Legislature(2021 - 2022)ADAMS 519

03/01/2021 09:00 AM FINANCE

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Audio Topic
09:03:55 AM Start
09:04:47 AM HB69 || HB71
09:04:59 AM Overview: Governor's Fy 22 Budget and 10-year Plan
10:23:42 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
*+ HB 69 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
*+ HB 71 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
Continuation of:
+ Presentation: FY 22 Governor's Budget & TELECONFERENCED
Amendments by
- Neil Steininger, Director, Office of
Management & Budget
- Alexei Painter, Director, Legislative
Finance Div.
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 1, 2021                                                                                            
                         9:03 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:03:55 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster called the House Finance Committee meeting                                                                      
to order at 9:03 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Kelly Merrick, Co-Chair                                                                                          
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Bryce Edgmon                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Andy Josephson                                                                                                   
Representative Bart LeBon                                                                                                       
Representative Sara Rasmussen                                                                                                   
Representative Steve Thompson                                                                                                   
Representative Adam Wool                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Ben Carpenter                                                                                                    
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Neil Steininger, Director, Office of Management and Budget,                                                                     
Office of the Governor                                                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 69     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 69 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 71     APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 71 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
OVERVIEW: GOVERNOR'S FY 22 BUDGET and 10-YEAR PLAN                                                                              
                                                                                                                                
9:04:47 AM                                                                                                                    
                                                                                                                                
Co-Chair Foster reviewed the meeting agenda.                                                                                    
                                                                                                                                
HOUSE BILL NO. 69                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;    making   reappropriations;    making                                                                    
     supplemental   appropriations;  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."                                                                                
                                                                                                                                
HOUSE BILL NO. 71                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive    mental    health    program;    making                                                                    
     supplemental  appropriations;  and   providing  for  an                                                                    
     effective date."                                                                                                           
                                                                                                                                
9:04:55 AM                                                                                                                    
                                                                                                                                
^OVERVIEW: GOVERNOR'S FY 22 BUDGET and 10-YEAR PLAN                                                                           
                                                                                                                                
9:04:59 AM                                                                                                                    
                                                                                                                                
NEIL STEININGER, DIRECTOR, OFFICE  OF MANAGEMENT AND BUDGET,                                                                    
OFFICE  OF THE  GOVERNOR, introduced  himself and  resumed a                                                                    
PowerPoint presentation  he had presented the  previous week                                                                    
titled "State  of Alaska Office  of Management  and Budget,"                                                                    
dated February  24, 2021  (copy on  file). He  had concluded                                                                    
with the Department of Corrections  the previous week (slide                                                                    
12).                                                                                                                            
                                                                                                                                
Representative  Wool noted  the governor's  proposal to  add                                                                    
six  medical positions  at  approximately  $791,000 for  the                                                                    
reopening of  the Palmer Correctional Center.  He stated his                                                                    
understanding that  all other positions  needed to  open the                                                                    
facility,  most  notably  correctional  officers,  had  been                                                                    
funded the previous year; however,  the funding had not been                                                                    
used because there had been  no correctional officers at the                                                                    
time. He asked  for verification that the  funding was still                                                                    
included in the budget.                                                                                                         
                                                                                                                                
Mr. Steininger  confirmed that the positions  had been added                                                                    
into the budget. He explained  that the money added into the                                                                    
budget  "in   those  years"  had  been   necessary  for  the                                                                    
construction  and  maintenance  work   done  on  the  Palmer                                                                    
Correctional Center. There were  some appropriations to fund                                                                    
the work  necessary to  reopen the  facility. He  noted that                                                                    
the facility had  been vacant for some  time; therefore, the                                                                    
funding had been necessary. Going  forward the funding would                                                                    
be used to  hire correctional officers added  to the budget;                                                                    
the position control  numbers (PCNs) had been  added but not                                                                    
filled at the time the decision  had been made to reopen the                                                                    
facility.                                                                                                                       
                                                                                                                                
9:06:49 AM                                                                                                                    
                                                                                                                                
Representative Johnson  noted that she had  previously asked                                                                    
Mr. Steininger when the Palmer  Correctional Center would be                                                                    
open. She asked if he had an answer.                                                                                            
                                                                                                                                
Mr.  Steininger replied  that he  had not  yet received  the                                                                    
information  from the  department and  would follow  up with                                                                    
the information shortly.                                                                                                        
                                                                                                                                
Representative  Rasmussen wondered  why operating  funds had                                                                    
been used for deferred maintenance  and work required to get                                                                    
the  facility  ready  for inmates.  She  asked  why  capital                                                                    
budget funding had not been used.                                                                                               
                                                                                                                                
Mr. Steininger  answered that when  the item had  been added                                                                    
to the budget, part of the idea  was to phase in the cost of                                                                    
reopening the  facility into the  operating budget  in order                                                                    
to avoid  a significant shock to  the budget in the  year it                                                                    
was added.  He stated  that knowing  the operating  cost and                                                                    
that  the money  needed to  be spent  once the  facility was                                                                    
reopened, the administration believed  it was appropriate to                                                                    
add the  funding "in this  manner." He stated that  the item                                                                    
could equally  have been  funded as  a capital  project, but                                                                    
the chosen  funding mechanism had  been an effective  way to                                                                    
fund the work necessary to open the facility.                                                                                   
                                                                                                                                
9:08:39 AM                                                                                                                    
                                                                                                                                
Mr. Steininger  relayed that slides  13 and 14  pertained to                                                                    
the  Department of  Education and  Early Development  (DEED)                                                                    
budget.  Slide   13  showed  the   department's  non-formula                                                                    
budget. He  highlighted that the budget  had been relatively                                                                    
flat over the  past decade in terms of all  funds. There had                                                                    
been  some  declines  in unrestricted  general  funds  (UGF)                                                                    
followed by an  increase in the past couple  of years (shown                                                                    
in  the upper  left graph  in dark  blue). He  pointed to  a                                                                    
large  spike   in  federal  funds  (shown   in  light  blue)                                                                    
representing Coronavirus Aid,  Relief, and Economic Security                                                                    
(CARES) Act funding that DEED  had distributed out to school                                                                    
districts. He  reported that  the CARES  Act had  provided a                                                                    
substantial amount of money that  had been distributed based                                                                    
on  the allocation  through the  department's federal  title                                                                    
programs.                                                                                                                       
                                                                                                                                
Mr. Steininger spoke to significant  FY 22 budget changes in                                                                    
the DEED  non-formula items. He reported  a slight reduction                                                                    
in  the number  of support  staff needed,  travel, and  some                                                                    
redundant expenditures, which would  save just over $100,000                                                                    
in  UGF  and eliminate  one  PCN.  Additionally, there  were                                                                    
several positions  within Alaska State  Libraries, Archives,                                                                    
and Museums  that had been  vacant for quite some  time that                                                                    
DEED did not intend to  fill. He elaborated that eliminating                                                                    
the  one  full-time  position and  two  part-time  positions                                                                    
would  save   about  $180,000.   The  department   had  also                                                                    
discovered it  had a redundant data  assessment contract. He                                                                    
expounded  that as  the  department had  looked  at data  it                                                                    
received from school districts  on student achievement, DEED                                                                    
determined the work could be  done in-house. He relayed that                                                                    
the  elimination of  the contract  would save  approximately                                                                    
$230,000  with no  reduction in  the  actual data  analysis.                                                                    
There  were  other  savings of  about  $121,000  related  to                                                                    
travel reductions  and increases in virtual  work. He stated                                                                    
that  DEED had  done  a lot  to  increase its  technological                                                                    
communications presence to work with school districts.                                                                          
                                                                                                                                
9:11:09 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz stated  that  the  governor had  requested                                                                    
increased  funds in  FY 21  to  enable to  the State  School                                                                    
Board to  meet more  frequently in person.  He asked  if the                                                                    
travel reductions  included the  board. He  wondered whether                                                                    
the  board  had  moved  away  from the  plan  to  meet  more                                                                    
frequently in person.                                                                                                           
                                                                                                                                
Mr. Steininger  deferred specifics to the  department. Given                                                                    
that the board  had met remotely during COVID,  it had found                                                                    
it may be  able to increase the number of  meetings, but the                                                                    
additional meetings  would be virtual.  He stated  that some                                                                    
board members lived  in remote areas without  good access to                                                                    
broadband; therefore, there was still  a need for travel for                                                                    
in  person meetings.  He  noted the  board  could meet  more                                                                    
frequently as it embraced videoconferencing.                                                                                    
                                                                                                                                
Vice-Chair Ortiz asked for  verification that Mr. Steininger                                                                    
did  not  believe the  school  board  was returning  to  the                                                                    
proposal (from  the previous year)  to meet  more frequently                                                                    
in person.                                                                                                                      
                                                                                                                                
Mr.  Steininger replied  in  the  affirmative. He  clarified                                                                    
that the proposal  to meet more frequently in  person was no                                                                    
longer  in  effect.  He  explained   that  travel  had  been                                                                    
reduced, but the board was  expanding the number of meetings                                                                    
virtually.                                                                                                                      
                                                                                                                                
Vice-Chair  Ortiz  asked  about the  elimination  of  vacant                                                                    
positions within  the Division  of Libraries,  Archives, and                                                                    
Museums. He asked  if the positions had not  been filled due                                                                    
to the  absence of a tour  season. He asked if  the decision                                                                    
to  reduce the  staff was  for the  long-term or  related to                                                                    
COVID.                                                                                                                          
                                                                                                                                
Mr. Steininger  answered that change was  for the long-term.                                                                    
He  relayed  there  were  additional  vacant  positions  the                                                                    
governor's  budget  did  not reduce  because  post-COVID-19,                                                                    
when  tourism increased,  the department  would  need to  be                                                                    
able to fully staff the  museum. He remarked that the museum                                                                    
received  a  significant  number  of visitors  in  a  normal                                                                    
summer. He explained that the  proposed staff reductions had                                                                    
been identified as unnecessary in a "post-COVID world."                                                                         
                                                                                                                                
9:14:17 AM                                                                                                                    
                                                                                                                                
Representative Josephson  looked at slide 13  and referenced                                                                    
the  triangular  shaped bump  in  the  graph reflecting  the                                                                    
CARES Act  funding. He stated  that a couple of  years back,                                                                    
the legislature  had concluded  school districts  needed $30                                                                    
million in  FY 19 and $30  million beyond the formula  in FY                                                                    
20.  He remarked  that the  $30 million  in FY  19 had  been                                                                    
litigated and  had ultimately been funded.  He recalled that                                                                    
the FY 20 [FY 21] funding  had been vetoed on April 7, 2020.                                                                    
He asked how  he could know the extra CARES  Act funding had                                                                    
backfilled the  needs of the  districts in place of  the $30                                                                    
million as had been concluded by the legislature.                                                                               
                                                                                                                                
Mr. Steininger  clarified that the  funding vetoed  in April                                                                    
[2020]  had been  for  FY  21. He  explained  that when  the                                                                    
governor  had vetoed  the funding,  the administration  knew                                                                    
there would be $38 million in  CARES Act funds that would be                                                                    
available for  distribution to districts.  At the  time, the                                                                    
administration had  believed it  could distribute  the money                                                                    
based on the K-12 formula  calculation (the same way the $30                                                                    
million   legislative   appropriation    would   have   been                                                                    
distributed);  however, they  had  subsequently learned  the                                                                    
money  needed  to  be distributed  based  on  federal  title                                                                    
programs,  which  had   a  slightly  different  distribution                                                                    
formula.                                                                                                                        
                                                                                                                                
Mr.  Steininger elaborated  that  part of  the funding  that                                                                    
went to DEED had much  more discretion than the larger chunk                                                                    
that  went out  based on  the title  distribution. When  the                                                                    
administration  had lined  out who  would receive  the title                                                                    
funds and who would have  received the $30 million there had                                                                    
been  some  gaps  -  there  had  been  some  districts  that                                                                    
received less and some that  received more. As a result, the                                                                    
administration   had  utilized   a  portion   of  the   more                                                                    
discretionary funds  in order to  backfill some of  the gaps                                                                    
to  ensure no  district  received less  than  it would  have                                                                    
under  the  legislative  appropriation that  had  been  made                                                                    
prior to knowing the funds from the CARES Act would come.                                                                       
                                                                                                                                
9:16:50 AM                                                                                                                    
                                                                                                                                
Representative  Josephson  considered  a  scenario  where  a                                                                    
district's  needs for  the funds  were COVID-19  related and                                                                    
therefore  did not  truly backfill  as  the legislature  had                                                                    
concluded was  necessary. He asked for  verification that it                                                                    
would be incredibly complicated and nuanced to know.                                                                            
                                                                                                                                
Mr.  Steininger answered  that  he could  not  speak to  the                                                                    
specific  finances  of  individual districts  as  there  was                                                                    
significant  variability  between  districts.  He  explained                                                                    
that generally  districts received  a large amount  of money                                                                    
through the K-12 formula  program that contained significant                                                                    
discretion in the way districts  could spend the funding. He                                                                    
put himself in  the shoes of a district  finance officer and                                                                    
stated  that  he would  use  the  slightly more  restrictive                                                                    
federal  title  money  before   using  the  K-12  foundation                                                                    
funding. He communicated that any  given district likely had                                                                    
enough COVID related expenditures in  the past year to apply                                                                    
to   the   federal   dollars;  therefore,   the   additional                                                                    
restrictions  on  the  federal  dollars  were  not  material                                                                    
because districts  could use  the most  restrictive spending                                                                    
first  and  would  have  additional   money  from  the  K-12                                                                    
distribution.  The  administration  had changed  the  amount                                                                    
districts were allowed to carryover  from prior years, which                                                                    
increased the  amount of discretionary assets  districts had                                                                    
available. The administration  believed districts had access                                                                    
to  the same  amount of  funding compared  to what  had been                                                                    
imagined  prior to  the CARES  Act and  appropriated by  the                                                                    
legislature.                                                                                                                    
                                                                                                                                
9:19:01 AM                                                                                                                    
                                                                                                                                
Representative Josephson highlighted that  the U.S. House of                                                                    
Representatives  had recently  passed  a  $1.9 trillion  aid                                                                    
package that  the U.S. Senate  was likely to take  action on                                                                    
in the near-term.  He remarked that the  state could receive                                                                    
$800 million  to $900 million  [in federal funds].  He asked                                                                    
for verification  that the federal funds  would postpone the                                                                    
cliff  wall where  there would  be no  more backfilling.  He                                                                    
asked if  Mr. Steininger had  any comment on the  topic. For                                                                    
example, he  wondered how  the deficit  would be  dealt with                                                                    
when the day of reckoning came.                                                                                                 
                                                                                                                                
Mr. Steininger stated his understanding  of the question. He                                                                    
believed Representative  Josephson was asking how  the state                                                                    
would   manage  through   once   additional  federal   funds                                                                    
(available for  both specific  and general  purposes) coming                                                                    
to the state were expended. He  looked back at how the state                                                                    
had  dealt with  backfilling some  of the  American Recovery                                                                    
and Reinvestment Act (ARRA) funding  that had expired in the                                                                    
2009/2010  timeframe.   Some  of   the  funds   that  needed                                                                    
backfilling  were predictable  - much  of it  was additional                                                                    
money  for new  programs  that were  not necessarily  needed                                                                    
post-COVID.  He remarked  that ideally  the state  would not                                                                    
need additional money in  things like unemployment insurance                                                                    
or  social  services  activities. He  noted  that  hopefully                                                                    
people needing those  services would have the  ability to go                                                                    
back to work after the end of the pandemic.                                                                                     
                                                                                                                                
Mr.  Steininger continued  that  the federal  funding was  a                                                                    
fairly large  injection into the education  system including                                                                    
$38 million through  the CARES Act and  between $130 million                                                                    
and  $160  million  through  the  Coronavirus  Response  and                                                                    
Relief   Supplemental   Appropriations  Act   (CRRSAA).   He                                                                    
highlighted that the state could  not pick up a $130 million                                                                    
increase without cause  or need. He elaborated  that much of                                                                    
the  federal  funding  was  because  additional  investments                                                                    
needed to  be made  due to shortfalls  in various  areas and                                                                    
programs. He furthered  that care needed to be  taken to not                                                                    
generate an  expectation that the  state would  backfill all                                                                    
of the  federal funding [in  the future]. He stated  that as                                                                    
decisions were made  it was important to  recognize that the                                                                    
increased funding was short-term in response to a crisis.                                                                       
                                                                                                                                
9:22:17 AM                                                                                                                    
                                                                                                                                
Representative  Wool  assumed  the reference  to  Libraries,                                                                    
Archives,  and   Museums  was   the  SLAM   (State  Library,                                                                    
Archives, and Museum) located in  Juneau. He asked if it was                                                                    
the one  museum facility  under DEED. He  had not  known the                                                                    
facility  fell under  DEED. He  referenced Mr.  Steininger's                                                                    
testimony about federal funding based  on a title system. He                                                                    
asked  if Title  One  schools received  the  first batch  of                                                                    
funding. He  asked for an  explanation of the  title system.                                                                    
He referred  to the  separate slides  showing the  DEED non-                                                                    
formula  versus  formula  budget  items.  He  asked  if  Mr.                                                                    
Steininger would  explain what  the labels meant.  He stated                                                                    
he had not done the education  budget in the past. He shared                                                                    
that his school district would  have a revenue shortfall due                                                                    
to lack of  enrollment and the associated lack  in state and                                                                    
federal funding.  He assumed  it was  a formula  funding. He                                                                    
asked if  future federal funding  could help fill  the hole.                                                                    
He  ventured  that  every  school district  had  a  lack  of                                                                    
enrollment in the current year.                                                                                                 
                                                                                                                                
Mr. Steininger agreed that  Libraries, Archives, and Museums                                                                    
was  commonly called  SLAM and  was located  in Juneau;  the                                                                    
facility was officially the APK  [Andrew P. Kashevaroff]. He                                                                    
noted that DEED  also managed the Sheldon  Jackson Museum in                                                                    
Sitka.  He deferred  the  question  regarding federal  title                                                                    
programs  to the  department for  additional  detail on  how                                                                    
funds were  distributed to districts. He  intended to review                                                                    
numbers  on  slide  14   regarding  reduced  student  counts                                                                    
physically in  schools versus an increase  in correspondence                                                                    
students.   He  noted   the  situation   impacted  different                                                                    
districts differently.  He informed the committee  that DEED                                                                    
had  some  good  tables   showing  the  impact  district-by-                                                                    
district based  on student demographic and  count changes as                                                                    
well  as how  it compared  to  money coming  in through  the                                                                    
CARES Act and CRRSSA and  the ability for districts to carry                                                                    
forward money  from prior years.  He would provide  the data                                                                    
to the committee.                                                                                                               
                                                                                                                                
                                                                                                                                
Co-Chair Foster  added that the Department  of Education and                                                                    
Early  Development   would  present  to  the   committee  on                                                                    
Thursday.                                                                                                                       
                                                                                                                                
9:25:41 AM                                                                                                                    
                                                                                                                                
Mr. Steininger  reviewed the K-12 foundation  formula in the                                                                    
DEED budget  (including pupil  transportation) on  slide 14.                                                                    
He explained that the K-12  formula had been fully funded at                                                                    
the Base  Student Allocation (BSA); however,  there had been                                                                    
changes in the  student count and the  way students received                                                                    
education. He  pointed to the  table on the bottom  right of                                                                    
the  slide  showing a  high  level  summary of  the  formula                                                                    
calculation.   He  detailed   that  regular   Average  Daily                                                                    
Membership  (ADM)   represented  traditional   in  classroom                                                                    
students  and  correspondence reflected  students  receiving                                                                    
distance education.  He highlighted a small  but significant                                                                    
decrease in the  total number of students in  the state from                                                                    
FY  21 to  FY 22  in addition  to a  significant shift  from                                                                    
classroom education to correspondence.  He elaborated that a                                                                    
correspondence student received less  funding in the formula                                                                    
than  a classroom  student because  there  were fewer  costs                                                                    
associated with educating a correspondence student.                                                                             
                                                                                                                                
Mr. Steininger  explained that the changes  in student count                                                                    
and demographics  had drove  the reduction  of close  to $20                                                                    
million  in  the  overall  formula.  He  reported  that  the                                                                    
reduction  would  hit  different districts  differently.  He                                                                    
elaborated    that   districts    running   some    of   the                                                                    
correspondence programs had picked  up students, while other                                                                    
districts saw  a reduction in  the number of kids  living in                                                                    
their  community or  attending  school in  person. He  noted                                                                    
that  DEED would  go  into more  detail  on the  differences                                                                    
district by district.                                                                                                           
                                                                                                                                
Mr. Steininger highlighted  the last change on  slide 14. He                                                                    
referenced  a   residential  school  formula   program  that                                                                    
enabled individual  residential schools to be  authorized to                                                                    
receive  funding.   There  was   a  residential   school  in                                                                    
Anchorage  that  had  been  authorized  to  receive  funding                                                                    
several years  back, but  the school  had never  opened, and                                                                    
the  district  no longer  planned  to  move forward  on  the                                                                    
school. Consequently, the  governor's budget removed funding                                                                    
associated with the Anchorage school.  He explained that the                                                                    
money had been  in the budget for several years,  but it had                                                                    
never been used because the school never opened.                                                                                
                                                                                                                                
                                                                                                                                
Co-Chair Foster  asked if the reduction  was associated with                                                                    
a  school in  the  Lower  Yukon that  was  working with  the                                                                    
Anchorage School District.                                                                                                      
                                                                                                                                
Mr.  Steininger  answered  that the  funding  reduction  was                                                                    
associated with  a school  intended to  be in  Anchorage. He                                                                    
was  uncertain   what  population  the  school   would  have                                                                    
targeted. He stated that he  did not know the precise answer                                                                    
to the  question. He reiterated that  the residential school                                                                    
would have been in Anchorage, but it had never opened.                                                                          
                                                                                                                                
Co-Chair  Foster  asked if  the  residential  site had  been                                                                    
planned for the old Long House [Alaskan] Hotel.                                                                                 
                                                                                                                                
Mr. Steininger  replied that the location  sounded familiar,                                                                    
but he did not know exactly  where the site was. He deferred                                                                    
the question to DEED.                                                                                                           
                                                                                                                                
9:28:57 AM                                                                                                                    
                                                                                                                                
Representative Wool  considered the  ADM reduction  of 2,000                                                                    
for  a total  of  $20  million. He  shared  that his  school                                                                    
district was reporting a loss  of 2,000 [students] and up to                                                                    
$27 million in other funds.  He speculated that perhaps some                                                                    
of  the  students had  gone  to  correspondence outside  the                                                                    
district, so  the district did  not know exactly  where they                                                                    
were.  He  remarked  that  the   state  tracked  the  entire                                                                    
correspondence system  and he imagined  it would  share some                                                                    
of the  data with  the local  districts. He  reiterated that                                                                    
there was  a deficit of  2,000 students in  Fairbanks alone.                                                                    
He  was   interested  in  speaking   with  DEED   about  the                                                                    
statistics.                                                                                                                     
                                                                                                                                
Mr.  Steininger  continued  to slide  15  which  showed  the                                                                    
budget  for  the  Department of  Environmental  Conservation                                                                    
(DEC). He  highlighted slight reductions in  overall funding                                                                    
over  the   past  10  years  with   fairly  significant  UGF                                                                    
reductions. He  relayed there was  a slight increase  in UGF                                                                    
primarily due  to a change the  administration was proposing                                                                    
for FY  22 to correct  a fund source for  shellfish testing.                                                                    
He  explained that  previously  shellfish  testing had  been                                                                    
funded  with the  Commercial Passenger  Vessel Environmental                                                                    
Compliance  Fund, which  came from  head  taxes from  cruise                                                                    
ship passengers; however, review  with the Department of Law                                                                    
had  determined that  there may  be some  legal issues  with                                                                    
utilizing  the  fund  source for  shellfish  testing.  As  a                                                                    
result,  the governor's  budget changed  the fund  source to                                                                    
UGF in order to continue shellfish testing.                                                                                     
                                                                                                                                
Mr. Steininger  highlighted a reduction in  spill prevention                                                                    
and  response   activity.  He  detailed  that   the  account                                                                    
responsible  for funding  the activity  had been  in deficit                                                                    
spending for several years and  only contained funding for a                                                                    
couple  of years.  He  explained that  in  order to  prevent                                                                    
depleting available  resources for  the program,  the budget                                                                    
included a  smaller reduction  at present  in order  to make                                                                    
the account more sustainable going  forward. There were also                                                                    
numerous small  savings resulting  from efficiencies  in the                                                                    
Division of  Administrative Services within  the department.                                                                    
The  department  had  determined it  could  centralize  some                                                                    
things within  the division and save  approximately $140,000                                                                    
UGF and  $120,000 DGF,  in addition  to some  matching funds                                                                    
from federal programs.                                                                                                          
                                                                                                                                
Representative  Josephson asked  why the  administration did                                                                    
not  fight  for  more  funding for  the  Division  of  Spill                                                                    
Prevention  and Response  (SPAR). He  recalled hearing  from                                                                    
the  administration the  previous year  that the  large tank                                                                    
storage  facilities were  fine and  no longer  needed to  be                                                                    
monitored.  He highlighted  the  further  reductions in  the                                                                    
governor's proposed  budget. He  stressed it was  well known                                                                    
that   the  division   was  suffering.   He  asked   if  the                                                                    
administration cared about the issue.                                                                                           
                                                                                                                                
Mr. Steininger answered that  the administration cared about                                                                    
the ability  to get the  work done.  He deferred to  the DEC                                                                    
commissioner  to  talk  about  how  the  solution  had  been                                                                    
determined. He  explained that it  was necessary  to address                                                                    
the issue because  there was not an ability  to continue the                                                                    
program  into  the future  if  something  was not  done.  He                                                                    
detailed that a piece of the  solution was to reduce some of                                                                    
the activity  done in  the division. He  deferred to  DEC to                                                                    
comment on  any of the  other proposed solutions  that could                                                                    
be pursued.                                                                                                                     
                                                                                                                                
Vice-Chair  Ortiz asked  if there  would  be an  opportunity                                                                    
later in the week to hear from DEC on the topic.                                                                                
                                                                                                                                
9:34:09 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:34:38 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Ortiz asked  about the fund source  change to UGF                                                                    
for  shellfish testing.  He asked  about the  status of  the                                                                    
Cruise  Ship   Passenger  Vessel   Environmental  Compliance                                                                    
Account.                                                                                                                        
                                                                                                                                
Mr. Steininger answered  that the balances were  very low in                                                                    
the  Cruise Ship  Passenger Vessel  Environmental Compliance                                                                    
Account  and  other  accounts associated  with  cruise  ship                                                                    
activity and  head tax.  He detailed  that without  the fund                                                                    
change  and corresponding  fund change  in the  supplemental                                                                    
budget  proposal for  FY 21,  the account  would be  near or                                                                    
below zero. He  reported that a similar  analysis applied to                                                                    
the Ocean  Ranger Account, which  was also funded  with head                                                                    
tax  and  the  normal   Commercial  Passenger  Vessel  (CPV)                                                                    
account. He  noted the  acronyms for  the accounts  could be                                                                    
confusing because they were very  similar. He explained that                                                                    
the accounts  were very  near or at  zero because  there had                                                                    
been no cruise ship season  in 2020. When appropriations had                                                                    
been  made from  the  accounts for  FY  21, projections  had                                                                    
assumed half  of a  cruise ship  season; therefore,  some of                                                                    
the  appropriations had  brought the  funds much  lower than                                                                    
otherwise would  be comfortable.  He informed  the committee                                                                    
there  was a  sufficient  balance in  the  accounts to  meet                                                                    
immediate needs  but going  forward any  appropriations from                                                                    
the  accounts for  FY 22  needed  to be  looked at  closely,                                                                    
given the uncertainty of cruise ship revenues in 2021.                                                                          
                                                                                                                                
9:36:52 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz pointed  out  that there  should not  have                                                                    
been any  draws on the  ocean ranger subaccount  because the                                                                    
program had  not been  in operation. He  asked if  funds had                                                                    
been used from the account for another reason.                                                                                  
                                                                                                                                
Mr.  Steininger answered  that two  appropriations had  been                                                                    
made  in  FY   21,  one  of  which  had   been  vetoed.  The                                                                    
appropriations  had been  made to  address similar  concerns                                                                    
for  passive  water  quality  testing  for  the  traditional                                                                    
onboard ocean ranger activity. He  reported that the onboard                                                                    
ocean ranger activity had been  vetoed, but there had been a                                                                    
$2 million  appropriation for passive water  quality testing                                                                    
that DEC  was currently working  on. He summarized  that two                                                                    
appropriations  had been  made from  the account  to achieve                                                                    
the  same  general  mission, but  not  through  the  program                                                                    
itself.                                                                                                                         
                                                                                                                                
Vice-Chair  Ortiz  stated  his  understanding  that  the  $2                                                                    
million  appropriation had  not gone  directly to  the ocean                                                                    
rangers. He  asked if  the funds had  gone to  water quality                                                                    
testing  in   various  communities.  He  wondered   how  the                                                                    
appropriation had been distributed.                                                                                             
                                                                                                                                
Mr.  Steininger replied  that he  would follow  up with  the                                                                    
exact  details. He  relayed that  the passive  water quality                                                                    
testing  had been  an add  by the  legislature the  previous                                                                    
session to address the concern over water quality.                                                                              
                                                                                                                                
9:38:43 AM                                                                                                                    
                                                                                                                                
Mr.  Steininger moved  to the  Department of  Fish and  Game                                                                    
(DFG) budget on  slide 16. He remarked  that all departments                                                                    
had  seen significant  reductions over  the past  decade and                                                                    
DFG was  no exception.  He pointed to  an uptick  in federal                                                                    
receipts (shown  in light blue)  in FY 22. He  explained the                                                                    
increase reflected a change in  budgeting. He expounded that                                                                    
fisheries and  wildlife programs  had traditionally  been in                                                                    
the capital budget. He continued  that many of the sportfish                                                                    
and wildlife projects  funded numerous operating activities;                                                                    
therefore, the  FY 22 budget represented  the operating side                                                                    
of the programs  in the operating budget,  while keeping the                                                                    
capital portions of the programs  in the capital budget. The                                                                    
administration believed  it gave  better clarity to  the way                                                                    
DFG operations were  funded. The uptick in the  blue did not                                                                    
reflect  a  true  increase,  but a  correction  in  how  the                                                                    
expenditures were reflected.                                                                                                    
                                                                                                                                
Mr. Steininger highlighted  other significant changes within                                                                    
the  DGF  budget.  The  budget  replaced  some  UGF  in  the                                                                    
Commercial  Fisheries  Division  with program  receipts.  He                                                                    
detailed  that over  the past  several years  the department                                                                    
identified that  it collected sufficient receipts  to reduce                                                                    
some other UGF  spend and replace it  with program receipts.                                                                    
The change  allowed the  department to offset  a bit  of the                                                                    
general fund  need within  the program.  Additionally, there                                                                    
the budget included a  consolidation of budgetary components                                                                    
within  the Commercial  Fisheries Division.  Previously, the                                                                    
division  had  been  budgeted based  on  distinct  divisions                                                                    
within the  state; however, staff members  worked across the                                                                    
regions.   Consequently,   there    had   been   significant                                                                    
complexity associated with billing  staff member time across                                                                    
the  regions and  ensuring  money was  in  the budget  where                                                                    
needed  to pay  employee salaries.  He added  that employees                                                                    
would  continue to  record their  time  spent on  individual                                                                    
fisheries  projects and  the  data on  the  amount of  money                                                                    
spent  in   each  region  would  still   be  available.  The                                                                    
technical change would save some  backend work for DFG staff                                                                    
responsible  for tracking  where the  money went  and making                                                                    
budget  transactions mid-year  to  ensure  payroll could  be                                                                    
met.                                                                                                                            
                                                                                                                                
Mr.  Steininger  continued to  address  changes  in the  DFG                                                                    
budget. He referenced a piece  of 2018 legislation impacting                                                                    
the   Commercial    Fisheries   Entry    Commission   (CFEC)                                                                    
commissioners' salaries,  which resulted  in a  reduction of                                                                    
about  $42,000. The  budget increased  authority related  to                                                                    
federal grants. Additionally, some  money had been added for                                                                    
fisheries disaster funding.                                                                                                     
                                                                                                                                
9:42:02 AM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz referenced the  first bullet point on slide                                                                    
16  related  to  replacing  UGF  with  commercial  fisheries                                                                    
program receipts. He  asked if the money  would be generated                                                                    
through hatchery cost recovery fisheries activities.                                                                            
                                                                                                                                
Mr.  Steininger replied  the funds  came from  fees paid  by                                                                    
fishermen. He elaborated that  previously the department had                                                                    
collected greater than the amount  budgeted to spend and had                                                                    
lapsed the money into the  General Fund. The proposed budget                                                                    
reflected directly spending the  receipts and offsetting the                                                                    
UGF  cost.  He  did  not  believe  it  was  related  to  the                                                                    
hatcheries, but he would confirm with the department.                                                                           
                                                                                                                                
9:43:18 AM                                                                                                                    
                                                                                                                                
Mr.  Steininger   turned  to   slide  17:  "Office   of  the                                                                    
Governor."  He  highlighted  the   transfer  of  the  Alaska                                                                    
Development Team from the  Department of Commerce, Community                                                                    
and Economic  Development (DCCED), which had  been discussed                                                                    
on an  earlier slide  the previous  Wednesday. Additionally,                                                                    
the budget would eliminate the  OMB analyst chargeback rate.                                                                    
He detailed that the chargeback  rate had been implemented a                                                                    
couple of  years back and over  time it had been  found that                                                                    
the  chargeback  was not  generating  the  savings from  the                                                                    
ability to bill  back to the federal  government. The budget                                                                    
added  $200,000  UGF  and removed  $410,000  in  chargebacks                                                                    
because within  the past year,  some cost  saving reductions                                                                    
had been  implemented within  OMB in  order to  minimize the                                                                    
impact of the chargeback on agencies and the UGF cost.                                                                          
                                                                                                                                
                                                                                                                                
Mr.  Steininger  continued  to review  the  budget  for  the                                                                    
Office of the  Governor on slide 17.  The administration was                                                                    
undergoing an initiative to adjust  the way central services                                                                    
rates  were  charged.  He explained  that  central  services                                                                    
rates  were  charged  by agencies  like  the  Department  of                                                                    
Administration  or  the  Department  of  Transportation  and                                                                    
Public Facilities  for services  they provided on  behalf of                                                                    
other  departments.   The  administration  was   making  the                                                                    
adjustment   to  create   some  certainty   for  departments                                                                    
regarding  future rates.  He detailed  that currently  rates                                                                    
were calculated at the beginning  of each fiscal year, which                                                                    
was  significantly  after the  department  had  a chance  to                                                                    
determine  its  budget  request for  the  fiscal  year.  The                                                                    
proposal  would set  the rates  one year  in advance  so the                                                                    
departments would know  what they would pay  for things like                                                                    
human  resources   (HR)  or  information   technology  (IT).                                                                    
However, setting the rates one  year in advance created some                                                                    
uncertainty for IT and HR related  to how they would pay for                                                                    
any unanticipated  cost or if the  rate calculation slightly                                                                    
missed the mark. In order  to create certainty for agencies,                                                                    
the  administration was  looking to  use prior  year lapsing                                                                    
general fund dollars  to create a fund that  would allow the                                                                    
smoothing of rates and ensure  that any decline in the rates                                                                    
collected  (compared to  the projection)  did  not harm  the                                                                    
ability to provide IT or HR services.                                                                                           
                                                                                                                                
Representative  Josephson noted  that slide  17 reflected  a                                                                    
change during  the current  administration of  -$3.3 million                                                                    
and 15 more staff. He asked for detail.                                                                                         
                                                                                                                                
Mr.  Steininger   answered  that  the  15   new  staff  were                                                                    
primarily  the Administrative  Services Directors  that were                                                                    
transferred   from  the   departments  to   the  Office   of                                                                    
Management and Budget in December 2019.                                                                                         
                                                                                                                                
Co-Chair  Foster asked  where  the  Alaska Development  Team                                                                    
currently under DCCED was being transferred.                                                                                    
                                                                                                                                
Mr. Steininger replied  that the transfer was  from DCCED to                                                                    
the governor's office.                                                                                                          
                                                                                                                                
9:47:00 AM                                                                                                                    
                                                                                                                                
Representative Wool thought the  transfer had been denied in                                                                    
the subcommittee  process. He speculated that  perhaps there                                                                    
had been a  request to move more people  into the governor's                                                                    
office. He asked for detail.                                                                                                    
                                                                                                                                
Mr. Steininger  answered that  he was  not as  familiar with                                                                    
the request from  the prior year. The  current request would                                                                    
move  two   positions  within   the  Division   of  Economic                                                                    
Development to  the governor's office  to raise the  work to                                                                    
cabinet level activity. He stated  there may be some overlap                                                                    
with  the proposal  from the  previous  year, but  generally                                                                    
speaking it was a new proposal to elevate the activity.                                                                         
                                                                                                                                
Representative  Wool asked  for verification  that the  item                                                                    
was a request that had not yet taken place.                                                                                     
                                                                                                                                
Mr. Steininger  answered that  the proposal  would implement                                                                    
the change within the FY 22 budget.                                                                                             
                                                                                                                                
9:48:19 AM                                                                                                                    
                                                                                                                                
Mr.  Steininger reviewed  the  non-Medicaid  portion of  the                                                                    
Department of  Health and Social  Services (DHSS)  budget on                                                                    
slide  18   (slide  19  reflected  Medicaid   spending).  He                                                                    
highlighted   a  significant   spike  in   federal  receipts                                                                    
reflected  in  light  blue  in the  upper  left  graph.  The                                                                    
increase represented  substantial money  from the  CARES Act                                                                    
as  well as  in  emergency programs.  He  detailed that  the                                                                    
funding  included  anything  related to  the  mitigation  of                                                                    
COVID  or response  to  COVID.  He noted  that  much of  the                                                                    
COVID-19 related  relief funding  had been  distributed from                                                                    
DHSS (apart from grant programs within DCCED).                                                                                  
                                                                                                                                
Mr. Steininger spoke to changes  in the non-Medicaid portion                                                                    
of the  DHSS budget going  into FY  22. He relayed  that the                                                                    
Division of  Public Assistance (DPA) was  the "poster child"                                                                    
for  efficiencies  and savings  discovered  as  a result  of                                                                    
telework.  He elaborated  that when  the  division sent  its                                                                    
staff  off  to  telework,   their  processes  within  public                                                                    
assistance  and  public  assistance  eligibility  were  very                                                                    
paper-heavy.  He explained  that the  workflow did  not work                                                                    
when employees  were all working  from home. He  shared that                                                                    
the solution  had come in  the form of an  electronic system                                                                    
that allowed  the division to  scan and catalogue data  in a                                                                    
way that enabled  lining out data on a  document and loading                                                                    
it  into IT  systems. The  change had  significantly reduced                                                                    
the  time spent  by staff  on reading  documents, typing  in                                                                    
names,  and moving  fields from  documents into  the digital                                                                    
system. The  change would allow  the division to  reduce 121                                                                    
positions  including  20   positions  hired  temporarily  to                                                                    
address the  backlog. He detailed  that the  positions would                                                                    
be reduced  through attrition over  the next 1.5  years. The                                                                    
division had already begun by  not filling vacated positions                                                                    
where a need  did not exist. He clarified that  there was no                                                                    
intention to lay  anyone off, but there  was enough turnover                                                                    
within the unit that the  division believed it would be able                                                                    
to eliminate the positions by the  end of FY 22. The savings                                                                    
equaled almost  $3.5 million UGF and  a corresponding amount                                                                    
in  federal receipts,  in addition  to the  expiration of  a                                                                    
temporary initiative  addressing the backlog.  He summarized                                                                    
that  the  division  had  worked  through  its  backlog  and                                                                    
generated significant efficiencies going forward.                                                                               
                                                                                                                                
9:51:36 AM                                                                                                                    
                                                                                                                                
Mr. Steininger  continued to review  slide 18.  The Division                                                                    
of Public Assistance  would see a reduced  postage cost from                                                                    
moving to online renewal. The  Office of Children's Services                                                                    
(OCS) was looking to replace  a Circle of Support grant with                                                                    
direct  case  work. He  explained  that  the grant  included                                                                    
activities involving  working with  families in the  home to                                                                    
try  to prevent  people  from needing  the more  significant                                                                    
services performed by OCS. The  division was looking to move                                                                    
towards using direct  casework, which would be  a more hands                                                                    
on approach rather  than granting out funding  for the work.                                                                    
The change would  enable OCS to collect  federal receipts to                                                                    
pay for the work.                                                                                                               
                                                                                                                                
Mr. Steininger addressed  the last bullet point  on slide 18                                                                    
related to an  increase of $2.4 million  in federal receipts                                                                    
for  subsidized adoption  and guardianship.  He noted  there                                                                    
was  a  corresponding  supplemental   request  as  well.  He                                                                    
reported  that OCS  had seen  an increase  in the  number of                                                                    
children being  placed in  permanent care.  He characterized                                                                    
the increase as successful  because children were going into                                                                    
permanent care.                                                                                                                 
                                                                                                                                
Representative Johnson stated that  the most recent audit of                                                                    
OCS and  Medicaid reported there  was about $130  million in                                                                    
benefits going to people who  no longer qualified. She asked                                                                    
what  was happening  with the  information. She  wondered if                                                                    
the needed changes were reflected in the budget.                                                                                
                                                                                                                                
Mr. Steininger  answered that he  was not familiar  with the                                                                    
specific  audit, but  he expressed  interest in  reading it.                                                                    
One of  the issues the  state had been facing  with Medicaid                                                                    
in  the past  year was  that  the enhancement  to the  money                                                                    
coming in through the CARES Act  - a 6.2 percent increase in                                                                    
federal  reimbursement received  by  the state  - came  with                                                                    
some strings  attached. During the  pandemic, the  state was                                                                    
not allowed  to make any  changes to benefits  or enrollment                                                                    
in Medicaid. Consequently, addressing  concerns like the one                                                                    
mentioned  by Representative  Johnson had  been hampered  in                                                                    
the past year.  He clarified it did not  mean the department                                                                    
had ceased all  activity in trying to review  or think about                                                                    
what  it would  be able  to  do once  the restrictions  were                                                                    
lifted. He  added that the  state was still able  to address                                                                    
direct fraud  that occurred. He  deferred to  the department                                                                    
on any specific fraud prevention efforts.                                                                                       
                                                                                                                                
9:55:12 AM                                                                                                                    
                                                                                                                                
Representative Johnson stated  her understanding that Alaska                                                                    
had been  selected as one  of the  states to be  audited for                                                                    
the CARES  Act funding. She  asked if CARES Act  money could                                                                    
be   used   to   finance   work  related   to   the   audit.                                                                    
Alternatively,  she wondered  whether  the budget  addressed                                                                    
the issue.                                                                                                                      
                                                                                                                                
Mr. Steininger  clarified that the  state had  been randomly                                                                    
selected for a  desk review, not an audit.  He remarked that                                                                    
the review  could potentially become an  audit. He explained                                                                    
that the desk review would  look at the processes behind the                                                                    
state's  reporting of  CARES  Act  expenditures. He  relayed                                                                    
that  costs associated  with the  work were  generally borne                                                                    
through  the state's  normal operating  costs. For  example,                                                                    
some  activities  looked  at in  the  desk  review  happened                                                                    
within OMB and  the division would accommodate  for the work                                                                    
with  existing  staff  time  with  no  need  for  additional                                                                    
resources.                                                                                                                      
                                                                                                                                
Co-Chair  Merrick asked  what  year  Medicaid expansion  had                                                                    
been implemented.                                                                                                               
                                                                                                                                
Mr.  Steininger   responded  that  Medicaid   expansion  had                                                                    
occurred in 2016.                                                                                                               
                                                                                                                                
9:57:11 AM                                                                                                                    
                                                                                                                                
Mr. Steininger detailed the Medicaid  portion of DHSS budget                                                                    
on slide 19. He pointed to a  graph in the upper left of the                                                                    
slide  and   highlighted  the  budget   increase  reflecting                                                                    
Medicaid expansion.  He noted a slight  decline, fairly flat                                                                    
spend in  UGF over the time  period. He reported that  a lot                                                                    
of  effort  over  the  past several  years  had  focused  on                                                                    
stemming  some  of the  increases  to  Medicaid and  keeping                                                                    
downward  pressure   on  the  UGF   portion  of   the  cost.                                                                    
Additionally,   several   Division   of   Juvenile   Justice                                                                    
positions   were  eliminated   that  were   associated  with                                                                    
Anchorage  School  District  Step-Up Program.  He  explained                                                                    
that  the  activity  had  been  transferred  to  the  school                                                                    
district and  would no  longer appear  in the  state budget.                                                                    
The budget  would eliminate a  couple of vacant  Division of                                                                    
Juvenile  Justice positions  that  had  been eliminated.  He                                                                    
clarified  that the  positions were  for office  support and                                                                    
did not work directly with children served by the division.                                                                     
                                                                                                                                
Mr. Steininger  highlighted a Medicaid program  reduction of                                                                    
about $35  million from FY  21 to FY 22.  The administration                                                                    
was looking to  utilize some of the money  saved through the                                                                    
enhanced  federal   participation  over  the   past  several                                                                    
quarters  in  order  to  phase-in  cost  reductions  in  the                                                                    
program. He  referenced his earlier statement  the state was                                                                    
not allowed  to make any  changes to benefits  or enrollment                                                                    
in  Medicaid  [during  the  pandemic].  He  noted  that  the                                                                    
restriction did  not allow  the state to  look at  people on                                                                    
the   eligibility   rolls   that  did   not   meet   current                                                                    
requirements.  The  state  could   not  make  any  immediate                                                                    
changes to the program.                                                                                                         
                                                                                                                                
Mr. Steininger  highlighted that  even in the  best possible                                                                    
world,  it  was  not  possible  to  make  quick  changes  to                                                                    
Medicaid;  making changes  required substantial  interaction                                                                    
with federal  partners and the  medical industry  within the                                                                    
state in  order to come to  an agreement on how  the program                                                                    
should  look. Additionally,  changing eligibility  standards                                                                    
required legislation.  The budget  used the excess  money to                                                                    
effectively buy  the state  a year with  a target  amount at                                                                    
which to budget FY 23.  He explained that while the proposed                                                                    
reduction for  FY 22  was backfilled  with savings  from the                                                                    
prior year, it set a  standard and objective for partners to                                                                    
work towards for FY 23.                                                                                                         
                                                                                                                                
10:00:30 AM                                                                                                                   
                                                                                                                                
Representative  Josephson  stated that  [DHSS]  Commissioner                                                                    
[Adam]  Crum had  testified before  a Senate  committee that                                                                    
because of the  6.2 percent enhanced match,  $35 million had                                                                    
lapsed  to the  General Fund.  He believed  the commissioner                                                                    
had stated  there would be  an enhanced match for  the first                                                                    
two  quarters of  FY 22.  He asked  if the  commissioner was                                                                    
correct  that  because of  COVID  and  federal funding,  the                                                                    
general fund  should have  around $60  million lapsed  to it                                                                    
spanning two years.                                                                                                             
                                                                                                                                
Mr. Steininger  answered in the  affirmative. He  added that                                                                    
the information reflected the  budget the administration had                                                                    
put  forward  in  December  [2020],  prior  to  knowing  the                                                                    
enhanced Federal Medical  Assistance Percentage (FMAP) would                                                                    
reach into FY  22; therefore, the numbers in  the budget did                                                                    
not really account  for the situation. He  explained that at                                                                    
the time  the budget  had been released,  the administration                                                                    
expected the  enhanced FMAP to  expire in the  first quarter                                                                    
of 2021. He informed the  committee that it changed what was                                                                    
necessary for the Medicaid program  going into FY 22 and how                                                                    
much of  the lapsing funding from  FY 21 would be  needed in                                                                    
order to ensure DHSS could meet its obligations in FY 22.                                                                       
                                                                                                                                
Mr.  Steininger reported  there was  significant uncertainty                                                                    
about  whether  there  would be  another  extension  of  the                                                                    
enhanced  FMAP.  He  noted   an  extension  seemed  unlikely                                                                    
because it was  so far out; however, he would  have said the                                                                    
same  thing a  year  earlier.  He stated  that  it would  be                                                                    
necessary  to keep  an  eye  on the  General  Fund need.  He                                                                    
pointed  out that  if money  was not  spent on  the Medicaid                                                                    
program,  it  lapsed  to the  General  Fund.  A  significant                                                                    
amount of  funding had lapsed  in FY 20  as a result  of the                                                                    
enhanced  FMAP.  He  predicted  that  a  fairly  significant                                                                    
amount, more than  was necessary for the  phase-in, would be                                                                    
lapsed in FY 21.                                                                                                                
                                                                                                                                
10:03:29 AM                                                                                                                   
                                                                                                                                
Vice-Chair Ortiz looked  at the graph on  slide 19 depicting                                                                    
how increased  federal revenue began  coming into  the state                                                                    
with  Medicaid expansion.  He  asked if  it  was clear  that                                                                    
Medicaid  expansion did  not cost  the state  any additional                                                                    
money  when implemented.  He believed  an additional  60,000                                                                    
residents had gained insurance  under Medicaid expansion. He                                                                    
asked for  verification that expansion had  financially been                                                                    
a good deal for Alaska.                                                                                                         
                                                                                                                                
Mr. Steininger answered that through  a great deal of effort                                                                    
by DHSS, the General Fund  spending on Medicaid had remained                                                                    
fairly  flat.  He  reported  that  there  was  General  Fund                                                                    
spending associated with Medicaid  expansion. There had been                                                                    
100  percent  [federal]  match  in  the  first  year,  going                                                                    
towards a  90/10 [federal/state]  match. He  elaborated that                                                                    
expansion had  also allowed access to  federal funds through                                                                    
things like  tribal reclaiming. He  reported there  had been                                                                    
numerous  efforts in  terms of  reforms  in eligibility  and                                                                    
optional services  the department  engaged in with  the goal                                                                    
of  keeping  General  Fund costs  flat.  He  confirmed  that                                                                    
Medicaid  expansion  had  increased  the  number  of  people                                                                    
served by  the Medicaid program  in Alaska. He  could follow                                                                    
up with the precise statistics.                                                                                                 
                                                                                                                                
Vice-Chair Ortiz  asked for verification that  the flat line                                                                    
in dark blue [in the graph  on slide 19] indicated that from                                                                    
2015 to 2022 the total  [UGF] expenditures had not increased                                                                    
and had decreased slightly.                                                                                                     
                                                                                                                                
Mr.  Steininger  agreed.  He  explained  that  there  was  a                                                                    
General  Fund cost  associated with  expansion. The  cost in                                                                    
addition to other  cost pressures (e.g., the  rising cost of                                                                    
medical  services   in  Alaska)  had  been   challenges  the                                                                    
department had confronted in order  to keep the budget flat.                                                                    
He  stated it  had been  substantial effort  put in  by DHSS                                                                    
staff to  keep the line  flat. He noted the  information was                                                                    
necessary context  to have regarding whether  the line could                                                                    
remain flat for much longer.                                                                                                    
                                                                                                                                
10:06:43 AM                                                                                                                   
                                                                                                                                
Mr. Steininger  discussed the budget  for the  Department of                                                                    
Labor  and  Workforce Development  (DLWD)  on  slide 20.  He                                                                    
highlighted a gradual decline in  General Fund spending over                                                                    
the past  decade. The FY  22 budget included a  reduction in                                                                    
General Fund match for the  Basic Support Federal Grant (the                                                                    
change  reflected  less  UGF  spend  and  increased  federal                                                                    
funding  for the  program  at the  same  level of  service).                                                                    
There were  some small reductions throughout  the department                                                                    
to  commodities,  travel,  and  office  space  for  a  total                                                                    
savings  of about  $214,000. He  explained that  the savings                                                                    
had been  identified as employees  had gone to  telework and                                                                    
the department found areas where  savings could be sustained                                                                    
in the  long-term. The department was  deleting three vacant                                                                    
positions that it had no need to fill.                                                                                          
                                                                                                                                
10:08:10 AM                                                                                                                   
                                                                                                                                
Mr. Steininger  reviewed the Department of  Law (DOL) budget                                                                    
on slide  21. He highlighted  a decrease in funding  from FY                                                                    
16  to FY  17  followed  by a  gradual  increase  in UGF  as                                                                    
investments  had been  made  in  public protection  agencies                                                                    
including the  Criminal Division. The proposed  budget would                                                                    
add 19 positions and $3  million to ensure timely processing                                                                    
and  prosecution  of sexual  assault  and  abuse cases.  The                                                                    
budget  sought partnership  with  home  rule communities  to                                                                    
support the prosecution of  misdemeanors. He elaborated that                                                                    
the proposal would  allow UGF savings of  about $1.3 million                                                                    
with collection  of $1.3 million  to support  the activities                                                                    
performed on behalf of the communities.                                                                                         
                                                                                                                                
Representative Wool  surmised that  the proposal  would mean                                                                    
local   communities  would   pay   $1.3   million  for   the                                                                    
prosecution  of  misdemeanors,  which would  save  DOL  $1.3                                                                    
million.  He   asked  if  that   was  the   partnership  the                                                                    
administration was seeking.                                                                                                     
                                                                                                                                
Mr.  Steininger   replied  that  currently  the   home  rule                                                                    
communities  had  the  legal authority  to  prosecute  local                                                                    
misdemeanors. He explained that DOL  had been picking up the                                                                    
cost  for   a  number  of  years   without  any  [financial]                                                                    
participation from  the communities. The  administration was                                                                    
looking to  expand the  partnership to  include compensation                                                                    
from communities for the services  rendered on their behalf.                                                                    
The budget  item asked communities  to assist with  the cost                                                                    
incurred on their behalf.                                                                                                       
                                                                                                                                
Representative   Wool  surmised   there   was  currently   a                                                                    
partnership where  the state was paying  for the prosecution                                                                    
and the  administration wanted to reduce  the partnership by                                                                    
passing  the  costs to  the  communities.  He remarked  that                                                                    
municipalities   were  not   doing   well  financially.   He                                                                    
referenced a past statement  by Representative Thompson that                                                                    
Fairbanks  did not  prosecute  driving  under the  influence                                                                    
(DUI) cases because they did not  have a law against it, yet                                                                    
the state did.  He did not know if the  situation existed in                                                                    
other  municipalities.   He  asked  if  there   would  be  a                                                                    
reduction  in  the  prosecution  of  misdemeanors  if  local                                                                    
communities could  not afford the  expense. He asked  if DOL                                                                    
had contemplated  that communities would  not be able  to do                                                                    
the work because they did not have the funds.                                                                                   
                                                                                                                                
Mr. Steininger  answered that the  budget item  was specific                                                                    
to  misdemeanors under  a community's  misdemeanor code.  He                                                                    
clarified that if an offence fell  under a state law, it was                                                                    
a  state obligation  to prosecute.  He explained  that money                                                                    
paid by  a community  for the  purpose of  prosecuting local                                                                    
misdemeanors could only be used  for the specific purpose in                                                                    
the specific  community. He  stated that at  the end  of the                                                                    
day, there  was other  money within  DOL to  support general                                                                    
activities.  He  relayed  that   communities  that  did  not                                                                    
contribute  would   be  dealt  with  within   the  resources                                                                    
remaining  at  DOL.  He  elaborated  that  if  DOL  had  the                                                                    
capacity  to  prosecute  a  misdemeanor,  it  would  assist.                                                                    
Communities  that  contributed  would   have  paid  for  the                                                                    
service  and   would  receive   the  service,   while  other                                                                    
communities would not be prioritized  as much as communities                                                                    
that had paid.                                                                                                                  
                                                                                                                                
Mr. Steininger elaborated that there  were several home rule                                                                    
communities  within  the  state that  prosecuted  their  own                                                                    
misdemeanors. He  was aware of  at least one  community that                                                                    
had  entered   into  a  partnership   with  DOL   to  ensure                                                                    
prosecution  presence. He  noted that  the proposal  was not                                                                    
necessarily  a  new  concept,  but  the  administration  was                                                                    
looking  to expand  it  to all  communities  with the  legal                                                                    
authority   and  responsibility   to  prosecute   their  own                                                                    
misdemeanors to  ensure the service provided  was funded. He                                                                    
clarified there was  not a desire to  reduce the prosecution                                                                    
of misdemeanors.  The desire was  to cost-share  an activity                                                                    
that was  the responsibility  of home rule  communities. The                                                                    
administration  saw the  value  of having  the service  take                                                                    
place  within  DOL,  yet the  state  was  also  experiencing                                                                    
difficult fiscal  times and when something  was not directly                                                                    
the  state's  responsibility,  looking for  partnership  was                                                                    
important.                                                                                                                      
                                                                                                                                
10:13:51 AM                                                                                                                   
                                                                                                                                
Representative   Rasmussen   asked   how  many   home   rule                                                                    
communities existed in Alaska.                                                                                                  
                                                                                                                                
Mr. Steininger  answered that  he would  follow up  with the                                                                    
number.                                                                                                                         
                                                                                                                                
Representative  Rasmussen asked  how many  communities would                                                                    
be impacted by the proposed partnership.                                                                                        
                                                                                                                                
Mr.  Steininger answered  that all  [home rule  communities]                                                                    
would  be impacted  with the  exception  of two  communities                                                                    
that did  their own prosecution  and one community  that had                                                                    
an existing agreement with the  state. He noted there may be                                                                    
others, but he only knew of the three.                                                                                          
                                                                                                                                
Representative   Rasmussen   referenced   a   note   listing                                                                    
Fairbanks, Kenai, Cordova,  Ketchikan, Kodiak, Nenana, North                                                                    
Pole,  Palmer, Seward,  and Valdez.  She asked  if the  list                                                                    
sounded  accurate  in terms  of  communities  that would  be                                                                    
impacted by the budget change.                                                                                                  
                                                                                                                                
Mr.  Steininger  believed  there were  more  communities  in                                                                    
addition to the ones  listed by Representative Rasmussen and                                                                    
he would follow up with the information.                                                                                        
                                                                                                                                
Representative LeBon  noted that  Representative Rasmussen's                                                                    
list of home rule communities  was not all encompassing, but                                                                    
it provided a  good idea of which communities  fell into the                                                                    
category.  He remarked  that the  budget  item pertained  to                                                                    
local  misdemeanors in  home rule  communities that  DOL had                                                                    
been  prosecuting on  behalf of  the communities.  He stated                                                                    
his  understanding that  the  budget shift  was  to put  the                                                                    
responsibility where it lay with the home rule communities.                                                                     
                                                                                                                                
Mr. Steininger replied in the affirmative.                                                                                      
                                                                                                                                
10:16:08 AM                                                                                                                   
                                                                                                                                
Representative LeBon  asked if part of  the problem involved                                                                    
home rule communities not paying for trooper service.                                                                           
                                                                                                                                
Mr.  Steininger replied  that the  proposal did  not address                                                                    
trooper service;  the state was continuing  to directly fund                                                                    
trooper service.                                                                                                                
                                                                                                                                
Representative  Johnson highlighted  that the  situation was                                                                    
larger than the  one line appearing on slide  21. She shared                                                                    
that in  the past,  she had  been the mayor  of a  home rule                                                                    
city  for six  years. She  detailed that  Palmer had  police                                                                    
department and  courthouse. She explained one  of the things                                                                    
that  happened when  people  were waiting  for  trial on  an                                                                    
ankle  monitor.  She  detailed   that  a  person  could  not                                                                    
necessarily  have  an ankle  monitor  tracked  if they  were                                                                    
outside  a   certain  radius  of  the   monitoring  station;                                                                    
therefore, those  individuals often ended up  waiting inside                                                                    
the city  limits. She remarked  that it was not  a situation                                                                    
that  was organic  to the  city,  but it  was something  the                                                                    
state had brought in. She  highlighted that home rule cities                                                                    
often  had their  own police  departments, but  part of  the                                                                    
issue was the state bringing  people to live inside the city                                                                    
limits for  a period of time  who had a history  of criminal                                                                    
behavior.                                                                                                                       
                                                                                                                                
10:18:10 AM                                                                                                                   
                                                                                                                                
Vice-Chair Ortiz  asked for  the definition  of a  home rule                                                                    
community.                                                                                                                      
                                                                                                                                
Mr. Steininger  answered that home rule  communities had the                                                                    
authority to  set their own  misdemeanor code  and prosecute                                                                    
misdemeanors.  He  noted  that  DCCED  could  speak  to  the                                                                    
specific definition of a home rule community.                                                                                   
                                                                                                                                
Vice-Chair  Ortiz  asked  if   Anchorage  was  a  home  rule                                                                    
community.  If not,  he asked  what distinguished  Anchorage                                                                    
from a home rule community.                                                                                                     
                                                                                                                                
Mr.  Steininger  answered  that Anchorage  was  one  of  the                                                                    
communities that provided its own misdemeanor prosecution.                                                                      
                                                                                                                                
Vice-Chair  Ortiz surmised  that  Anchorage was  not a  home                                                                    
rule community.                                                                                                                 
                                                                                                                                
Mr.   Steininger   replied   that  Anchorage   was   already                                                                    
performing the service itself.                                                                                                  
                                                                                                                                
Representative Josephson  stated that  in some  respects the                                                                    
powers home  rule communities  chose were  "a la  carte." He                                                                    
believed home  rule communities did  not have to  choose the                                                                    
prosecution  of misdemeanors  if they  did not  want to.  He                                                                    
believed  that part  of  what the  budget  proposal did  was                                                                    
require  communities  to  pay   for  a  service  that  local                                                                    
governments had elected not to invest in.                                                                                       
                                                                                                                                
Mr.  Steininger  answered that  at  issue  was the  decision                                                                    
being  made   not  to  fund   the  necessary   activity.  He                                                                    
elaborated  that  the  state  took  up  the  prosecution  of                                                                    
misdemeanors when  the community  elected not to  because it                                                                    
was   a  necessary   service  in   public  protection.   The                                                                    
administration  was asking  communities  to  help support  a                                                                    
cost  of an  obligation  necessary for  the communities.  He                                                                    
confirmed that communities had the  ability to choose not to                                                                    
prosecute  misdemeanors and  the state  had been  picking up                                                                    
the cost.  The state was  asking the communities to  pick up                                                                    
the cost,  not the activity  itself. He reiterated  that the                                                                    
administration was looking for  communities to help pitch in                                                                    
on the cost the state  was incurring on their behalf through                                                                    
the decisions made by the communities.                                                                                          
                                                                                                                                
10:21:38 AM                                                                                                                   
                                                                                                                                
Representative  Josephson   stated  it  begged   the  larger                                                                    
question  that   had  recently   been  raised   about  costs                                                                    
associated  with  law  enforcement  outside  the  cities  of                                                                    
Wasilla  and Palmer  for example.  He noted  that the  costs                                                                    
were borne by  all of the citizens but  benefitted by people                                                                    
living  outside of  the  organized  communities. He  thought                                                                    
following  the budget  proposal meant  the state  would also                                                                    
have to charge for Alaska  State Trooper service outside the                                                                    
cities in the Mat-Su Borough.                                                                                                   
                                                                                                                                
Mr.  Steininger answered  that  the  administration was  not                                                                    
proposing to do that. He  clarified that the proposal looked                                                                    
only at  activities specific to DOL.  The administration did                                                                    
not have  a proposal to  change the way  troopers interacted                                                                    
in the state and was  continuing to prioritize investment in                                                                    
troopers within the state's means.                                                                                              
                                                                                                                                
10:22:58 AM                                                                                                                   
                                                                                                                                
HB  69  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HB  71  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Foster noted that the  meeting would adjourn due to                                                                    
House  floor  session. He  discussed  the  schedule for  the                                                                    
afternoon meeting.                                                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
10:23:42 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:23 a.m.                                                                                         
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HFIN OMB Budget Overview 2.24.21.pdf HFIN 3/1/2021 9:00:00 AM
FY22 Governor Amend Operating Spreadsheet OMB 2.16.21.pdf HFIN 3/1/2021 9:00:00 AM