Legislature(2021 - 2022)ADAMS 519

01/20/2022 01:30 PM House FINANCE

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01:35:17 PM Start
01:36:17 PM Overview: Governor's Fy 2023 Operating Budget by the Office of Management and Budget
03:38:42 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Governor's FY 2023 Operating Budget by TELECONFERENCED
Neil Steininger, Director, Office of Management
and Budget
                   HOUSE FINANCE COMMITTEE                                                                                      
                      January 20, 2022                                                                                          
                          1:35 p.m.                                                                                             
                                                                                                                                
1:35:17 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster called the House Finance Committee meeting                                                                      
to order at 1:35 p.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 (via teleconference)                                                                              
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                                                                                                                       
                                                                                                                                
OVERVIEW: GOVERNOR'S FY 2023 OPERATING BUDGET BY THE OFFICE                                                                     
OF MANAGEMENT AND BUDGET                                                                                                        
                                                                                                                                
Co-Chair Foster reviewed the agenda for the afternoon                                                                           
meeting.                                                                                                                        
                                                                                                                                
^OVERVIEW: GOVERNOR'S FY 2023 OPERATING BUDGET BY THE                                                                         
OFFICE OF MANAGEMENT AND BUDGET                                                                                               
                                                                                                                                
1:36:17 PM                                                                                                                    
                                                                                                                                
NEIL STEININGER, DIRECTOR, OFFICE  OF MANAGEMENT AND BUDGET,                                                                    
OFFICE   OF   THE   GOVERNOR,  introduced   the   PowerPoint                                                                    
Presentation: "Overview: FY 2023   Governor's Budget  by the                                                                    
Office of Management and Budget.  He began on Slide 2 titled                                                                    
 Budget Lookback   that depicted  a summary of  the revenue,                                                                    
expenditures, and  Permanent Fund Dividend  information over                                                                    
the previous  years from FY 2019,  FY 2022, and FY  2023. He                                                                    
reported a 5.1 percent  reduction in overall expenditures, a                                                                    
5  percent reduction  in  the operating  budget,  and a  7.9                                                                    
percent reduction in the capital  budget. He elaborated that                                                                    
there  was a  2.2 percent  reduction in  agency expenditures                                                                    
primarily  from  reductions  in  the  University  of  Alaska                                                                    
budget,   changes    in   financing   for    Department   of                                                                    
Transportation  and Public  Facilities  (DOT) projects,  and                                                                    
other reductions  in agency operating budgets.  He qualified                                                                    
that  the  reductions were  offset  by  increases in  public                                                                    
safety and  natural resource development. He  pointed to the                                                                    
significant  reduction  in   statewide  operations  of  $146                                                                    
million from  decreased obligations to the  state retirement                                                                    
system due to high returns.  He highlighted that the capital                                                                    
budget was held to federal  match money for federal programs                                                                    
and was  a  baseline  budget. Mr.  Steininger commented that                                                                    
the budget  deficit of over  one half a billion  dollars was                                                                    
closed,  and the  FY 23  budget was  accomplished without  a                                                                    
deficient or draw on savings.                                                                                                   
                                                                                                                                
Co-Chair Foster  clarified that the committee  was currently                                                                    
addressing the  FY 23 budget  and the last  completed budget                                                                    
cycle was FY  21. He wondered why the  comparisons were made                                                                    
to  FY 19.  He  suspected that  it was  because  it was  the                                                                    
governors   first year  in  office.  Mr. Steininger  replied                                                                    
that the FY  19 budget was the budget that  was inherited by                                                                    
the  current  administration. He  noted  that  the table  on                                                                    
slide  2 and  in  presentation data  used  numbers from  the                                                                    
prior fall revenue forecast. He  relayed that on January 19,                                                                    
2022,  the  Department  of Revenue  (DOR)  provided  revenue                                                                    
updated  estimates to  offer  more  current information.  He                                                                    
would  update  the  information when  possible,  during  the                                                                    
presentation.                                                                                                                   
                                                                                                                                
Vice-Chair  Ortiz asked  whether the  change column  [titled                                                                    
 FY 2019  to FY 2023  UGF Change]  represented  changes from                                                                    
FY  19 compared  to FY  23.  Mr. Steininger  replied in  the                                                                    
affirmative.  He   added  that   in  following   slides  the                                                                    
comparison was between FY 22 and FY 23.                                                                                         
                                                                                                                                
Co-Chair Foster pointed out that  the slide showed a surplus                                                                    
of $27  million. He  relayed that  the number  included $375                                                                    
million in  American Rescue Plan  Act (ARPA) funds  in which                                                                    
case  there  could  be  a   deficit  of  $350  million.  Mr.                                                                    
Steininger responded that the  administration was using ARPA                                                                    
State  and Local  Fiscal Recovery  Funds (SLFRF)  funding in                                                                    
place of Unrestricted General Funds (UGF).                                                                                      
                                                                                                                                
Representative Wool queried whether  the  FY 2022 Authorized                                                                    
and  Supplemental    column  represented   the  supplemental                                                                    
budget  that  had  not  been  adopted  yet.  Mr.  Steininger                                                                    
concurred   that  the   numbers  reflected   the  governors                                                                     
proposed supplemental budget.                                                                                                   
                                                                                                                                
Mr.   Steininger   turned   to  slide   3   titled    Budget                                                                    
Objectives:                                                                                                                     
                                                                                                                                
    50/50 PFD with Constitutional Amendment                                                                                  
                                                                                                                                
    FY2023 operating budget to address baseline needs and                                                                    
     priorities                                                                                                                 
                                                                                                                                
        Ensure a safe environment for individuals and                                                                           
        businesses                                                                                                              
                                                                                                                                
        Public   protection,   permitting,    and   resource                                                                    
        development                                                                                                             
                                                                                                                                
    Continue efforts towards efficiency and operational                                                                      
     change                                                                                                                     
                                                                                                                                
    Use FY2022 surplus and bonding to support a robust                                                                       
     capital investment                                                                                                         
                                                                                                                                
    Avoid a FY2023 deficit or draws from savings accounts                                                                    
                                                                                                                                
1:44:27 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  turned to slide  4 titled   FY 22 and  FY 23                                                                    
Revenues.   He discussed  available revenue.  He pointed  to                                                                    
the top  3 lines  on the chart  portraying UGF  revenues and                                                                    
total revenue  available from  both traditional  sources and                                                                    
the Percent of  Market Value (POMV) draw.  He drew attention                                                                    
to  the 50  percent to  50 percent  (50/50) POMV  draw split                                                                    
between the  Permanent Fund  Dividends (PFD)  and government                                                                    
services. He highlighted  the  Carry-forward and Adjustment                                                                     
column.  The summary  was typically  limited  to prior  year                                                                    
appropriations  available  for  expenditure in  the  current                                                                    
year. However, in  the current year it reflected  the use of                                                                    
the Statutory  Budget Reserve through  direct appropriations                                                                    
in FY  22 that reduced the  amount of UGF by  $410.7 million                                                                    
and the  use of  ARPA replacement  funding. He  informed the                                                                    
committee  that  ARPA  allowed   SLERF  to  replace  UGF  by                                                                    
offsetting revenue loss due to  COVID 19. He elucidated that                                                                    
SLERF  funding  was coded  as  UGF  where it  was  replacing                                                                    
funding  that was  not directly  related to  COVID response.                                                                    
Effectively, the relief funding  acted as UGF. He reiterated                                                                    
that  the revenue  numbers on  the slide  were based  on the                                                                    
Fall Revenue  Sources Book  totaling $4.6  billion in  FY 23                                                                    
and $4.9 billion  in FY 22. The updated  figures provided by                                                                    
DOR increased  UGF revenue by $221  million in FY 22  and by                                                                    
$467  million in  FY 23.  He noted  the significant  change,                                                                    
which  was the  reason the  department released  the updated                                                                    
estimates.                                                                                                                      
                                                                                                                                
Co-Chair Foster  relayed that  DOR issued  a caveat  that it                                                                    
did not favor  relying on monthly updates  because they were                                                                    
variable. He wanted the committee to keep that in mind.                                                                         
                                                                                                                                
Representative Wool cited the  $1.25 billion carryforward on                                                                    
slide 4 and asked for an explanation.                                                                                           
                                                                                                                                
1:48:23 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  replied that the amount  represented  almost                                                                    
entirely direct  federal COVID  relief to  departments  that                                                                    
was appropriated  in FY 20  and FY  21 that carried  into FY                                                                    
22.  He added  that  community relief  was  included in  the                                                                    
figure.                                                                                                                         
                                                                                                                                
1:48:56 PM                                                                                                                    
                                                                                                                                
Representative  Wool  cited  the  $250  million  in  federal                                                                    
revenue replacement in FY 22  and the $375 million amount in                                                                    
FY  23.  He deduced  that  the  total was  approximately  $1                                                                    
billion,  and  he  wondered if  the  numbers  reflected  the                                                                    
remaining   amount  used   for   revenue  replacement.   Mr.                                                                    
Steininger replied in  the affirmative and noted  that in FY                                                                    
23 $375  million was  used for  revenue replacement  and the                                                                    
remainder was expended in direct appropriations.                                                                                
                                                                                                                                
1:49:43 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz referenced  the  $1.25  billion in  direct                                                                    
relief money  from the federal  government. He asked  if the                                                                    
amount  was  a  one-time  spending  amount.  Mr.  Steininger                                                                    
replied in the  affirmative. He detailed that it  was a one-                                                                    
time revenue appropriation from  the federal government that                                                                    
could be expended over multiple years.                                                                                          
                                                                                                                                
1:50:45 PM                                                                                                                    
                                                                                                                                
Representative  Rasmussen asked  about  the monthly  revenue                                                                    
forecast.  She asked  if the  legislature  would be  getting                                                                    
more  accurate   information  with  additional   or  monthly                                                                    
reports  since  oil  revenue was  variable  over  time.  Mr.                                                                    
Steininger deferred  the answer  to DOR. He  underlined that                                                                    
the tables  on the  slide was based  the information  on the                                                                    
fall  revenue forecast.  The  monthly  information was  only                                                                    
released because the revenue change was so drastic.                                                                             
                                                                                                                                
1:52:07 PM                                                                                                                    
                                                                                                                                
Representative Rasmussen  asked that from a  budgeting point                                                                    
of view whether  it was more useful to have  up to date real                                                                    
time  information on  revenue and  if it  provided a  better                                                                    
picture of available revenue. Mr.  Steininger thought it was                                                                    
helpful  especially  with  any  dramatic  changes  occurring                                                                    
after the revenue forecast.                                                                                                     
                                                                                                                                
1:53:06 PM                                                                                                                    
                                                                                                                                
Representative Josephson  asked if the  administration would                                                                    
be letting  the legislature know  what its plan was  for the                                                                    
additional  revenues  through   amendments.  Mr.  Steininger                                                                    
preferred to look  at the need for  expenditures rather than                                                                    
available revenue  for expenditure. The  revenue information                                                                    
was merely provided  for a more accurate  picture. He voiced                                                                    
that  the appropriations  reflected  the true  needs of  the                                                                    
state  and not  expenditures  based  on available  revenues.                                                                    
Representative Josephson  remarked that in some  respects he                                                                    
was aligned  with Mr. Steiningers  comments.  He deemed that                                                                    
the  state  could become  $700  million  wealthier over  the                                                                    
following months. He asked if  the administration would save                                                                    
the funding.  Mr. Steininger  indicated the  following slide                                                                    
would address the topic of  surplus which would be deposited                                                                    
into  the general  fund and  swept  into the  Constitutional                                                                    
Budget Reserve (CBR) according to the state Constitution.                                                                       
                                                                                                                                
1:55:52 PM                                                                                                                    
Mr. Steininger advanced  to slide 5 titled  FY 22  and FY 23                                                                    
Expenditures.  He  noted a 2  percent increase  in operating                                                                    
expenditures  between FY  22 and  FY 23  [$103 million].  He                                                                    
broke   down  the   increase  as   $14  million   in  agency                                                                    
operations,  and a  $36 million  increase  in large  formula                                                                    
expenditures such  as Medicare and K-12  Education. He noted                                                                    
that there  was a decrease  of $21.8 million in  agency non-                                                                    
formula  items that  were  the day  to  day operations.  The                                                                    
decrease  accommodated   an  increase   in  the   amount  of                                                                    
Designated General Funds (DGF) that was swept.                                                                                  
                                                                                                                                
Mr.   Steininger   moved   to   the   statewide   operations                                                                    
expenditures. He  noted a dramatic  increase of  roughly $90                                                                    
million  primarily  for  the  payment of  oil  and  gas  tax                                                                    
credits per the statutory calculation.  It was offset by the                                                                    
retirement system earnings which  did well and decreased the                                                                    
liability of the  fund. He added that the ARM  board did not                                                                    
fund   the  retirement   health   system   because  it   was                                                                    
overfunded.                                                                                                                     
                                                                                                                                
Mr.  Steininger turned  to the  capital budget  and noted  a                                                                    
decrease  of  $88.2 million  in  UGF  by trying  to  achieve                                                                    
capital  needs elsewhere  for other  than   core needs.   He                                                                    
relayed that  before counting supplementals the  capital and                                                                    
operating budgets were essentially  flat with an increase of                                                                    
$15 million  or zero  percent change.  He restated  that the                                                                    
total  surplus was  $27 million  and  including the  current                                                                    
revenue adjustment, the surplus for  FY 23 would be  roughly                                                                    
$493 million.                                                                                                                   
                                                                                                                                
Representative   Josephson   commented    on   the   state's                                                                    
retirement  debt. He  requested  that the  committee hold  a                                                                    
hearing on the status of the states retirement accounts.                                                                        
                                                                                                                                
Co-Chair Foster  took note and thought  a presentation might                                                                    
be in order.  He commented on the balanced budget  in FY 23.                                                                    
He  thought  the  budget really  reflected  a  $350  million                                                                    
deficit  because of  the use  of one-time  ARPA funding.  He                                                                    
also  wanted to  maintain  consistency going  forward as  to                                                                    
whether the  budget was based  on fall and  spring forecasts                                                                    
or monthly  forecasts. He  questioned using  monthly numbers                                                                    
as  a  basis  for   budgeting  and  expressed  some  caution                                                                    
regarding the size of the surplus  in relation to the use of                                                                    
one-time ARPA funding.                                                                                                          
                                                                                                                                
2:01:17 PM                                                                                                                    
                                                                                                                                
Co-Chair Merrick  asked how much  SLERF funding was  used in                                                                    
the budget.  Mr. Steininger recounted that  the total amount                                                                    
was roughly  $504 million,  and a  future slide  contained a                                                                    
breakdown.                                                                                                                      
                                                                                                                                
Representative  Edgmon questioned  the governors   budgeting                                                                    
process.  He referenced  some of  the major  expenditures in                                                                    
the  budget  and  noted  that the  budget  did  not  utilize                                                                    
savings but  was concerned that  it did not save  any money.                                                                    
He warned that  he would very closely examine  the layers of                                                                    
the budget. He thought the  state was building a budget with                                                                    
anticipated money and no contingency  factor. He thought the                                                                    
budget  reflected spending  money the  state had  not earned                                                                    
yet,   used    one-time   federal   funding    for   typical                                                                    
expenditures, made  promises that  the FY 22  and FY  23 PFD                                                                    
would be  larger than in  prior years, and  everything would                                                                    
work out  fine. He cautioned that  future legislatures would                                                                    
need  to  pick  up the  tab.   He believed  that the  budget                                                                    
spent beyond  its means. He acknowledged  that the operating                                                                    
budget was kept  in check but worried that  the budget spent                                                                    
money the  state did  not have and  made promises  that were                                                                    
unlikely to be kept.                                                                                                            
                                                                                                                                
Co-Chair  Foster  concurred   with  Representative  Edgmons                                                                     
comments.                                                                                                                       
                                                                                                                                
2:04:30 PM                                                                                                                    
                                                                                                                                
Representative  Wool  noted there  were  also  items in  the                                                                    
FY 22  budget that  were not  funded  including school  bond                                                                    
debt reimbursement,  oil tax  credits, etc.  He acknowledged                                                                    
that the  budget proposed  to backfill  the PFD  but thought                                                                    
there were  other items that  were not  funded in FY  22 and                                                                    
not proposed in the supplemental  or FY 23 budget that could                                                                    
be backfilled.                                                                                                                  
                                                                                                                                
Co-Chair  Foster invited  Mr. Steininger  to correct  him or                                                                    
other committee members if inaccurate statements were made.                                                                     
                                                                                                                                
2:05:42 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  replied that  the budget  was built  off the                                                                    
normal  process based  on the  fall revenue  projections and                                                                    
was  adjusted in  March  based on  the  spring forecast.  He                                                                    
countered  comments that  the budget  was  based on  revenue                                                                    
that  was  not  earned  relative  to  the  normal  budgeting                                                                    
process,  where  it  was always  based  on  projections.  He                                                                    
admitted  that  although  minor,  there was  a  $27  million                                                                    
surplus, and  the budget was  balanced. He offered  that the                                                                    
budget achieved  the outcome  without compromises  on School                                                                    
Bond Debt Reimbursement or the  amount of the PFD payout. He                                                                    
furthered that  merely because the federal  funding was one-                                                                    
time funding  it was available  for expenditure, and  it was                                                                    
fair count it in a statement of surplus.                                                                                        
                                                                                                                                
2:07:44 PM                                                                                                                    
                                                                                                                                
Representative   Edgmon  asked   about  the   state  lawsuit                                                                    
regarding the Higher Education Fund.  He ascertained that if                                                                    
the state  lost the higher  education lawsuit it  would lose                                                                    
$400 million  deducted from the  CBR. Mr.  Steininger agreed                                                                    
with  the statement.  Representative Edgmon  maintained that                                                                    
as a policy maker he had  to consider factors like the price                                                                    
of oil dropping to  $45 per barrel in the fall  of FY 23. He                                                                    
did  not want  to put  a  budget together  that merely  made                                                                    
things add up. He noted that  it was not typical to use $375                                                                    
million  of  one-time federal  money  for  state money  that                                                                    
would  be needed  again the  following year.  Mr. Steininger                                                                    
contended  that the  budget was  not  expending any  funding                                                                    
from  the CBR,  and he  did not  follow the  logic that  the                                                                    
state would not  use the SLERF funding for  lost revenue due                                                                    
to  the  pandemic.  Representative  Edgmon  appreciated  the                                                                    
opportunity   for  spirited   debate.   He  reiterated   the                                                                    
importance of contingency measures  and money in savings due                                                                    
to volatile  revenue. He was concerned  with the possibility                                                                    
of  a downturn.  He  did  not view  the  budget as  fiscally                                                                    
responsible. He  thought it  was his duty  to look  beyond a                                                                    
short term  budget. He thanked  Mr. Steininger for  the room                                                                    
to address his viewpoint.                                                                                                       
                                                                                                                                
2:11:09 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  thought it was  appropriate to  have debate                                                                    
on the  issue and  stressed its  importance. He  thought the                                                                    
big picture  perspective was  import when  the subcommittees                                                                    
would be dealing with the budget details.                                                                                       
                                                                                                                                
2:12:14 PM                                                                                                                    
                                                                                                                                
Representative Rasmussen thought that  if the state had one-                                                                    
time  funding, she  did not  think it  was inappropriate  to                                                                    
spend it. She  thought Alaskans were still  dealing with the                                                                    
consequences of  the pandemic. She  was also  concerned that                                                                    
Alaskans might  need help  with interest  rates and  a tough                                                                    
economy.  She asked  how long  the  state had  to spend  the                                                                    
SLERF money.  Mr. Steininger responded that  the funding was                                                                    
available   through   December  31,   2024.   Representative                                                                    
Rasmussen asked  how much  money was  in the  Permanent Fund                                                                    
presently.  Mr.  Steininger  did  not have  the  figure  but                                                                    
thought  it was  greater  than  $80 billion.  Representative                                                                    
Rasmussen  asked whether  it was  accurate to  say that  the                                                                    
state had a  significant amount of money in  an account. Mr.                                                                    
Steininger  agreed that  there was  a substantial  amount of                                                                    
money in the Permanent Fund  that provided the POMV revenue.                                                                    
Representative Rasmussen  opined that it  was  disingenuous                                                                     
to  state  that  the  state   did  not  have  funding  if  a                                                                    
catastrophic  event  happened, and  oil  tanked  to $20  per                                                                    
barrel. She guessed that there  would be  options and time.                                                                     
The state could  maneuver   and fulfill all the government's                                                                    
obligations  in  the  current fiscal  year.  She  hoped  the                                                                    
legislature would work with the governor.                                                                                       
                                                                                                                                
Co-Chair Foster  commented on the debate  regarding one-time                                                                    
funding. He shared an analogy  of someone with weekly income                                                                    
of  $500  and the  same  in  weekly  expenses with  $200  in                                                                    
savings then  their work hours  were cut back and  only made                                                                    
$400 per week.  One could say using $100  from savings would                                                                    
balance the budget but eventually  savings would run out and                                                                    
not cover ongoing  expenses after two weeks.  He favored the                                                                    
analogy because it illustrated the  result of using one-time                                                                    
funding to cover ongoing annual operating expenses.                                                                             
                                                                                                                                
Representative Josephson shared testimony  from the Ways and                                                                    
Means  Committee that  at current  projections in  the 10                                                                       
year plan,  even at low  oil prices with  prudent budgeting,                                                                    
the  path was  predictable and  sustainable. He  agreed with                                                                    
prior  comments regarding  sustainability  and spending.  He                                                                    
was concerned with the public's  expectations in the future.                                                                    
He asked for   a sense  of how the FY  23 budget would  play                                                                    
out in  FY 24 and FY  25.  Mr. Steininger responded  that in                                                                    
FY  24 and  several  of  the years  in  the  10 year  fiscal                                                                    
outlook  the administration  predicted deficits.  He offered                                                                    
that  the deficit  disappeared over  time. He  detailed that                                                                    
there were  many assumptions inherent  in developing a  10                                                                      
year outlook and it was a  long time. The fiscal problems of                                                                    
the   state  would   continue  to   morph  and   change.  He                                                                    
acknowledged that in  the FY 24 the state would  be facing a                                                                    
deficit of  more than  $100 million.  He noted  the changing                                                                    
policy  decisions involved  in each  years  budget  process.                                                                    
Some  funding  was  based  on  additional  revenue  and  was                                                                    
discretionary like  school bond debt reimbursement  and some                                                                    
funding  items  were  things the  state  should  support  no                                                                    
matter what like public protection.                                                                                             
                                                                                                                                
2:22:25 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  understood that the SLERF  funding was real                                                                    
money  that   should  be  used.  However,   he  agreed  with                                                                    
Representative  Josephson   that  it  was   not  sustainable                                                                    
revenue.                                                                                                                        
                                                                                                                                
2:22:49 PM                                                                                                                    
                                                                                                                                
Representative Johnson found the  vast difference of opinion                                                                    
surprising. She  felt that the budget  was  well considered                                                                     
and was  impressed   with the results. She  thought that the                                                                    
governor had listened carefully  and included increases that                                                                    
were  not granted  in  prior budgets.  She  opined that  the                                                                    
budget reflected  many sides  across the  political spectrum                                                                    
and was   masterfully  crafted. She offered  that the budget                                                                    
did   not   include   any   of   the   forthcoming   federal                                                                    
infrastructure  funding.  She  restated  that  overall,  the                                                                    
budget was well considered. She appreciated the effort.                                                                         
                                                                                                                                
2:24:59 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  referenced  the capital  budget  totaling                                                                    
$1.67 billion.  He asked whether  the proposed amount  was a                                                                    
bonding package. Mr. Steininger  responded that $308 million                                                                    
of   capital  spending   would  be   comprised  of   General                                                                    
Obligation  Bonds  (GO) receipts  if  the  bond package  was                                                                    
adopted  and the  bulk of  the  remainder reflected  federal                                                                    
funding. He indicated that it showed  up as other funds on a                                                                    
table  in  the  presentation.   Vice-Chair  Ortiz  asked  if                                                                    
bonding was recurring debt. Mr.  Steininger responded in the                                                                    
affirmative. Vice-Chair  Ortiz suggested the  possibility of                                                                    
using some of the  one-time funding for capital expenditures                                                                    
instead  of incurring  debt.  He offered  that  it was  more                                                                    
appropriate   to    use   one-time   money    for   one-time                                                                    
expenditures. He asked whether  his suggestion was possible.                                                                    
Mr. Steininger understood  the logic but deemed  that in the                                                                    
current low interest environment  it would be an opportunity                                                                    
to  take advantage  of low  interest rates  for bonding.  He                                                                    
shared  that  it  was  the   reason  the  bond  package  was                                                                    
introduced. He reasoned that while  it added debt service to                                                                    
the state  of roughly  $22.8 million  over twenty  years the                                                                    
sum  was  manageable within  the  amount  of debt  that  was                                                                    
expiring. The  bonding fit within the  long-term fiscal plan                                                                    
and was a good opportunity for the state.                                                                                       
                                                                                                                                
2:28:04 PM                                                                                                                    
                                                                                                                                
Representative Wool clarified that in  FY 22 and FY 23 there                                                                    
was  a 50/50  PFD and  a  surplus. He  deduced that  looking                                                                    
ahead to FY  24 and FY 25  when the price of  oil was closer                                                                    
to  $70 per  barrel coupled  with  a 50/50  PFD payout,  the                                                                    
state  would  be  facing  a  deficit. He  asked  if  he  was                                                                    
correct.  Mr. Steininger  responded in  the affirmative  and                                                                    
noted the 10- year plan did  show a deficit that would close                                                                    
over  time.   He  communicated  that  the   10-year  outlook                                                                    
reflected the  December 15, 2022, Fall  Revenue Sources Book                                                                    
and did not consider the updated revenue forecast.                                                                              
                                                                                                                                
2:29:54 PM                                                                                                                    
                                                                                                                                
Representative Rasmussen  recalled that the state  could not                                                                    
use  the  federal  money   for  certain  infrastructure  and                                                                    
capital  expenses.  She  asked   if  she  was  correct.  Mr.                                                                    
Steininger  responded   that  he   was  not  aware   of  any                                                                    
restrictions on capital expenditures  and did use some SLERF                                                                    
funding in the  capital budget. He noted  the prohibition of                                                                    
using  SLERF  funding  to  directly  pay  debt  service.  He                                                                    
guessed that there  was another pot of  federal relief money                                                                    
that had the restriction.                                                                                                       
                                                                                                                                
2:31:25 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon admitted  his previous  comments were                                                                    
combative.  He  emphasized  that  he wanted  to  find  every                                                                    
opportunity  to  save  money  for the  rainy  day  that  was                                                                    
inevitable.                                                                                                                     
                                                                                                                                
Co-Chair  Foster  referenced  a bumper  sticker  that  read,                                                                    
 please  give  me  one  more   oil  boom.   He  agreed  with                                                                    
Representative Edgmons remarks.                                                                                                 
                                                                                                                                
Representative  Johnson  agreed with  Representative  Edgmon                                                                    
and  was in  favor of  finding efficiencies.  She reiterated                                                                    
that the governor's budget was a great starting place.                                                                          
                                                                                                                                
2:33:26 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  moved to  Slide 6  titled  Fiscal  Summary -                                                                    
Savings Balances:                                                                                                               
     FY2022  CBR  beginning  balance reflects  an  estimated                                                                    
     $490.4m  swept CBR  under Alaska  Constitution Art.  IX                                                                    
     Sec.  17(d). Audited  amounts will  be reported  in the                                                                    
     FY2022 Annual Comprehensive Financial Report.                                                                              
                                                                                                                                
     FY2023 budget includes $33.6m in UGF to replace fund                                                                       
     sources impacted by the CBR sweep. Fully supports all                                                                      
     associated programs.                                                                                                       
                                                                                                                                
Mr. Steininger  communicated that the state  had two primary                                                                    
savings  accounts: The  Statutory Budget  Reserve (SBR)  and                                                                    
the CBR.  He elucidated  that the  SBR had  an approximately                                                                    
$70  million  balance  and  was   available  with  a  simple                                                                    
majority  vote.   The  Constitutional  Budget   Reserve  was                                                                    
available with  a super majority or  three-quarter vote. The                                                                    
balance  was expected  to  grow  over the  FY  22  to FY  23                                                                    
period. The current  CBR balance of $1.17  billion was based                                                                    
on  pre-audited  financial  information. He  explained  that                                                                    
due to the sweep, the only  way to calculate the swept funds                                                                    
was  via a  pre-audit.  The swept  amount  was $490  million                                                                    
under Article 9,  Section 17 b of  the states  Constitution.                                                                    
The balance  would be updated once  the financial statements                                                                    
were   audited.   Mr.    Steininger   continued   that   the                                                                    
administration  had tried  to build  a budget  that did  not                                                                    
rely on  the savings   accounts to meet  the needs  of state                                                                    
programs. He reported that the  budget contained $34 million                                                                    
in fund  change actions  to shift from  DGF that  were swept                                                                    
and transferred to UGF appropriations.                                                                                          
                                                                                                                                
2:36:11 PM                                                                                                                    
                                                                                                                                
Representative  LeBon   stated  his  understanding   of  the                                                                    
states  savings accounts. He  asked for discussion regarding                                                                    
how money flowed  into both accounts and the  sources of the                                                                    
money.  Mr. Steininger  answered  that the  SBR balance  was                                                                    
directly  appropriated  by  the legislature.  He  elucidated                                                                    
that there  was no automatic mechanism  that deposited money                                                                    
into the SBR. It was  comprised completely of ad-hoc savings                                                                    
deposited  by the  legislature. He  noted that  roughly $481                                                                    
million  was deposited  and $410  million was  spent leaving                                                                    
the balance of $70 million.  The CBR contained certain types                                                                    
of revenues  or earnings  that flowed  into it  as automatic                                                                    
deposits  via  constitutional  provisions  for  things  like                                                                    
court  settlements.  He  stated  that $30  million  and  $60                                                                    
million were deposited over  two years. Representative LeBon                                                                    
asked  whether  the  CBR balance  currently  included  swept                                                                    
funds and  if the largest  swept amount was from  the Higher                                                                    
Education  Investment  Fund  (HEIF).   He  answered  in  the                                                                    
affirmative.  He added  that out  of the  $490 million  pre-                                                                    
audited balance, $400 million was from the HEIF.                                                                                
                                                                                                                                
Representative  Josephson noted  that there  were scores  of                                                                    
sub funds that  were swept. He wondered if the  total of the                                                                    
other  swept   funds  was  $33.6  million.   Mr.  Steininger                                                                    
answered that  the $33.6 million was  the difference between                                                                    
anticipated   revenue  into   the  sub   accounts  and   the                                                                    
appropriated need  for the program. He  provided the example                                                                    
of alcohol taxes. If the  amount collected was less than the                                                                    
actual needs a fund change  was necessary for the remainder.                                                                    
The  fund change  would accommodate  the difference  between                                                                    
projected revenue  and expenditure need. He  voiced that the                                                                    
utilization was  greater than $33  million, but  that amount                                                                    
was necessary to protect the programs.                                                                                          
                                                                                                                                
2:39:50 PM                                                                                                                    
                                                                                                                                
Representative  Josephson  cited  the Spill  Prevention  and                                                                    
Response  (SPAR)   fund  and  the  HEIF.   He  had  received                                                                    
correspondence  from concerned  citizens  regarding the  two                                                                    
funds.  He  asked  it  there were  other  groups  that  were                                                                    
alarmed  by   having  their  funds  swept.   Mr.  Steininger                                                                    
responded that  the transition to  a  post-sweep   period of                                                                    
the  budget would  take  some  time to  figure  out all  the                                                                    
implications of the sweep. He  explained that the reason the                                                                    
special  funds   existed  was  because  the   revenues  were                                                                    
somewhat  volatile. The  current fund  change was  predicted                                                                    
for FY 23.  He determined that it would be  necessary to use                                                                    
variable fund  changes each year  or reconsider how  some of                                                                    
the  programs  were financed.  He  concluded  that it  would                                                                    
require  time  to look  at  the  structure  of some  of  the                                                                    
programs to figure  out how to support  the programs without                                                                    
the  sweep. He  added  that many  of  the programs  required                                                                    
relatively small amounts of support.                                                                                            
                                                                                                                                
2:41:53 PM                                                                                                                    
                                                                                                                                
Representative  Thompson  wondered   what  the  balances  of                                                                    
unspent money  was in  COVID relief  accounts. He  asked how                                                                    
much money had been spent.  Mr. Steininger would provide the                                                                    
information.                                                                                                                    
                                                                                                                                
2:42:43 PM                                                                                                                    
                                                                                                                                
Mr. Steininger turned to slide 7 titled Capital Budget:                                                                         
                                                                                                                                
     Baseline traditional FY23 capital budget                                                                                   
     $157.4m UGF; $1.4b Fed                                                                                                     
                                                                                                                                
     Minimum level capital budget for federal match and                                                                         
     core state functions                                                                                                       
                                                                                                                                
     Use FY22 surplus for additional capital projects $93m                                                                      
     UGF                                                                                                                        
                                                                                                                                
     Projects that benefit from expedited construction                                                                          
                                                                                                                                
     GO Bond financing for community projects $325.2m bond                                                                      
     issuance                                                                                                                   
                                                                                                                                
     Investment in key infrastructure to maximize public                                                                        
     benefit around the state                                                                                                   
                                                                                                                                
     Approved by voters in Fall 2022 general election                                                                           
                                                                                                                                
Mr.  Steininger  reviewed  the  strategy  used  to  increase                                                                    
capital investments  beyond the  capital budget  process. He                                                                    
noted  that  $93 million  in  surplus  was included  in  the                                                                    
supplemental for capital  projects. The supplemental capital                                                                    
appropriations  enabled  obtaining contractors  and  getting                                                                    
them  working earlier.  He relayed  that  with the  oncoming                                                                    
infrastructure  spending in  every  state,  Alaska would  be                                                                    
competing  for  contractors  and  crew. He  thought  it  was                                                                    
prudent to get some of  the state's projects starting sooner                                                                    
in  order  to  attain   commitments  from  contractors.  Mr.                                                                    
Steininger continued by discussing  the state bond issuance.                                                                    
The  administration  viewed it  as  a  means of  working  on                                                                    
community projects that would come  online in the future due                                                                    
to the need for voters' approval.                                                                                               
                                                                                                                                
2:45:15 PM                                                                                                                    
                                                                                                                                
Co-Chair Merrick asked  if the $325 million  was accurate or                                                                    
updated. Mr.  Steininger responded  in the  affirmative. The                                                                    
bond  issuance  bill  was  drafted in  the  amount  of  $325                                                                    
million. However,  one bond  project needed  to be  added to                                                                    
the capital  budget bill as  an amendment and  explained the                                                                    
difference between the $325 million versus $308 million.                                                                        
                                                                                                                                
2:45:53 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  addressed the  graph on  slide 8  titled  FY                                                                    
2023 Operating  UGF.  The graph  was included to  depict the                                                                    
relative  sizes  of the  departmental  budgets.  He noted  a                                                                    
change  reflected in  the separation  of  the Department  of                                                                    
Health  and Social  Services into  the Department  of Health                                                                    
and  the Department  of Family  and  Community Services.  He                                                                    
reported  that the  retirement debt  used to  be the  fourth                                                                    
column but shifted down to the tenth column.                                                                                    
                                                                                                                                
2:46:57 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger  moved  to  slide 9  titled   FY  23  Agency                                                                    
Operating  Budget  Changes.   He indicated  that  the  table                                                                    
reflected  the major  changes in  the operating  budget. The                                                                    
budget had $108  million in built-in cost drivers  such as a                                                                    
Reverse DOTPF  One-Time Fed  Relief totaling  $10.9 million,                                                                    
and  a Medicaid  increase in  of $45  million. There  was an                                                                    
increase  to the  Medicaid budget  of $45  thousand, Central                                                                    
Service   Rate   Adjustments   of   $4.2   million,   Salary                                                                    
adjustments  of  13  million, Restoring  Funding  for  Sweep                                                                    
Impacts  of  $33.6  million,  and  other  small  adjustments                                                                    
totaling  $1.1  million. He  reported  that  there was  $136                                                                    
million  in agency  reductions. The  largest was  due to  an                                                                    
infusion of $63.4 million of  federal subsidy for the Alaska                                                                    
Marine Highway System (AMHS). He  qualified that there was a                                                                    
5 year  rural ferry  program included in  the infrastructure                                                                    
bill, which  reflected the subsidy  and was included  in the                                                                    
FY  23  capital  budget  as an  exception  because  it  only                                                                    
required a small  amount of state match money.  He noted the                                                                    
$16.8 million  in the K-12 Formula  program, and significant                                                                    
reduction  of  $44.5  million  in  PERS/TERS  and  from  the                                                                    
passage of SB  55, which changed the way  the state financed                                                                    
retirement  system   obligations.  He  cited   the  targeted                                                                    
reductions  of  $11.8  million.  The  chart  concluded  with                                                                    
 Targeted  Investments  in  the amount  of $42.6  million in                                                                    
public safety  and resource development and  primacy issues.                                                                    
He  reiterated that  the budget  was flat  showing a  slight                                                                    
increase of $13.9 million.                                                                                                      
                                                                                                                                
2:49:16 PM                                                                                                                    
                                                                                                                                
Representative  Wool referred  to  the $63  million for  the                                                                    
AMHS.  He asked  if the  money  was a  one-time infusion  or                                                                    
spread over 5 years. Mr.  Steininger responded that it was a                                                                    
5  year program  distributing $200  million nationwide,  and                                                                    
only two  rural ferry programs qualified.  The amount offset                                                                    
$63.4 million UGF and offset  the receipts from ferry system                                                                    
ticket sales.  The appropriation removed all  but $5 million                                                                    
of   state  money. Representative  Wool queried  whether the                                                                    
appropriation was for  FY 23 or whether it  continued over 5                                                                    
years. Mr. Steininger  replied that it was a  5 year program                                                                    
and would  continue for 5  years. Representative  Wool asked                                                                    
if the  total amount was  $300 million  over 5 years  or how                                                                    
much  was  anticipated  over  the  following  4  years.  Mr.                                                                    
Steininger  responded  that  the  entire  program  was  $200                                                                    
million per year  over 5 years. It was  a nationwide program                                                                    
with only two states competing for the funding.                                                                                 
                                                                                                                                
2:51:59 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger  turned to  Slide  10  titled  Formula  Cost                                                                    
Drivers.  He explained that formula  cost drivers were state                                                                    
programs  where  the  amount of  expenditure  was  based  on                                                                    
eligibility or  other mathematical  formulas resulting  in a                                                                    
state  obligation.  He  commented that  K-12  Education  was                                                                    
fully funded  to the $5,930  base student  allocation (BSA).                                                                    
There  was a  small  reduction in  Average Daily  Membership                                                                    
(ADM)  and an  increase  in correspondence  students in  the                                                                    
amount  of  $19  million  primarily  because  correspondence                                                                    
received  less funding  than brick  and mortar  students. He                                                                    
discussed the Medicaid program:                                                                                                 
                                                                                                                                
     Medicaid                                                                                                                   
                                                                                                                                
      COVID-related enhanced federal match (FMAP) currently                                                                     
      expires at end of FY 2022                                                                                                 
                                                                                                                                
     Pent up demand for services increases utilization                                                                          
                                                                                                                                
       $45m UGF increment restores Medicaid state share to                                                                      
       pre-pandemic levels                                                                                                      
                                                                                                                                
Mr.  Steininger   conveyed  that  more  than   one-third  of                                                                    
Alaskans  were   on  Medicaid  due  to   the  pandemic.  The                                                                    
administration  hoped that  recipients  could transition  to                                                                    
other sources for health care needs.                                                                                            
                                                                                                                                
2:54:42 PM                                                                                                                    
                                                                                                                                
Representative  LeBon cited  slide 9  and the  federal money                                                                    
for the  Alaska Marine Highway  System. He deduced  that the                                                                    
funding was  for operating costs  and wondered if  the funds                                                                    
could be used  for a capital maintenance fund  and use state                                                                    
money to operate  the system to build up  a maintenance fund                                                                    
to build the  system back up. Mr.  Steininger responded that                                                                    
the federal  monies used in the  FY 23 budget was  only from                                                                    
the rural ferry program. He  explained that there were other                                                                    
items  in  the  infrastructure   bill  that  the  state  was                                                                    
eligible for but was awaiting  clarity on the rules. Some of                                                                    
the programs covered maintenance  but the administration was                                                                    
waiting for a directive on how  the money could be spent. He                                                                    
revealed that  if the federal  funds were slated for  only 5                                                                    
years,  the administration  wanted to  transition the  ferry                                                                    
system to  a system  that was  sustainable under  full state                                                                    
support.  Representative LeBon  thought the  federal funding                                                                    
was an  opportunity to  shore  up  the capital  funding pool                                                                    
to support  maintaining the system over  years. He commented                                                                    
that he endorsed a shared  approach of come capital and some                                                                    
operating  to the  AMHS  funding.  Mr. Steininger  commented                                                                    
that  one  of  the  benefits  of  using  the  federal  money                                                                    
replacing passenger receipts left the  $50 or $60 million in                                                                    
annual revenue free for other things.                                                                                           
                                                                                                                                
2:58:02 PM                                                                                                                    
                                                                                                                                
Representative Wool asked if the  ferry replacement fund had                                                                    
been  swept  and  was  no longer  available  for  the  ferry                                                                    
system.  Mr. Steininger  responded  in  the affirmative  and                                                                    
relayed that the vessel replacement  fund was subject to the                                                                    
CBR sweep.                                                                                                                      
                                                                                                                                
Representative  Josephson asked  if the  BSA was  updated to                                                                    
reflect  the last  5 years  of  inflation and  what was  the                                                                    
cost.  Mr. Steininger offered to provide the information.                                                                       
                                                                                                                                
2:59:05 PM                                                                                                                    
                                                                                                                                
Representative Edgmon  thanked the  congressional delegation                                                                    
for getting infrastructure money to  the State of Alaska and                                                                    
specifically  operational money  for the  AMHS. He  believed                                                                    
that   the   AMHS   was  a   critical   part   of   Alaskas                                                                     
transportation chain.                                                                                                           
                                                                                                                                
Representative  Rasmussen agreed  with the  previous speaker                                                                    
and  applauded  the  congressional  delegation  and  Senator                                                                    
Murkowskis   leadership.   She  asked   if  the   state  had                                                                    
increased ferry service in FY  23. Mr. Steininger replied in                                                                    
the  affirmative.  He  indicated   that  the  rural  program                                                                    
allowed the system  to run all of the  vessels, maximize the                                                                    
schedule, and increase service.                                                                                                 
                                                                                                                                
3:01:25 PM                                                                                                                    
                                                                                                                                
Mr.   Steininger   moved   to  slide   11   titled    Public                                                                    
Protection:                                                                                                                     
                                                                                                                                
     Over $30 million operating UGF added for public                                                                            
     protection:                                                                                                                
     ? Fully fund filled positions added in previous fiscal                                                                     
       years for Public Safety and Law: $1.3m                                                                                   
     ? 15 new Trooper positions                                                                                                 
    ? 10 new Village Public Safety Officers and related                                                                         
       costs: $3.9m                                                                                                             
   ? Add 14 DPS support positions so Troopers can focus                                                                         
       on policing: $1.8m                                                                                                       
     ? Add positions for Rural Fire Investigations and                                                                          
       increase DNR wildland fire fighting capacity: $4.5m                                                                      
   ? Add 30 Correctional institution support positions,                                                                         
       mental health treatment resources, and Hiland                                                                            
       Mountain  booking:   $4.1m                                                                                               
    ? Address trial backlogs $1.8m and defense capacity                                                                         
      $428.7k                                                                                                                   
                                                                                                                                
3:03:49 PM                                                                                                                    
                                                                                                                                
Representative  LeBon   asked  where  the  15   new  trooper                                                                    
positions would be sent. Mr.  Steininger responded that most                                                                    
of them  would likely be stationed  in the Matanuska-Susitna                                                                    
Valley  (Mat-Su).   He  pointed  out  that   the  department                                                                    
preferred  to start  new troopers  in urban  areas and  send                                                                    
senior troopers  to rural areas. Representative  LeBon asked                                                                    
why  the   Mat-Su  Valley  needed  15   new  positions.  Mr.                                                                    
Steininger deferred  the answer to the  Department of Public                                                                    
Safety  (DPS). Representative  LeBon inquired  why Fairbanks                                                                    
was  not considered  for new  troopers.  He understood  that                                                                    
some of  the new troopers  would be  part of a  mobile rapid                                                                    
response  unit that  could respond  in rural  communities as                                                                    
needed.  He   asked  if  that  was   still  envisioned.  Mr.                                                                    
Steininger  indicated that  the 15  positions were  added to                                                                    
help with  recruitment and retention issues.  He deferred to                                                                    
the department to  relay its strategy for  the deployment of                                                                    
its   troopers.   Representative  LeBon   acknowledged   the                                                                    
struggles  around  trooper  recruitment  and  retention.  He                                                                    
hoped that DPS was making progress on the issue.                                                                                
                                                                                                                                
Co-Chair Merrick  reported she  had a  meeting with  DPS and                                                                    
relayed  that  she  would  address the  issues  in  the  DPS                                                                    
subcommittee.                                                                                                                   
3:07:17 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger  continued  with  slide  12  titled   Public                                                                    
Protection:                                                                                                                     
                                                                                                                                
     People First Initiative UGF:                                                                                               
                                                                                                                                
     ? Domestic Violence and Sexual Assault                                                                                     
                                                                                                                                
     ? $3.5m for victim services provider grants                                                                                
                                                                                                                                
     ? $1.5m to reduce turnaround time on DNA testing and                                                                       
       increase forensics lab capacity                                                                                          
                                                                                                                                
       $1.0m for staff to provide victim services and                                                                           
       perpetrator intervention                                                                                                 
                                                                                                                                
       Missing and Murdered Indigenous Persons                                                                                  
                                                                                                                                
     ? Tribal liaisons and additional support for the                                                                           
       Missing Persons Clearinghouse $713.9k                                                                                    
                                                                                                                                
     ? Homelessness                                                                                                             
                                                                                                                                
     ? Statewide homelessness coordinator, database and                                                                         
       data manager $866.3k                                                                                                     
                                                                                                                                
     ? Foster Care and Office of Children's Services                                                                            
                                                                                                                                
       $1.4m for the Tribal Child Welfare Compact                                                                               
                                                                                                                                
Representative Edgmon  asked where the tribal  liaison would                                                                    
be  located.  He  heard  they would  be  in  the  governor's                                                                    
office.  Mr.   Steininger  would  provide  the   answer.  He                                                                    
furthered  that  the  tribal  liaison  engagement  would  be                                                                    
focused between the governors office and agencies.                                                                              
                                                                                                                                
Co-Chair Foster thanked the governor  for the services being                                                                    
in  both rural  and  urban areas  and  the positive  efforts                                                                    
taken.                                                                                                                          
                                                                                                                                
3:09:51 PM                                                                                                                    
                                                                                                                                
Mr.   Steininger  discussed   Slide   13  titled    Resource                                                                    
Development and State Primacy:                                                                                                  
                                                                                                                                
     Invest in state primacy over resource management                                                                           
     Expand timber resource capacity $460.0k                                                                                    
                                                                                                                                
    $5.7m to assume primacy from the EPA over resource                                                                          
      development permitting                                                                                                    
                                                                                                                                
          Resource Conservation and Recovery Act $830.0k                                                                        
                                                                                                                                
          Clean Water Act Section 404 $4.9m                                                                                     
                                                                                                                                
     $4m to continue statehood defense efforts                                                                                  
                                                                                                                                
     Capital funding to develop mariculture and agriculture                                                                     
     industries to enhance food security and economic                                                                           
     development $50m                                                                                                           
                                                                                                                                
3:11:24 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz referenced the  Clean Water Act Section 404                                                                    
at  $4.9  million.  He  relayed that  in  the  prior  years                                                                     
Department of Environmental  Conservation (DEC) subcommittee                                                                    
the agency was encouraged to  hire for unfilled positions in                                                                    
SPAR, which they  failed to carry out. He asked  if the $4.9                                                                    
million  created  a  new  section  in  DEC.  Mr.  Steininger                                                                    
confirmed  that  the  administration   was  creating  a  new                                                                    
section and taking on additional  activity. He remarked that                                                                    
currently the work  was performed at the  federal level. The                                                                    
expenditure represented a significant  increase in staff and                                                                    
workload.  However,  the  administration   viewed  it  as  a                                                                    
benefit to   Alaska  in the long-term  by bringing  a  state                                                                    
focus  to  the decisions being made.  Vice-Chair Ortiz asked                                                                    
if  the increment  would be  one-time  only. Mr.  Steininger                                                                    
indicated the  service would  be ongoing  and scale  up over                                                                    
time as the capacity increased.                                                                                                 
                                                                                                                                
3:13:38 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger  moved to  slide  14  titled  Improve  State                                                                    
Government Functions:                                                                                                           
                                                                                                                                
     Executive Order for new Department of Family and                                                                           
     Community Services and Department of Health                                                                                
                                                                                                                                
          DFCS for leadership focus to Children's                                                                               
          Services, Juvenile Justice, and 24-hour                                                                               
           facilities                                                                                                           
                                                                                                                                
           DOH for leadership focus on public health                                                                            
          Medicaid, and public assistance                                                                                       
                                                                                                                                
       $434.3k UGF and $1.9m Total for new positions                                                                            
                                                                                                                                
  Public Safety Communication Systems transfer to Public                                                                        
     Safety                                                                                                                     
                                                                                                                                
           This function is more aligned with DPS' mission                                                                      
           to ensure public safety                                                                                              
                                                                                                                                
           DPS has an existing division that can seamlessly                                                                     
           absorb these services                                                                                                
                                                                                                                                
           Net zero budget impact                                                                                               
                                                                                                                                
   Transfer Exxon Valdez Oil Spill Trustee Council from                                                                         
     ADFG to DEC                                                                                                                
                                                                                                                                
          ? Net zero budget impact                                                                                              
                                                                                                                                
    Invest in Department of Administration Information                                                                          
     Technology                                                                                                                 
                                                                                                                                
           "Pandemic Proofing" and avoidance of the next                                                                        
          major cyber-attack $28.9m UGF (capital)                                                                               
                                                                                                                                
           Restructured how  cost of  investments in  IT and                                                                    
          other  central  services   are  reflected  in  the                                                                    
          budget.  Adds  additional accountability  for  DOA                                                                    
          costs. $4.1m UGF                                                                                                      
                                                                                                                                
3:16:19 PM                                                                                                                    
                                                                                                                                
Representative  LeBon  spoke  of  moving  the  communication                                                                    
system from  the Department of  Administration (DOA)  to the                                                                    
Department  of  Military  and Veterans  Affairs  (DMVA).  He                                                                    
wondered  if   the  transaction  was  being   reversed.  Mr.                                                                    
Steininger responded that it was  currently being moved from                                                                    
DMVA to DPS.  He added that it became apparent  it should be                                                                    
housed in DPS.                                                                                                                  
                                                                                                                                
Representative Wool cited food  security and the $50 million                                                                    
appropriation and  wondered how  the appropriation  would be                                                                    
spent.  Mr.  Steininger  responded  there  were  2  separate                                                                    
programs:  $25 million  in mariculture  and  $25 million  in                                                                    
agriculture. He  expounded that the mariculture  program was                                                                    
primarily grant  focused. The Division of  Agriculture would                                                                    
manage the $25 million  for agriculture. There were multiple                                                                    
objectives   for  the   funding.  He   offered  to   provide                                                                    
additional information to the committee or subcommittee.                                                                        
                                                                                                                                
3:18:48 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger discussed  slide  15  titled  Federal  Covid                                                                    
Relief:                                                                                                                         
                                                                                                                                
     American Rescue Plan Discretionary Funding                                                                                 
                                                                                                                                
          $375.4m for revenue replacement                                                                                       
                                                                                                                                
          $20m in Fast Track Supplemental for public health                                                                     
           response                                                                                                             
                                                                                                                                
          $37.4m FY2023 Operating investments                                                                                   
                                                                                                                                
              $10m for workforce development                                                                                    
               $22.8m to the University of Alaska for                                                                           
               critical economic development                                                                                    
                                                                                                                                
                    Drone Research $10m                                                                                         
                    Critical   Minerals   and   Rare   Earth                                                                    
                    Elements $7.8m                                                                                              
                    Heavy Oil Recovery Method Research $5m                                                                      
                                                                                                                                
          $3.5m for Domestic Violence and Sexual Assault                                                                        
          Victim Services                                                                                                       
                                                                                                                                
          $1.1m to continue priority DNA collection                                                                             
          activities in Corrections                                                                                             
                                                                                                                                
          $72m in Capital projects                                                                                              
                                                                                                                                
          $64m of Coronavirus Capital Project Funds                                                                             
          Allocated                                                                                                             
                                                                                                                                
          $47.9m remaining to allocate                                                                                          
                                                                                                                                
3:21:21 PM                                                                                                                    
                                                                                                                                
Representative Johnson  asked for  some examples of  the $64                                                                    
million.  Mr.   Steininger  replied   that  the   money  was                                                                    
allocated  in  the  proposed  capital  budget  but  not  yet                                                                    
appropriated.  He  delineated  that there  were  3  proposed                                                                    
projects.  First, a  student Information  Technology program                                                                    
for  the University  of Alaska.  Secondly, an  appropriation                                                                    
for  the  fire  facility  in  Eagle  River  built  around  a                                                                    
community center  concept. The third project  was for Health                                                                    
Information Systems for DHSS.                                                                                                   
                                                                                                                                
3:22:26 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz asked if there  was a list of projects that                                                                    
made up the $72 million  in capital projects. Mr. Steininger                                                                    
would provide more detailed information  in a future capital                                                                    
budget presentation.                                                                                                            
                                                                                                                                
3:23:05 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger   continued  to  slide  16   titled   FY  23                                                                    
Statewide  Operating Items.   He  noted an  increase of  $60                                                                    
million UGF for Debt Service  due to the increment in School                                                                    
Bond  Debt  Reimbursement.  He highlighted  the  significant                                                                    
reduction  in   Retirement  Assistance  Payments   for  $116                                                                    
million. He  reported that there was  a substantial increase                                                                    
in Fund Capitalizations and Transfers  due to the payment of                                                                    
the full statutory appropriation of  Oil and Gas Tax Credits                                                                    
in the amount of $145  million. The chart showed a decrement                                                                    
of $34  million in  the Disaster  Relief Fund;  however, the                                                                    
request  was   in  the   current  supplemental   budget  for                                                                    
continued work  for the earthquake  disaster in  2017. There                                                                    
was  an increase  in the  REAA fund  that went  hand-in-hand                                                                    
with School Bond Debt Reimbursement  and was fully funded at                                                                    
$15.6 million.  He pointed to  the statutory  designation of                                                                    
 Other  showing  a $14.3 million reduction  and indicated it                                                                    
was due to  a recategorization of funds from UGF  to DGF and                                                                    
was not truly a reduction.                                                                                                      
                                                                                                                                
3:25:23 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  moved to slide  17 titled   SB 55/Retirement                                                                    
Contributions:                                                                                                                  
                                                                                                                                
     Strong investment performance in FY21 resulted in                                                                          
  significant savings for the public employee retirement                                                                        
     systems                                                                                                                    
                                                                                                                                
    Investment performance reduced the State's required                                                                         
   contribution to PERS/TRS systems by $75.4 million UGF                                                                        
                                                                                                                                
     Avoiding overcontribution to PERS/TRS health trusts                                                                        
     saved $71 million UGF                                                                                                      
                                                                                                                                
     SB55 year two fiscal note reduction of $14.7 million                                                                       
     UGF by shifting to other fund sources                                                                                      
    Total FY23 retirement savings: ($161.1 million UGF)                                                                         
                                                                                                                                
3:25:58 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  asked about the $161  million reduction in                                                                    
contributions  to the  retirement fund.  He wondered  if the                                                                    
state  eliminated  its  unfunded  lability.  Mr.  Steininger                                                                    
answered that  the states  funding  ratio was less  than 100                                                                    
percent and  the state maintained  its obligation  above the                                                                    
normal  costs  of paying  into  the  retirement system.  The                                                                    
strong   investment  returns   considerably  decreased   the                                                                    
obligation. The state  had been closing the  gap between the                                                                    
liability  and the  assets  available.  He deferred  further                                                                    
answer to the Division of Retirement and Investments.                                                                           
                                                                                                                                
3:27:17 PM                                                                                                                    
                                                                                                                                
Mr. Steininger  addressed slide  18 titled   Other Statewide                                                                    
Items: on                                                                                                                       
                                                                                                                                
     Fully fund municipal school bond debt reimbursement                                                                        
     $79.0m UGF                                                                                                                 
                                                                                                                                
     Fully fund rural school construction contribution                                                                          
     (Regional Educational Attendance Area fund) $32.8m UGF                                                                     
                                                                                                                                
    Full community assistance deposit of $30m from PCE                                                                          
                                                                                                                                
     Full funding for oil and gas tax credits of $199m UGF                                                                      
                                                                                                                                
3:28:03 PM                                                                                                                    
                                                                                                                                
Mr.  Steininger  continued  to the  final  slide  19  titled                                                                    
 Federal Infrastructure Investment and Jobs Act:                                                                                
                                                                                                                                
     Infrastructure Investments and Jobs Act                                                                                    
          Enacted November 15, 2021                                                                                             
                                                                                                                                
       5-year reauthorization of established federal                                                                            
          programs and new programs                                                                                             
                                                                                                                                
                                                                                                                                
          New program details still pending Some program                                                                        
     funding appropriated in the bill, others awaiting                                                                          
          an FFY22 budget                                                                                                       
                                                                                                                                
     Maximizing use in Alaska Marine Highway System to                                                                          
          preserve UGF and transition to a sustainable                                                                          
          system                                                                                                                
                                                                                                                                
          Remaining funds to be addressed when further                                                                          
          guidance is received                                                                                                  
                                                                                                                                
Mr.  Steininger   cautioned  that  the   administration  was                                                                    
attempting to determine  how the IIJA funding  could be used                                                                    
but  the details  were actively  changing, and  the guidance                                                                    
was not  yet available.  He reiterated  that except  for the                                                                    
AMHS funding, none  of the money was appropriated  in the FY                                                                    
23 budget.                                                                                                                      
                                                                                                                                
                                                                                                                                
Representative LeBon  asked if the school  bond indebtedness                                                                    
payment  was reimbursing  at the  statutory amounts  and not                                                                    
more. Mr.  Steininger replied in  the affirmative  and added                                                                    
that it depended  on the year the  municipality entered into                                                                    
the debt,  which guided the percentage  of payment according                                                                    
to  statute.  The  $79  million  represented  the  statutory                                                                    
obligation under the program.                                                                                                   
                                                                                                                                
3:30:16 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon referred  to  slide 19  and the  IIJA                                                                    
funding.  He wondered  what the  process  to distribute  the                                                                    
funding  was  and  if  the  administration  would  submit  a                                                                    
proposal or  amendments. Mr. Steininger ascertained  that as                                                                    
more  guidance  for  the funding  was  known  the  committee                                                                    
should expect amendments for some  of the items, but not all                                                                    
the  items.  There  were  many questions  that  need  to  be                                                                    
answered  and at  the current  stage of  understanding there                                                                    
were  no amendments  ready to  offer. Representative  Edgmon                                                                    
asked if the administration  would work with the legislature                                                                    
and work  through the appropriations  process or  would some                                                                    
of the  funding go  through the Revised  Program Legislative                                                                    
(RPL)  process  in  the  Budget  and  Audit  Committee.  Mr.                                                                    
Steininger responded  that the  administration was  happy to                                                                    
work  with  the  legislature and  would  present  additional                                                                    
information   regarding  IIJA.   He  reiterated   that  more                                                                    
guidance was  needed from the  federal government.  He noted                                                                    
that the funding  was different than the  prior COVID relief                                                                    
money  that was  meant to  respond to  an emergency  and was                                                                    
more   open ended.   Representative  Edgmon  thought he  had                                                                    
heard the  governor had appointed  an individual  to oversee                                                                    
the  activity.  He  wondered whether  the  person  would  be                                                                    
placed in  Juneau during  session. Mr.  Steininger responded                                                                    
that  the   administration  was  ready  to   work  with  the                                                                    
legislature  and  would  make itself  available  whether  in                                                                    
person  or  other  means.  Representative  Edgmon  found  it                                                                    
 dramatically   underwhelming   regarding   the  focus   and                                                                    
inertia   that  was   not   being   generated  towards   the                                                                    
 generational   opportunity  being   afforded  Alaska.    He                                                                    
reiterated his  thanks for the efforts  of the congressional                                                                    
delegation  and  specifically   Senator  Murkowski.  He  was                                                                    
surprised that the issue was not a major focus.                                                                                 
                                                                                                                                
3:35:12 PM                                                                                                                    
                                                                                                                                
Representative Thompson  referred to slide 18  and cited the                                                                    
$30 million  for community assistance programs  from PCE. He                                                                    
recalled  that  community  assistance   used  to  be  funded                                                                    
through  UGF. He  wondered why  the  money was  not used  to                                                                    
reduce the costs of power  in rural communities. He asked if                                                                    
his assessment was correct. Mr.  Steininger replied that the                                                                    
$30 million was based on  the statutory formula waterfall of                                                                    
how the  earning should be  used. He detailed that  first it                                                                    
covered the  PCE program  itself at  $32 million,  then paid                                                                    
the Community  Assistance Fund  and finally  supported other                                                                    
programs that  invested in infrastructure in  the state. The                                                                    
capital budget contained further  PCE appropriations per the                                                                    
statutory  calculations that  covered  programs through  the                                                                    
Alaska  Energy Authority  (AEA)  and others.  Representative                                                                    
Thompson  asked  if the  $30  million  payout for  Community                                                                    
Assistance was statutorily  mandated. Mr. Steininger replied                                                                    
in the affirmative.                                                                                                             
                                                                                                                                
Co-Chair Foster  asked whether there was  sufficient funding                                                                    
to  pay the  $30 million  from  the waterfall  from the  PCE                                                                    
earnings.  Mr. Steininger  answered in  the affirmative  and                                                                    
noted that if the fund  earned more than the waterfall needs                                                                    
the balance would remain in the fund.                                                                                           
                                                                                                                                
Co-Chair Foster  reviewed the agenda for  the following day.                                                                    
He  thanked   Mr.  Steininger   for  appearing   before  the                                                                    
committee and appreciated the robust discussion.                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
3:38:42 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:38 p.m.