote one way based  on a                                                                    
bill  that  might  come  before  the  legislature.  She  was                                                                    
disgruntled with the bill.                                                                                                      
Representative Knopp  stated that  no one  was bound  to any                                                                    
vote. He further clarified that  what failed last time was a                                                                    
funding  source vote,  rather than  the individual  items in                                                                    
the bill. He  indicated the governor's crime  package was in                                                                    
the  bill. If  members chose  not to  support the  bill, the                                                                    
crime  package   would  not  be   funded.  He   referred  to                                                                    
Section 18,  line 27  on page  25. He  asked if  the section                                                                    
contained  repeal language  for the  population trigger  for                                                                    
the  Palmer  Correctional  Facility.  Mr.  Irvine  responded                                                                    
Representative Knopp commented that  the repeal language was                                                                    
in the  original capital budget  bill [SB 19].  However, the                                                                    
language was not  in the governor's bill  when he introduced                                                                    
the  last version,  SB 2002.  He questioned  why the  repeal                                                                    
language was in the bill.                                                                                                       
Paul  Labolle  stated  there  was  a  structural  difference                                                                    
between the capital budget appropriations  that were put out                                                                    
by  the  governor and  the  repealers  from what  passed  in                                                                    
SB 19. The  Governor repealed the sections  of language that                                                                    
addressed the crime  bill and reenacted them  in the numbers                                                                    
section. The  Senate left  the structure  intact from  SB 19                                                                    
that reopened the Palmer  Correctional Facility limiting the                                                                    
funding  to only  its reopening.  Also, only  the population                                                                    
triggers  were  removed based  on  population  at points  of                                                                    
3:49:48 PM                                                                                                                    
Co-Chair Foster responded to  earlier comments about hearing                                                                    
the bill again. He stated  that Alaskans had spoken loud and                                                                    
clear that they  wanted to leverage federal  funds for roads                                                                    
and highways. They did not  want to leave $1 billion dollars                                                                    
on the  table for other  states to access. He  mentioned $12                                                                    
million  for  village safe  water  that  would leverage  $52                                                                    
million in federal  funds. He also had  a question regarding                                                                    
the  reverse sweep.  He specified  that  if the  legislature                                                                    
were to achieve the reverse  sweep, it would restore funding                                                                    
to  the  PCE  Program  and the  Higher  Education  Fund.  He                                                                    
continued  that  without  the  reverse  sweep  thousands  of                                                                    
Alaskan students  across the state  would not  receive their                                                                    
Co-Chair  Foster  also  noted  the PCE  fund  would  not  be                                                                    
recapitalized  without the  reverse sweep.  He was  aware of                                                                    
other  options  such  as  funding the  program  for  1  year                                                                    
through undesignated  general funds (UGF). He  was concerned                                                                    
that if  the state  did not recapitalize  the fund  it would                                                                    
not  be available  in  the following  year.  The Power  Cost                                                                    
Equalization  Program  was  created  to  bring  a  level  of                                                                    
equality  to rural  communities  in terms  of energy  costs.                                                                    
Currently, the  proposal being considered was  to strip away                                                                    
the entire  fund of  $1 billion. He  asked what  other funds                                                                    
would be affected by the lack  of a reverse sweep that might                                                                    
compromise  communities.  He was  aware  of  the AMHS  being                                                                    
affected along  with other  items. He  asked Mr.  Labolle to                                                                    
Mr. Labolle responded that he  recently learned the Division                                                                    
of Occupational  Licensing carried  a balance every  year to                                                                    
keep their yearly fees at a  flat rate rather than having to                                                                    
fluctuate them  based on  the number of  cases in  any given                                                                    
year.  If  the balance  was  not  swept, fees  would  change                                                                    
yearly. He  suggested that not  only were  there anticipated                                                                    
problems  without   the  reverse   sweep,  there   would  be                                                                    
unanticipated problems which he  thought should be cause for                                                                    
concern. The  legislature would not know  the dollar amounts                                                                    
or  the demand  and  would not  have  the information  until                                                                    
after FY 20.                                                                                                                    
Co-Chair  Foster was  looking for  other examples  of things                                                                    
that would  be lost if  the reverse sweep was  not achieved.                                                                    
He mentioned  the PCE Fund,  the Higher Education  Fund, the                                                                    
Marine  Highway Fund,  and the  Vessel Replacement  Fund. He                                                                    
noted  that the  PCE Fund  had never  been swept  before. It                                                                    
would  be a  major policy  change that  would affect  84,000                                                                    
rural Alaskans. He emphasized how  important the bill was to                                                                    
him and the importance of taking another look at the bill.                                                                      
3:54:58 PM                                                                                                                    
Representative   Josephson   thought   there  had   been   a                                                                    
significant  amount of  education provided  in the  prior 30                                                                    
days regarding  the reverse sweep  issue. He heard  from the                                                                    
Office of  Management and Budget  (OMB) one of  the benefits                                                                    
of sweeping $2 billion was that  the state paid down the CBR                                                                    
debt.   He   reported   never  receiving   a   communication                                                                    
indicating any anxiety about the  sweep. He thought it was a                                                                    
legal duty,  but not an  interest-bearing duty. He  also saw                                                                    
that  the  concern  over  the loss  of  matching  funds  had                                                                    
changed. He wondered if someone  could speak to the issue of                                                                    
population management.  The prior  language was  designed to                                                                    
steer  the  administration   towards  refilling  the  Palmer                                                                    
Correctional Center  and receiving  money for  that purpose.                                                                    
He reported some anxiety about  sending Alaskan prisoners to                                                                    
other  states  to  contract prisons.  He  asked  someone  to                                                                    
comment on potential obstacles.                                                                                                 
Mr.  Labolle  stated  that   the  funding  was  specifically                                                                    
delineated for  opening the Palmer Correctional  Center. The                                                                    
structure set  forth in  SB 21  [Legislation passed  in 2018                                                                    
regarding  the  mental   health  budget  appropriation]  was                                                                    
removed  in  the governor's  original  version  of the  bill                                                                    
[SB 2002].  He suggested  the  original  version would  have                                                                    
allowed for the  funds to be used  for population management                                                                    
and provided  full authority to  send Alaskan  prisoners out                                                                    
of state.                                                                                                                       
Representative  Josephson  asked  how  the  absence  of  the                                                                    
language did the opposite and  kept prisoners in Alaska. Mr.                                                                    
Labolle responded  that it was  because the language  was in                                                                    
existing  law  with  the  passage  of SB  18  [SB  19].  The                                                                    
portions containing  the language were not  vetoed. The only                                                                    
item remaining  in question in  SB 18  [SB 19] was  the fund                                                                    
source since the funds came  from the PCE Fund. However, the                                                                    
reverse sweep in  the current bill would fix  the issue from                                                                    
SB 19.                                                                                                                          
Representative   Tilton  referenced   discussions  regarding                                                                    
funding  for  the  Higher  Education  Fund  and  Washington,                                                                    
Wyoming,  Alaska, Montana,  and Idaho  (WWAMI). She  thought                                                                    
the  original  version  of SB  2002  had  already  addressed                                                                    
funding for both  items. She asked if she  was correct. Paul                                                                    
Labolle   asked  Representative   Tilton   to  restate   her                                                                    
question. Representative  Tilton reported that  the original                                                                    
version of SB  2002 was funded entirely  with general funds.                                                                    
She believed  the issue of  paying out the  Higher Education                                                                    
Fund, the WWAMI  fund, and the PCE payments  were taken care                                                                    
of in SB 2002 using general funds.                                                                                              
3:59:16 PM                                                                                                                    
Paul Labolle replied, "The answer  to that is, kind of." The                                                                    
bill contained  language stipulating  that funds  that would                                                                    
have been  funded by fund  sources that were swept  would be                                                                    
replaced with general funds. However,  the bill, as written,                                                                    
created  a  deficit  of  about  $100  million.  Although  it                                                                    
provided  a paper  payment of  funds, the  bill contained  a                                                                    
budget hole.                                                                                                                    
Representative  Tilton asked  if  there could  have been  an                                                                    
opportunity to amend  SB 2002 to fill the  hole with another                                                                    
account  allowing the  programs  to be  funded. Mr.  Labolle                                                                    
replied that the bill reflected  the amendments agreed to by                                                                    
the Senate to address the deficit.                                                                                              
Co-Chair  Foster thought  the  issue was  that the  governor                                                                    
submitted the original version of  SB 2002, although it paid                                                                    
for PCE for  1 year with UGF, without the  reverse sweep. He                                                                    
explained that normally the PCE  program was funded from the                                                                    
earnings of the  $1 billion PCE Fund. He  was concerned that                                                                    
if the fund  was no longer there, there would  be no funding                                                                    
for the program the following  year and into the future. The                                                                    
Power  Cost Equalization  Fund had  been in  existence since                                                                    
the '80s. He  was concerned for the future  existence of the                                                                    
Representative LeBon  asked Mr. Teal to  discuss the concept                                                                    
of  the  reverse  sweep  and the  time  sensitivity  of  the                                                                    
legislature acting.  He thought the issue  was reason enough                                                                    
to be  in Juneau.  He mentioned  hearing that  3 to  4 dozen                                                                    
accounts  would  be affected  by  not  enacting the  reverse                                                                    
sweep with an impact of about $2 billion.                                                                                       
Mr.   Teal  thought   it  would   be   easiest  to   address                                                                    
Representative LeBon's  question in  the context  of timing.                                                                    
He  used  the Vaccine  Assessment  Fund  as an  example.  He                                                                    
suggested  that   although  not  doing  the   reverse  sweep                                                                    
immediately  might  not be  an  issue  currently, access  to                                                                    
money would be imperative if  there were a measles outbreak.                                                                    
Some of the funds that  were swept might not become problems                                                                    
until  the  end  of  the   fiscal  year.  He  mentioned  the                                                                    
Department  of  Labor  and Workforce  Development'  Worker's                                                                    
Safety Fund  which used the  balance and was spending  at an                                                                    
unsustainable  rate. By  sweeping  away the  balance in  the                                                                    
current year,  they would have to  reduce expenditures. Some                                                                    
of the  effects could be long-term,  some were hypothetical,                                                                    
some were certain, and some could happen very early.                                                                            
Mr. Teal  continued that  some people  were deciding  not to                                                                    
attend college  because of the  lack of a reverse  sweep and                                                                    
the  negative  impact  on  the  Higher  Education  Fund.  He                                                                    
recommended acting quickly to  reverse the sweep. He thought                                                                    
there could be retroactive payments  for the PCE Fund unlike                                                                    
people  immediately  having  to  decide  whether  to  go  to                                                                    
college. There  were several unanswered  questions regarding                                                                    
the  sweep. He  thought the  Higher Education  Fund was  the                                                                    
best example of a reason to  reverse the sweep as quickly as                                                                    
possible due  to the monetary  impact, the number  of people                                                                    
affected, and timing being critical.                                                                                            
4:05:37 PM                                                                                                                    
Representative Merrick  asked if there were  projects in the                                                                    
committee  substitute that  were  funded from  the CBR  that                                                                    
were traditionally funded from  the general fund. Mr. Irvine                                                                    
responded, "Yes."                                                                                                               
Representative  Merrick asked  for  a list  of projects  and                                                                    
their  dollar amounts.  Mr. Labolle  responded that  all the                                                                    
appropriations  were  funded with  the  CBR  apart from  the                                                                    
projects  Mr.   Irvine  noted  were  funded   otherwise.  He                                                                    
suggested looking at the roll-up  portion of each section of                                                                    
the bill.  He pointed to  the projects listed in  Section 1,                                                                    
items which  would be receiving  legislative appropriations.                                                                    
He indicated  the roll-up section  began on Section  2, page                                                                    
8.  Section 2  listed  the funding  per  department for  the                                                                    
projects. Most of the projects  would be funded via the CBR.                                                                    
Page  9  contained  the  second  part  of  Section  2  which                                                                    
provided  the  total  agency   budget  totaling  about  $161                                                                    
Representative Merrick  was trying  to get  an idea  of what                                                                    
was  traditionally funded  through  UGF  that was  presently                                                                    
being changed to CBR funding.                                                                                                   
Representative Tilton wanted to  ask about details regarding                                                                    
some of the  projects. She referred to page 4,  line 5 under                                                                    
DOC.  She pointed  to the  Lemon Creek  Correctional Center.                                                                    
The wording in the current  bill was different from what was                                                                    
in the capital bill. She  explained that the language in the                                                                    
capital  bill  made  the  appropriation  contingent  on  the                                                                    
implementation  of a  prison industry  laundry program.  She                                                                    
queried the change.  Mr. Labolle stated the  Senate chose to                                                                    
remove the language and the targets.                                                                                            
Representative Tilton referred  to page 7, line  5 under the                                                                    
University   of   Alaska.   She   noted   a   $2.5   million                                                                    
appropriation for  maintenance, renovation, and  repair. She                                                                    
asked if the amount was in  addition to the amount in SB 19.                                                                    
She asked  for the total appropriation.  Mr. Labolle replied                                                                    
that  the amount  in the  CS for  SB 2002  was an  identical                                                                    
amount   to   the  amount   that   was   vetoed  in   SB 19.                                                                    
Representative Tilton appreciated the clarification.                                                                            
4:10:17 PM                                                                                                                    
Representative  Josephson had  a  comment  on something  Mr.                                                                    
Teal  mentioned  about  hypothetical and  actual  harm  that                                                                    
could  be caused  by  the  failure of  a  reverse sweep.  He                                                                    
indicated  that  the  State   University  of  New  York  was                                                                    
advertising and directing a campaign  to Alaskan students to                                                                    
attend  school in  New York.  Alaskans could  not use  their                                                                    
Alaska Performance  Scholarships because  the monies  had to                                                                    
be used in  Alaska. He thought the dominos  were falling and                                                                    
the process was competitive.  He opined that the legislature                                                                    
was trying  to keep  the dominos from  falling, part  of the                                                                    
importance of the reverse sweep.                                                                                                
Representative Knopp  asked Mr. Teal about  a discrepancy in                                                                    
the available funding when the  governor's budget was rolled                                                                    
out.  He recalled  the  Legislative  Finance Division  (LFD)                                                                    
reporting a  discrepancy of about  $100 million.  The Office                                                                    
of Management  and Budget was  still working on  numbers. He                                                                    
asked about  the amount of  vetoes restored in  the Senate's                                                                    
version  of the  budget.  He referred  to  the total  agency                                                                    
funding  on page  8. He  asked if  the amount  reflected the                                                                    
amount of the draw from the  CBR. He asked for the total for                                                                    
the  entire  bill.  Mr.  Irvine  responded  that  the  total                                                                    
funding of the bill from the CBR was $178,951,800.                                                                              
Representative  Wool asked  for the  non-CBR funding  total.                                                                    
Mr. Irvine replied that it was $4 million.                                                                                      
Representative  Wool surmised  the  total  was roughly  $180                                                                    
million similar to HB 2002  which totaled approximately $170                                                                    
million. He spoke of discovering  new funds daily that would                                                                    
be negatively  impacted without a reverse  sweep. He thought                                                                    
it  was reflected  in the  large difference  between current                                                                    
and  previous  discussions.  He   wondered  about  a  figure                                                                    
related to the reverse  sweep. He mentioned the Occupational                                                                    
Licensing Fund  and other various  funds. He  also mentioned                                                                    
the PCE Fund which had a  balance of close to $1 billion. He                                                                    
asked  Mr.  Teal  how  he accounted  for  the  unknowns.  He                                                                    
requested an amount for the reverse sweep funds.                                                                                
4:14:26 PM                                                                                                                    
Mr. Teal  responded that LFD put  some spreadsheets together                                                                    
on  the  topic  Representative  Wool was  asking  about.  He                                                                    
reported that  the number  was not  firm. He  explained that                                                                    
when  the  number  was  put   together  there  were  various                                                                    
categories such as PCE funded  by an endowment. The fund ran                                                                    
off earnings. He argued that  if the PCE portfolio was taken                                                                    
away sweeping the  balance of the fund, the  earnings of the                                                                    
fund during  FY 20 would  be zero.  There would be  no money                                                                    
for  PCE,  and  money  could  not  be  recovered.  The  same                                                                    
circumstance  applied to  the Higher  Education Fund.  There                                                                    
would be no interest earnings on a zero balance portfolio.                                                                      
Mr. Teal  continued that other funds  collected money during                                                                    
the year  such as Occupational Business  Licensing, or Spill                                                                    
Prevention and  Response. Many could  be affected  by taking                                                                    
their  balance. However,  the  funds  including the  Tobacco                                                                    
Fund, the  Alcohol Fund, and the  Marijuana Fund regenerated                                                                    
new money during the year.  A fund might generate more money                                                                    
that it  spent. In  which case,  there would  be no  harm in                                                                    
sweeping such a fund.                                                                                                           
Mr. Teal  continued that many  of the funds spent  more than                                                                    
they would  take in. The real  impact of the sweep  would be                                                                    
in the last  few months of a fiscal year  when funds ran out                                                                    
of money. He  was uncertain when the fund would  run out and                                                                    
by  how much.  The  Legislative Finance  Division made  some                                                                    
guesses and came up with  just over $120 million. The Office                                                                    
of  Management and  Budget went  through a  similar exercise                                                                    
and derived  $115 million  as they  testified in  the Senate                                                                    
Finance   Committee.  He   concluded,  "Close   enough."  He                                                                    
remarked  the [reverse  sweep]  amount  was substantial.  He                                                                    
reported that  $85 million  of the impact  was from  the PCE                                                                    
Fund and the  Higher Education Fund. He told  of the Vaccine                                                                    
Fund being swept  for $21 million. It was  difficult to know                                                                    
how much money might be  needed for vaccines, and the amount                                                                    
was an educated  guess. He was comfortable  with an estimate                                                                    
of $115 million  since LFD and OMB  calculated their numbers                                                                    
independently and  were within $5 million to  $10 million of                                                                    
each other.                                                                                                                     
Representative  Wool referred  to  the  endowment funds.  He                                                                    
wondered about the  effects of paying for  PCE ($30 million)                                                                    
out of  the general fund.  He suggested more  pressure would                                                                    
be placed  on the  general fund  because of  the lack  of an                                                                    
endowment income. He asked if he was accurate.                                                                                  
Mr. Teal responded  that regarding the PCE Fund,  as long as                                                                    
there was  an endowment,  there would  be a  certain funding                                                                    
stream.  The  Power  Cost   Equalization  Program  would  be                                                                    
competing for  general funds without an  endowment. It would                                                                    
be difficult to know if  the program would last being funded                                                                    
with  UGF. He  thought Co-Chair  Foster could  speak to  the                                                                    
reason there  was a PCE endowment.  It had to do  with urban                                                                    
and rural subsidies.                                                                                                            
Representative  Wool referenced  the impact  of jeopardizing                                                                    
the Higher  Education Fund.  He received  a call  earlier in                                                                    
the day  from the local  Fairbanks newspaper asking  when he                                                                    
thought the issue would be  resolved. The newspaper reported                                                                    
students wanting  to go  to school which  was starting  in a                                                                    
month.  He  spoke  to  the negative  ripple  effect  of  not                                                                    
resolving the  issue. He underlined the  time sensitivity of                                                                    
resolving the reverse sweep question.                                                                                           
4:20:43 PM                                                                                                                    
Co-Chair Foster  relayed that  the prior  governor's version                                                                    
of HB 2002,  now SB 2002, proposed funding PCE  with UGF. He                                                                    
did not believe  the same was true for  the higher education                                                                    
scholarships. He asked for  clarification. He suggested that                                                                    
if  it was  not the  case,  it would  negatively affect  the                                                                    
WWAMI Program,  the program that  helped students  in Alaska                                                                    
to pursue a medical degree.                                                                                                     
Mr. Labolle's understanding was  that the general fund would                                                                    
backfill  any fund  that was  swept for  one year.  He noted                                                                    
that if  PCE was  swept into the  CBR, the  CBR's investment                                                                    
portfolio  would change.  He informed  members that  the CBR                                                                    
was managed for  liquidity. It was expected to  be spent and                                                                    
could  not be  invested at  a higher  level. He  thought the                                                                    
percentage was  between 2  to 3 percent.  The PCE  Fund, the                                                                    
balance  of which  was not  expected to  be spent,  could be                                                                    
invested at a higher rate - between 5 and 7 percent.                                                                            
Co-Chair  Foster  suggested  that   the  programs  could  be                                                                    
financed  in  the  current  year with  UGF,  but  a  problem                                                                    
remained. If  the Higher Education  Fund was swept  and went                                                                    
away,  the correlating  programs would  be put  at risk.  He                                                                    
shared the same  concern for the PCE Fund as  he had for the                                                                    
Higher Education Fund.                                                                                                          
Representative Merrick asked if it  was possible to fund the                                                                    
essential programs with time constraints  with UGF and to do                                                                    
the reverse swept later  with legislation. Co-Chair Johnston                                                                    
responded that  the longer  the legislature  delayed dealing                                                                    
with the  matter, the more complicated  the accounting would                                                                    
become. She also pointed out  that the PCE Fund would return                                                                    
less earnings.  Mr. Labolle  agreed with  Co-Chair Johnston.                                                                    
Representative  Merrick thought  her suggestion  could be  a                                                                    
solution in the short-term.                                                                                                     
4:25:24 PM                                                                                                                    
Representative  Tilton referred  to  Section 12  on page  18                                                                    
regarding  the funding  for  Mt.  Edgecombe boarding  school                                                                    
maintenance and  operations. She asked what  the funding was                                                                    
for. Mr.  Irvine replied  that the  provision, added  by the                                                                    
Senate, stated that  if Mt. Edgecombe was going  to sell off                                                                    
any  of  its lands,  the  proceeds  would  be used  for  the                                                                    
maintenance and operations of the school.                                                                                       
Representative  Tilton  mentioned  the pool  and  wanted  to                                                                    
clarify the  use of the  funds. She  moved on to  Section 13                                                                    
containing  a  reappropriation  for the  Flat  Top  Mountain                                                                    
Trail Cleanup  Pilot Project.  The appropriation  was coming                                                                    
from  the  Department  of  Military  and  Veterans  Affairs'                                                                    
deferred   maintenance  project:   Military  Youth   Academy                                                                    
deferred maintenance  renewal and replacement.  She wondered                                                                    
if it was  important for the Military Youth  Academy to have                                                                    
the  funds reappropriated  back to  them. She  asked if  the                                                                    
funding started as UGF. She  also wanted to more information                                                                    
on the project being funded.  Mr. Labolle responded that the                                                                    
money was  being reappropriated  from a closed  project, the                                                                    
balance of which was lapsing.                                                                                                   
Representative Tilton  asked Mr.  Labolle to  better explain                                                                    
the Flat Top  Mountain Trail Cleanup Pilot  Project. She was                                                                    
concerned  about  the  project  being a  pilot  project  and                                                                    
future  funding to  maintain it.  Mr. Irvine  explained that                                                                    
the  project encompassed  placing  receptacles  on Flat  Top                                                                    
Mountain so  that individuals that  were hiking had  a place                                                                    
to deposit their dog's poop.  Kids would be employed to pick                                                                    
up  the trash  in the  receptacles. There  was concern  that                                                                    
fecal matter was getting into streams creating pollution.                                                                       
Representative Tilton  questioned whether  any consideration                                                                    
had been  given to  future funding of  the project  since it                                                                    
was  currently a  pilot project.  Co-Chair Johnston  replied                                                                    
that  the  Senate had  indicated  that  if the  project  was                                                                    
successful and  seemed worthy, they would  be considering it                                                                    
for future years. She thought  the Senate had benchmarks for                                                                    
measuring the success of the program.                                                                                           
Representative Tilton  referred to Section 16  regarding the                                                                    
Alaska  Housing Finance  Corporation fund  balances for  the                                                                    
listed projects.  The balances were being  appropriated to a                                                                    
parking garage  for future use  and to be appropriated  in a                                                                    
future session. She  wondered why the monies  were not being                                                                    
placed  into the  CBR to  be used  for funding  some of  the                                                                    
state's current deficit.                                                                                                        
4:30:01 PM                                                                                                                    
Co-Chair Johnston  thought the issue  was a policy  call. It                                                                    
was  a common  practice  used for  the  past several  years,                                                                    
because  of the  state's limited  funds. Matching  funds for                                                                    
the following  year would be  a consideration. She  spoke of                                                                    
an issue  in the current  year of  getting funds out  of the                                                                    
CBR. She  thought any federal  matching funds that  could be                                                                    
reappropriated should be saved.                                                                                                 
Representative Tilton appreciated wanting  to make sure that                                                                    
the  state  had  funds available  for  reappropriations  for                                                                    
federal highways.  She wondered why the  funds weren't being                                                                    
used with the state's current deficit.                                                                                          
Representative Josephson  offered a comment relative  to the                                                                    
PCE Fund and  the Higher Education Fund.  He suggested that,                                                                    
although  the funds  were not  technically dedicated  funds,                                                                    
they could be  used for any purpose by  any legislature. The                                                                    
dedicated  funds the  state had  were  from the  territorial                                                                    
period.  He surmised  the funds  were an  expression of  the                                                                    
continued  belief  the  programs  were worthy  and  did  not                                                                    
believe they should be used for any other purpose.                                                                              
Representative Merrick  referred to  Section 13 on  page 18.                                                                    
She queried  the number  of receptacles  the state  would be                                                                    
receiving  at a  cost of  nearly $35,000.  Mr. Irvine  would                                                                    
have to get back to the committee with the information.                                                                         
Representative  Wool asked  how long  the reverse  sweep had                                                                    
been in place.  Mr. Teal replied, "The sweep  has been going                                                                    
on since  the creation of the  Constitutional Budget Reserve                                                                    
Fund in 1991."  He added that the sweep did  not occur every                                                                    
year. The sweep  only occurred when the state  owed money to                                                                    
the CBR.  He reported that  the state owed money  most every                                                                    
year until the last round of  high oil revenues when the CBR                                                                    
was completely reimbursed. He reported  there being no sweep                                                                    
in  2014,  2015,  and  2016.   The  state  currently  had  a                                                                    
liability to  the CBR of  about $12 billion with  $2 billion                                                                    
cash that  remained in the  fund. He explained that  when an                                                                    
accountant was asked for the  balance of the CBR, they would                                                                    
respond with  a figure  of $14 billion:  $2 billion  in cash                                                                    
and $12  billion in what  the state owed itself.  Every year                                                                    
the state  had an  outstanding liability  to the  CBR, there                                                                    
was a  sweep. Every year a  sweep occurred there was  also a                                                                    
reverse sweep.                                                                                                                  
Representative  Wool clarified  there had  never not  been a                                                                    
reverse sweep when the CBR had been swept.                                                                                      
Sullivan  Leonard relayed  that  in most  of her  experience                                                                    
with  local  and  state entity  budgets,  the  general  fund                                                                    
accounts was used  to pay for all  appropriations first. She                                                                    
asked Mr.  Teal why  the state would  pull from  its savings                                                                    
account  first as  opposed  to paying  the  budget from  the                                                                    
general fund.                                                                                                                   
4:35:06 PM                                                                                                                    
Mr. Teal replied that it could  be done either way. It was a                                                                    
policy  call.  Generally,  that legislature  did  not  spend                                                                    
directly from the CBR. The  legislature spent general funds.                                                                    
Due to the  provisions in Section 13(b), if  the state spent                                                                    
more general  funds than it  had, money  would automatically                                                                    
be drawn  from the CBR.  However, the draw would  be counted                                                                    
as general fund  spending. He continued that  when there was                                                                    
a direct  appropriation from  the CBR  (like the  $3 billion                                                                    
that was placed in the  retirement system) it would not show                                                                    
as  a  general  fund   appropriation.  In  effect,  spending                                                                    
general  funds   which  created  a  deficit   situation  was                                                                    
spending from the  CBR. It did not matter  whether the money                                                                    
was  spent before  being  forced  to draw  from  the CBR  or                                                                    
whether it was spent directly  from the fund. If revenue did                                                                    
not support the state budget,  the money would come from the                                                                    
Representative Merrick  understood the concept Mr.  Teal was                                                                    
explaining.  She  asked  for the  current  balances  of  the                                                                    
general fund and the CBR.  Mr. Teal replied that the general                                                                    
fund  balance was  zero. It  had  to be  zero. The  language                                                                    
regarding  the   deficit  filling  draw  in   Section  13(b)                                                                    
directed the state to draw  the necessary amount of money to                                                                    
fill  the deficit.  The  state had  not  had an  end-of-year                                                                    
general  fund balance  for years.  As  long as  there was  a                                                                    
sweep  and  a deficit  filling  measure  was used,  the  end                                                                    
balance of the general fund had  to be zero. The end balance                                                                    
of  the  CBR  was  slightly  over $2  billion  in  cash  and                                                                    
slightly over $14 billion of state-owed dollars.                                                                                
Co-Chair  Johnston  added  that,  with the  vetoes  and  the                                                                    
structured draw,  the governor  transferred $1  billion back                                                                    
to the Earnings Reserve  Account. The total revenues dropped                                                                    
presenting a problem with the budget.                                                                                           
Representative Wool  asked how to  get the CBR  balance down                                                                    
in  nominal terms.  He wondered  if  the fund  was always  a                                                                    
continually growing fund, or if it got smaller.                                                                                 
4:39:01 PM                                                                                                                    
Mr. Teal  indicated Representative  Wool had  described what                                                                    
happened  accurately. He  explained that  once money  was in                                                                    
the  CBR,  the  fund  would  never  go  below  that  balance                                                                    
including the amount the state  owed. The state was required                                                                    
to repay  what it drew from  the fund. The issue  that would                                                                    
always  arise was  whether  the  CBR had  to  be repaid.  He                                                                    
indicated the answer was,  "No." The constitution envisioned                                                                    
paying the money back with sweeping  funds at the end of the                                                                    
year. The state went from  owing a substantial amount in the                                                                    
mid-2000s to repaying it after  a spike in oil revenues. The                                                                    
amount was fully  repaid to the CBR. At the  time, there was                                                                    
a  decision made  to put  surplus funds  into the  Statutory                                                                    
Budget Reserve (SBR) rather than  the CBR. He explained that                                                                    
any  money  taken from  the  CBR  would  be owed  again.  He                                                                    
reported a current SBR balance of $172 million.                                                                                 
Co-Chair  Foster  returned  to  the idea  of  funding  items                                                                    
affected by the  reverse sweep with UGF and  returning to do                                                                    
the reverse sweep later. He  contemplated why he would allow                                                                    
the sweep  to occur when he  was aware of the  intent of the                                                                    
administration  to  drain  the   PCE  Fund  and  the  Higher                                                                    
Education  Fund. He  did not  see any  potential of  dealing                                                                    
with the reverse sweep later.                                                                                                   
Representative    Merrick   noted    she    was   not    the                                                                    
administration.  Co-Chair  Foster was  aware  Representative                                                                    
Merrick was  not the administration. However,  he knew full-                                                                    
well it  was the  intention of  the administration  to drain                                                                    
the funds, which he would not support.                                                                                          
Rep Ortiz  MOVED to report  CSSB 2002(FIN) out  of Committee                                                                    
with individual recommendations.                                                                                                
Representative Sullivan-Leonard objected.                                                                                       
Representative Sullivan-Leonard spoke  to her objection. She                                                                    
thought  an  opportunity  to   offer  amendments  should  be                                                                    
provided.  There  were  things   in  the  bill  she  thought                                                                    
contained  significant  fluff.  She  had  heard  there  were                                                                    
mission  critical  pieces  to   the  bill  which  she  could                                                                    
appreciate and  support. However,  there several  pieces she                                                                    
could not support. She reiterated  wanting a chance to offer                                                                    
and debate amendments.                                                                                                          
Representative Sullivan-Leonard MAINTAINED her OBJECTION.                                                                       
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Josephson, Knopp, LeBon, Ortiz, Wool, Johnston,                                                                       
OPPOSED: Tilton, Merrick, Sullivan-Leonard                                                                                      
The MOTION PASSED (7/3).                                                                                                        
CSSB 2002(FIN) was REPORTED out of committee with with                                                                          
seven "do pass" recommendations, one "do not pass"                                                                              
recommendation, and two "amend" recommendations.                                                                                
Co-Chair Johnston thanked the people involved in the budget                                                                     
process. She reported the agenda for the following day.                                                                         
4:45:31 PM                                                                                                                    
The meeting was adjourned at 4:45 p.m.                                                                                          

Document Name Date/Time Subjects