Legislature(2021 - 2022)ADAMS 519
03/01/2021 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB69 || HB71 | |
| Presentation: Coronavirus Aid, Relief, and Economic Security (cares) Act Funding Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 69 | TELECONFERENCED | |
| += | HB 71 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 1, 2021
1:34 p.m.
1:34:06 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:34 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
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; Paloma Harbour, Fiscal Management
Practices Analyst, Office of Management and Budget, Office
of the Governor; Leslie Isaacs, Ts'aang Gaa'y,
Administrative Service Director, Department of
Administration, Office of Management and Budget, Office of
the Governor.
PRESENT VIA TELECONFERENCE
Lacey Sanders, Administrative Services Director, Department
of Education and Early Development, Office of Management
and Budget, Office of the Governor; Dom Pannone,
Administrative Services Director, Department of
Transportation and Public Facilities, Office of Management
and Budget, Office of the Governor; Kelly Tshibaka,
Commissioner, Department of Administration.
SUMMARY
HB 69 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 69 was HEARD and HELD in committee for further
consideration.
HB 71 APPROP: MENTAL HEALTH BUDGET
HB 71 was HEARD and HELD in committee for further
consideration.
PRESENTATION: CORONAVIRUS AID, RELIEF, AND ECONOMIC
Security (CARES) ACT FUNDING UPDATE
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 69
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; making
supplemental appropriations; making appropriations
under art. IX, sec. 17(c), Constitution of the State
of Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
HOUSE BILL NO. 71
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making
supplemental appropriations; and providing for an
effective date."
1:34:06 PM
^PRESENTATION: CORONAVIRUS AID, RELIEF, AND ECONOMIC
Security (CARES) ACT FUNDING UPDATE
1:35:02 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced a PowerPoint
presentation titled "State of Alaska Office of Management
and Budget: House Finance COVID-19 Funding Overview," dated
March 1, 2021 (copy on file). He began with a timeline of
the state's fiscal response to COVID-19 on slide 2. He
detailed that there had been four separate bills on three
separate events related to COVID relief. He elaborated that
on March 16 [2020] the legislature had passed, and the
governor had signed the mental health budget, HB 206. The
budget had included an estimated $9 million in federal
receipts and $4.1 million in undesignated general funds
(UGF). He expounded that at the time the state thought the
response to COVID would be quarantining a couple of
travelers coming into the state or other smaller activities
with lower costs such as renting some hotel rooms out to
put people up and some smaller measures for cruise ship
traffic that had been expected during the summer.
Mr. Steininger continued to address slide 2. He explained
that by April 6 [2020] there had been a better
understanding that the initial cost estimates had been very
low. He expounded that at that point the state had received
some federal receipts from housing and urban development,
which were put into the supplemental budget for housing
relief. He elaborated that $8.5 million had been put
forward specifically for coastal communities, while still
anticipating a cruise ship season. Money had been
appropriated that would allow communities to mitigate the
spread of COVID-19 as a result of cruise ship traffic and
workers coming into the state. Additionally, $15 million
had been added to the Department of Health and Social
Services (DHSS) emergency programs budget related to what
the state thought would be the need for pandemic outreach
and activities to be undertaken by emergency programs and
epidemiology. The operating and capital budget passed
slightly later than the supplemental budget contained $75
million UGF (from the Constitutional Budget Reserve (CBR))
for DHSS emergency programs. The disaster relief fund had
also been capitalized with $5 million from the CBR and an
estimated $9 million in what the administration anticipated
from the Federal Emergency Management Agency (FEMA).
Mr. Steininger continued with slide 2. On April 9 [2020]
the state had a much better idea of what was going on and
things were changing constantly. The disaster declaration
bill, SB 241, had been implemented. The bill had contained
the authority to draw $10 million from the disaster relief
fund and a handful of references to funding in the
previously mentioned bills, predominately $9 million from
HB 206 in estimated federal funding. He explained that
because it had been appropriated as an estimate, the state
was able to expand the funding to include a substantial
amount of federal funding that came to DHSS for response
mitigation. He highlighted that the situation had been
rapidly changing between March 16 and April 6. He noted
that the dates shown on slide 2 reflected the dates the
bills were signed. When the legislature had passed the
supplemental and operating budgets there had been very
different information about what federal funding would be
available when the governor had signed the bills.
Co-Chair Foster noted that Representative Wool had joined
the meeting.
1:39:53 PM
Mr. Steininger turned to slide 3 and discussed the federal
fiscal response. On March 6 [2020] the federal government
similarly had considered the event would be much smaller in
cost and activity. The first federal relief package, the
Coronavirus Preparedness and Response Supplemental
Appropriations Act, was $8.3 billion, which covered things
like vaccines, smaller grants, and humanitarian assistance.
The Families First Coronavirus Response Act had been passed
on March 18 [2020] allocating $105 billion for paid family
leave (for individuals who caught COVID), expanded family
medical leave, and an increase in the federal participation
for the Medicaid program (collections by 6.2 percent of
federal match).
Mr. Steininger continued to review the federal fiscal
response on slide 3. The Coronavirus Aid, Relief, and
Economic Security (CARES) Act was passed on March 27 [2020]
allocating $2.3 trillion. He explained the passage of bills
over the time period showed the evolution of understanding
of the pandemic. The bulk of the programs discussed resided
in the CARES Act including the Paycheck Protection Program,
Pandemic Unemployment Assistance, and the Coronavirus
Relief Funds (CRF). The act granted $1.25 billion to the
State of Alaska with fairly loose spending guidance. He
noted most of the funding for the state response had come
from the allocation. He highlighted that a couple of the
provisions were extended in the Paycheck Protection Program
(PPP) and Health Care Enhancement Act, which had expanded
some programs and replenished associated funding. On
December 27 [2020] the Coronavirus Response and Relief
Supplemental Appropriations Act (CRRSAA) had passed, which
contained a substantial amount of money for areas like the
Department of Transportation and Public Facilities (DOT)
and contained similar provisions to the CARES Act (money
for school districts and the university had been expanded
under CRRSAA). Additionally, CRRSAA changed some of the
terms of the CRF and extended the expenditure deadline
through another calendar year.
1:43:16 PM
Representative Josephson asked if the $1.25 billion in
federal CARES Act funds allocated to Alaska was the RPL
[revised program legislative] portion of the $5.2 billion
[shown on slide 3].
Mr. Steininger answered that the RPLs covered many of the
different components. He detailed that the bulk of the
discussion on community assistance payments and the Alaska
CARES small business program had come from the $1.25
billion.
Representative Josephson asked about the remaining [CARES
Act] funds of close to $4 billion. He asked if the
remainder included funding for PPP and other related
programs.
Mr. Steininger replied that the presentation included
slides with further detail on the subject.
Vice-Chair Ortiz asked about the $683.8 million allocated
to Alaska under CRRSAA. He asked for verification that Mr.
Steininger had stated much of the money went to DOT.
1:45:27 PM
Mr. Steininger responded affirmatively. He elaborated that
the large portion of discretionary funds had come from the
Federal Transit Authority (FTA) and Federal Highway
Administration (FHWA) to DOT. Additionally, a large portion
of the funding came in for education related purposes. He
detailed that $130 million [$159.7 million] went to school
districts and a substantial amount went to the university.
Vice-Chair Ortiz asked if the committee would hear more
about the breakdown and how the funds would be spent.
Mr. Steininger replied in the affirmative.
Mr. Steininger turned to a pie chart showing a breakdown of
all of the funding coming to Alaska on slide 4. He
referenced a spreadsheet in members' packets that broke out
the different grants by each federal act, titled "Federal
Funding to Alaska for COVID-19 Response," dated 2/27/21
(copy on file). He remarked that due to the numerous
federal acts and different programs, tracking and sorting
the incoming funding could be complicated. He detailed that
the state had received $1.25 billion in unrestricted
funding in addition to funding that had passed through the
state to public and private organizations and individuals.
Approximately $1.5 billion went to public/private entities
and individuals had received approximately $1.3 billion. He
elaborated that the funding [for individuals] came in the
form of employment assistance and tax rebates. The paycheck
protection was included in the $1.7 billion to businesses
and about $500 million went to tribal organizations
throughout the state. The individual grants totaling about
$6.3 billion were included on the spreadsheet.
Mr. Steininger clarified that the information was based on
what the administration currently knew. He explained it
would take time to determine how much money had come into
Alaska for things like the PPP or unemployment insurance
benefits due to a lag in reporting between when the grant
happened and when an individual received it because the
funding ran through the state budget. He noted the number
would increase over time as some of the programs impacted
Alaskan businesses and individuals.
1:48:46 PM
Representative Wool referenced the $6.3 billion [in grants
shown on the spreadsheet] reflected how the amount had been
distributed throughout the state.
Mr. Steininger replied in the affirmative.
Representative Edgmon asked if the Department of Commerce,
Community and Economic Development (DCCED) or the Office of
Management and Budget (OMB) provided oversight over the
spending of funds. He looked at the pie chart on slide 4
and believed most, but not all, of the funding had been
distributed. He asked who was tracking the information. He
stated his understanding that Alaska was one of a handful
of states that would be audited in terms of how the funding
was expended.
Mr. Steininger responded that the administration of the
funds varied by grant. He elaborated that some of the
grants were administered by DCCED such as small business
grants under the Alaska CARES programs and grants out to
municipalities. He elaborated that the Department of Health
and Social Services (DHSS) managed a large portion of the
$1.25 billion reserves specifically for health and impact
mitigation. The Department of Education and Early
Development (DEED) managed a large amount of the funds in
terms of funding allocated to school districts.
Additionally, DOT managed a large amount of the funding.
All of the different pots of money and grants listed on the
spreadsheet had distinct criteria for record keeping and
reporting.
Mr. Steininger shared that early on in the pandemic, the
administration had started to establish coding in the
state's accounting system in order to track dollars spent
from any source on COVID. There had been some lessons
learned and shared by individuals who had worked for the
state during the American Recovery and Reinvestment Act
(ARRA) [in 2009], the last large federal relief effort. He
highlighted the importance of upfront expenditure tracking
and established reporting processes. He remarked that
fastidious recording in the coding system was important
because the state had been selected for a desk review of
its reporting. He explained that Paloma Harbour was
responsible for coordinating with all of the state agencies
on a daily basis to ensure the state was meeting federal
regulation guidelines. He shared that much of the $6.3
billion did not flow through the state and it did not
necessarily have responsibility for how it would be spent
because it went straight to recipients. He clarified the
state's exposure in reporting was not the entire $6.3
billion. He stated that each grant had its own tracking and
reporting criteria. Additionally, OMB also produced and
provided expenditure reports to the legislature and on the
OMB website.
1:52:47 PM
Representative Edgmon asked for verification that OMB was
the place to go for the information.
Mr. Steininger replied in the affirmative. He relayed that
OMB was trying to aggregate the information in one place.
PALOMA HARBOUR, FISCAL MANAGEMENT PRACTICES ANALYST, OFFICE
OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, answered
that OMB was trying to capture everything it could. She
added the money that did not go through state agencies was
more difficult to track and capture. For example, some
money had gone directly from FTA to the Municipality of
Anchorage for transportation that she did not capture in
the $6.3 billion and still needed to add. She noted that
the numbers were continuously changing.
Representative Edgmon remarked there was plenty to talk
about, especially in anticipation of the next tranche of
funding coming to Alaska. He thought there may be some
lessons learned along the way to capitalize on. He was
trying to get a better idea of who to contact to get the
information about how much of the funding was encumbered
but unexpended. He referenced Mr. Steininger's statement
that the deadline for the end of calendar year 2020 had
been extended for $528 million or $560 million of the
original $1.2 billion in CARES Act funding for communities
that had not spent their money.
Representative Edgmon stated that House Finance Committee
would have a larger discussion because it had to build the
budget for the coming year in addition to factoring in many
of the one-time payments that may have some relationship to
the budget being constructed. He furthered that what was
happening and who was coordinating the information and what
information was available would require a more in depth
conversation. He could see the legislature hopefully
playing some role in terms of overseeing what happened and
where the next tranche of money would go in association
with its relationship to the budget.
1:55:45 PM
Representative Josephson stated it would be useful to have
a document reflecting the administration's opinion of
monies that backfill. He had been frustrated by the June
28, 2019 and April 7 [2020] vetoes [by the governor]. He
stated to the extent the vetoes and FY 22 cuts had been
ameliorated in some way by the CARES Act funding, it may
change his position. He stressed that $6 billion was an
enormous sum. He remarked it was difficult enough to do a
budget during non-COVID times. He stated that the current
situation added another wrinkle in terms of trying to
understand. He used public radio for an example, which had
$3 million and then $1 million, which was important to
rural Alaska. He asked if something came in and covered the
issue. He stated if so, it may change his view of the
situation.
Mr. Steininger responded that there were reports laying out
how the $1.25 billion had been distributed, which was
included in members' packets specifying where the
allocations were made. He noted the information did not
cleanly specify whether funds backfilled other costs;
however, the information was shown in some cases. He added
that a presumption of eligibility for CRF dollars was
expenditures on public safety personnel including the
Department of Public Safety and Department of Corrections.
The administration had used some CARES Act money to
backfill costs in those agencies to avoid supplemental
needs in the current fiscal year and to allow the state to
lapse money in the prior fiscal year (FY 20). He explained
that there had been some actions backfilling costs where
there was eligibility to COVID or the CRF. One eligibility
stipulation was the cost could not be previously budgeted
with some exceptions like corrections and public safety. He
stated there was some difficulty in backfilling with CRF
dollars; however, the administration had backfilled other
areas particularly within DOT where the aforementioned
restrictions did not apply. Within DHSS, Medicaid utilized
some money that was displaced by additional federal funds
to cover future costs. He noted it was not as direct as the
method used for DOT, but it was a similar idea.
Mr. Steininger addressed the question about what had been
vetoed compared to funding available at present through
distributions. He stated that some of the comparisons could
be made. He explained that when the vetoes had been made,
on education for example, the state had possessed a certain
amount of knowledge. The administration had known money was
coming in and had thought it may have fewer or more
restrictions than it did, and veto decisions had been made
based on the limited information. He furthered that the
state had been able to utilize the money mostly how it
anticipated, but not perfectly. He explained that the money
may have covered one cost that enabled a community or
school district to free up funds within their own operating
general funds to cover costs that may have been supported
by a vetoed program. He remarked that there was not a
perfect tie or one-to-one, but $6.3 billion coming into the
state in one form or another had certainly offset some but
not all of the problems occurring due to COVID.
2:01:00 PM
Representative Wool asked about the $600 and $1,200 checks
(depending on the number of kids in a family) that came
from the federal government to individuals. He asked if the
checks were included in the $6.2 billion.
Mr. Steininger pointed to the $1.3 billion for individuals
shown in the orange section of the pie chart on slide 4.
Representative Wool observed that $1.3 billion out of $6.3
billion went to individual checks. He reasoned that $5
billion went to things other private and public businesses
or agencies. He remarked that $6.3 billion was twice the
statutory Permanent Fund Dividend (PFD) amount of
approximately $3.1 billion.
Representative Wool asked if the approximately $6,000 per
person was large compared to other states.
Mr. Steininger replied that it was large in terms of
population perhaps. He did not know what other states were
receiving per capita. He highlighted an analysis released
the previous Monday that looked at the impact of COVID on
various states' economies and the impact when offset by
incoming federal relief. He reported that the State of
Alaska was the most impacted even net of federal relief.
When access to reserve balances was factored in, Alaska
dropped to fifth or sixth on the list. He explained that
some of the other greatly impacted states did not have the
same reserves as Alaska. He noted that the analysis
included the corpus of the Permanent Fund. He advised
looking at the analysis net of federal benefits pre-
reserves when compared to other states, which showed the
impact on Alaska greatly exceeded that in any other state.
2:04:24 PM
Representative Wool thought that he had just seen the
analysis, which showed Alaska was -42.5 percent in revenue.
He believed the number pertained to tax revenue. It was his
understanding that some states had not taken a big hit
because stimulus money helped local economies, which helped
sales tax. He stated that Alaska had taken a big hit
because oil tax and other revenues had been impacted due to
the absence of a sales tax. He asked Mr. Steininger if it
was the same analysis he had referenced.
Mr. Steininger agreed and relayed that the analysis was by
Moody's. He elaborated that oil and tourism had been hit
the heaviest by the pandemic. He explained that because
Alaska's state revenue was reliant on oil and community
revenues were reliant on tourism, it put Alaska at a
disadvantage on a national scale when looking at the impact
of the pandemic.
Representative Wool stated that $6 billion was a
significant stimulus to the state's economy. He noted that
many other states realized a stimulus in their revenue
portfolios due to things like state sales tax, which
enabled them to have a much better post-COVID recovery. He
reasoned that Alaska may have realized some help, but it
did not show up on the state revenue side.
Mr. Steininger replied that while the federal funding
coming to Alaska was a huge amount, it did not fully offset
the impact to the state. In other states that did not have
revenues as uniquely tailored towards industries impacted
by the pandemic, net of federal relief, those states were
financially better off from a state perspective. He added
that Alaska was not financially better off.
Co-Chair Foster noted that Representative Johnson had
joined the meeting earlier.
Representative Rasmussen looked at page 2 of the
spreadsheet showing just under $600 million. She asked if
the amount reflected the $1,200 stimulus payment people
received.
Mr. Steininger confirmed the amount was for the $1,200
stimulus payments paid during the summer. He noted the
amount did not include additional stimulus payments because
the data was not yet available.
Representative Rasmussen asked if OMB had the number of
individuals who had received a stimulus payment.
PALOMA HARBOUR, FISCAL MANAGEMENT PRACTICES ANALYST, OFFICE
OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR replied
that she did not have the number of individuals who
received the stimulus payment, only the amount that came to
individuals in the state.
Representative Rasmussen stated that she believed many
people did not receive the stimulus payment based on
average household income. She remarked that many people in
the oil industry had been impacted financially or laid off
due to the pandemic. She explained that the individuals'
prior year income exceeded the guidelines set by the
federal government [to receive a stimulus payment]. She
thought that if money was put out into the economy and it
went to families using the funds to stay alive and not as
discretionary income, it likely would not have the same
impact as a dividend that people could use as they chose.
She pointed out there was more than one factor when it came
to economic impact from the pandemic.
2:09:25 PM
Mr. Steininger turned to a pie chart on slide 5 showing
federal funding to state agencies. The chart reflected
funding the state had visibility into and responsibility
for. The largest portion was CRF dollars followed by
unemployment compensation via the Department of Labor and
Workforce Development. The chart included nutrition and
emergency relief grants of slightly over $250 million that
ran through DEED and a large allocation to airport and
transit stimulus through DOT. He shared that recently the
Alaska Housing Finance Corporation (AHFC) received $164
million through CRRSA for housing relief and rental
assistance programs. Additional items in the chart were a
handful of much smaller items comparatively, but still
large dollars and impactful programs.
Ms. Harbour added that the amounts would grow as they did
not yet include CRRSA funding. She detailed that the
Centers for Disease Control and Prevention funding had not
been increased by funding that would come to Alaska for
CRRSA vaccinations and other things.
2:11:21 PM
Mr. Steininger relayed that Ms. Harbour would provide more
detail about the CRF and additional history and timing over
the past year.
Ms. Harbour advanced to slide 6 and spoke about Coronavirus
Relief Fund guidance and frequently asked questions. She
detailed that CRF funds were a part of the CARES Act
enacted at the end of March. The CARES Act had three broad
parameters for the expenditure of funding. First,
expenditures had to be necessary and incurred due to the
public health emergency. Second, expenditures could not be
accounted for in the most recently approved budget for the
state. Third, expenditures had to be incurred between March
1, 2020, and December 30, 2020. She highlighted that CRRSA
extended the expenditure deadline to December 31, 2021.
Ms. Harbour shared that when the [federal] funding had been
enacted there was a lack of guidance or direction to
recipients on how funds could be spent with the exception
of the three broad parameters. She elaborated that Treasury
released its original guidance and frequently asked
questions document on April 22 containing four questions
and answers, which were essentially the three broad
categories restated. She explained that the state had very
limited information on how the funding could be spent and
restrictions beyond the three basic categories when the
state was developing revised programs that came to the
legislature for review and approval. The administration had
developed the programs it could based on what was known,
including community relief grants and small business relief
grants.
Ms. Harbour relayed there were considerable iterations of
the guidance from Treasury that significantly changed the
administration's understanding of the programs. She listed
organizations that had been coordinating with Treasury to
get better spending guidance including the National
Governor's Association, the National Association of State
Budget Officers, the National Association of State
Auditors, Comptrollers, and Treasurers, and the National
Conference of State Legislatures. She relayed that there
had been concern by recipients that they would think they
were spending funds correctly but end up having to repay
the money. The administration had done its best in
developing some revised programs to help meet the needs of
the state that fit within the funding parameters.
Ms. Harbor reported that the guidance kept changing. She
explained that the administration had to submit its first
official report to the federal government on September 21
[2020], which had included all expenditures from March 1 to
June 30. The guidance for the report had not been available
until July 31. She elaborated that at that time, the state
had already received five months of spending reports from
communities and the administration had to make them redo
the reports based on the updated guidance from Treasury.
She noted the reporting categories had increased from six
to eighteen. The administration had worked with the Alaska
Municipal League and DCCED to get the revised reports from
communities. She remarked that communities had done an
amazing job updating the reports quickly.
Ms. Harbour pointed to the September 2 date highlighted in
purple on slide 6, which reflected the last major revision
to the guidance and frequently asked questions from
Treasury, which were federally registered.
2:15:47 PM
Representative Josephson looked at slide 6 and referenced
the CRRSA funding extension. He used a Yupik village with
400 residents that had received $100,000 in funding as an
example. He asked for verification the village would have
until the end of the current year to spend the funds.
Ms. Harbour replied in the affirmative.
Representative Josephson thought state agencies likely had
to hire staff to manage the monitoring of all of the
incoming funds. He asked for detail.
Ms. Harbour answered that DCCED had tried to establish a
position to help with CARES Act funding, specifically the
Small Business Relief Program to ensure adequate reporting.
The department had no success in filling the position. She
elaborated that until the position could be filled, DCCED
had handled local government staff. She reported that all
of the agencies including DHSS, DCCED, and OMB had to
absorb the work with existing staff. She relayed that OMB
had been able to hire a temporary staff to help with the
federal reporting.
Mr. Steininger added that one piece of the report OMB sent
to the legislature included personal services costs. He
elaborated that much of the costs pertained to time that an
otherwise budgeted person was spending on COVID. One of the
frequently asked questions addressed what point 2 [on slide
6] - specifying that funding could not go to expenses that
were accounted for in the most recently approved budget -
meant for existing staff who began spending most of their
work time on COVID. He explained there were numerous staff
employed by the state who had jobs and were now spending
most of their time on COVID. For example, many staff in
DHSS, DEED, and OMB were working on COVID related issues.
He noted there were a couple of non-permanent positions,
one at OMB, and contract tracer positions. He relayed the
state was trying to make do with what it had and COVID was
effectively the focus of the year.
2:18:55 PM
Representative Edgmon referenced the discussion in the
morning meeting about a desk review from the federal
government. He considered a desk review to be something
like a management review. He asked for detail about what
was expected with the review. He referenced strings
attached to the $1.25 billion the state had received in
April. He asked about the prospect the state may be on the
hook for money that had been mismanaged or misspent.
Ms. Harbour answered that she did not know presently
whether there would be any questioned costs. She explained
that the desk review would primarily look at what the state
had reported in supporting documentation and whether there
had been adequate internal controls. She noted it was very
low level. She elaborated that if the review found
something of concern, it could be expanded into a full-
fledged audit. She expounded that if the review developed
into an audit, questioned costs could be identified at that
point. She detailed that if questioned costs were
identified, the state had the opportunity to identify other
eligible costs to substitute for the questioned costs. She
furthered that if a local community received the funding
and had questioned costs, the state would work with the
community to identify and substitute other costs that were
eligible. She noted that hopefully the state would not have
to go through the entire process.
Representative Edgmon asked if there was adequate
infrastructure available at the state agency or OMB level
if an audit were to be required.
Mr. Steininger answered that the state would certainly
respond to any requirements that came forward from the
[U.S.] Office of Inspector General (OIG). He elaborated
that if questioned costs were discovered and a community or
the state had spent money that did not meet [federal]
guidelines or had spent the funds prior to updated guidance
that changed the nature of eligible expenditures, the
ability to substitute other eligible costs gave a level of
insurance the state would not necessarily have to pay money
back to the federal government. He stated that one of the
slides illustrated the amount of CRF dollars that had been
allocated versus unallocated at present. The administration
knew there were eligible costs far in excess of the amount
that had been allocated. For example, places where state
staff had diverted their work to COVID and places where
money had been spent within the bounds of the operating
cost of an agency that any questioned costs could be
applied to. The administration was not concerned there
would be a payback necessarily. He stated that the state's
ability to work through the questioned costs with federal
partners was sufficient if needed.
2:23:14 PM
Representative Edgmon looked ahead in the presentation [at
slide 7] and observed that $568 million of the $1.25
billion in CARES Act funding had gone to communities. He
considered a worst case scenario where funds were found to
be spent incorrectly. He asked whether the misspent funds
would be limited to the $568 million portion of the $1.25
billion and the broader $6.3 billion. Alternatively, he
asked if there would be other categories included in the
focus.
Ms. Harbour replied that any of the funding categories
could be included. She explained that the state had
substitutable costs for funding received by state agencies.
Her biggest concern with the funding received by
communities was that communities had to have incurred
substitutable costs. She explained that if expenditures by
communities were questioned and they did not have
substitutable costs, they would be in a situation.
Mr. Steininger added that when the state entered into the
agreements with communities and control of expenditures
were handed over to communities, part of the agreement was
the community was agreeing to spend the money per CRF
guidelines. He stated that the state had communicated to
communities that the guidelines from OIG and Treasury were
prone to change and it was their responsibility to make
sure they managed to the changing guidelines. He elaborated
that if a community did not have a substitutable cost and
had a cost that was not CRF eligible, per the agreement
with the state, the communities were responsible for
returning funding to the federal government. However, the
state also had the opportunity to find substitutable costs
within state payments because the state was the prime
recipient of the grant. He furthered that the $1.25 billion
needed to be spent on allowable costs anywhere underneath
the umbrella, which included the community distribution.
2:26:04 PM
Ms. Harbour added that the early review and extended
deadline to December 31, 2021, assisted the state. She
elaborated that if a community's current expenditures were
not allowable, but they could make a plan for allowable
expenditures prior to December 31, the funding could be
expended on eligible costs.
Ms. Harbour moved to slide 7 and addressed a pie chart
titled "Alaska Coronavirus Relief Fund Allocations." She
detailed that 45 percent of the funding or $568.6 million
was distributed in the form of community relief grants,
$290 million had been distributed for small business
relief, $50 million for nonprofit support through the
Alaska Community Foundation, $10 million was distributed as
housing support through AHFC, and $331.4 million had been
provided to DHSS to cover other COVID related costs. She
elaborated that of the funding given to DHSS, $133 million
went out in the form of non-state agency support costs and
services and $153.4 million went to state agency costs
including COVID leave, personnel services, and other. She
would provide more detail on a later slide. She noted that
$45 million had not yet been distributed and was in reserve
for other anticipated COVID costs.
Mr. Steininger added that the spreadsheet with the green
header in members' packets [titled "Office of Management
and Budget Alaska Coronavirus Relief Fund Allocations and
Expenditures" updated February 26, 2021 (copy on file)]
provided a breakdown of the $331.4 million in other COVID
relief that ran through DHSS.
Ms. Harbour noted that the sheet showed the amount
expended.
2:28:18 PM
Mr. Steininger noted there were subject matter experts
available online to answer detailed questions on the
upcoming slides. He turned to slide 8 related to
unemployment insurance payment and trust fund details. He
noted there had been a spike in unemployment claims over
the past year. He detailed that from March 1 through
February 4 regular unemployment insurance payments from the
state UI Trust Fund totaled $323.6 million, federal
pandemic unemployment compensation was $530 million,
pandemic unemployment assistance (100 percent federal) was
slightly over $68 million, emergency unemployment
compensation (100 percent federal) was $57 million, and
FEMA lost wages assistance (100 percent federal) was just
under $59 million. He reported that as of February 24, the
UI Trust Fund had a balance of $286.1 million. He stated
that while the balance was within the targeted range, it
was at the lower end.
Representative Josephson looked at the second bullet on
slide 8 related to federal pandemic unemployment
compensation. He asked if the compensation was being
considered for extension and perhaps retroactively to
November or sometime when it had expired.
Ms. Harbour replied that she believed CRRSA had extended
all of the programs [on slide 8], but perhaps not
retroactively. She noted that the new relief may apply
retroactively. She would follow up with the information.
Representative Wool looked at the regular unemployment
insurance cost of $323 million and the total fund balance
of $286 million. He asked if the figures meant there would
not be sufficient funding for a draw the following year to
cover regular unemployment insurance. Alternatively, he
asked if the fund was constantly replenished from outgoing
paychecks. He understood there were currently fewer
paychecks going out. He asked how the UI Trust Fund looked
going forward for the next year.
Ms. Harbour replied that there was a subject matter expert
available online. She relayed that the balance was within a
healthy range.
Representative Wool asked for verification that Ms. Harbour
had stated the balance was in a healthy range.
Ms. Harbour replied that the balance was healthy. She
elaborated that revenue would be coming into the fund from
paychecks over the course of the next year. She relayed the
department anticipated regular unemployment insurance
payments would decrease because it was only possible to be
unemployed for a given period of time while receiving
regular unemployment insurance payments. She explained that
the pandemic emergency unemployment compensation would
extend eligibility and was 100 percent federally funded.
She elaborated that reliance on state funds would decrease
as reliance on federal funding increased.
Representative Wool asked for verification that all
assistance and compensation listed on slide 8 with the
exception of the regular unemployment insurance was fully
federally funded. He asked how frequently the UI Trust Fund
balance was replenished.
Ms. Harbour answered that payments were made quarterly.
2:33:38 PM
Mr. Steininger moved to slide 9 to discuss the higher
education relief details. The CARES Act had included $7.9
million to the University of Alaska in addition to $71,000
for the Alaska Vocational Technical Center (AVTEC). The
CARES Act required that 50 percent of the funds go directly
to students in the form of direct relief. The remaining
half of the funding could be used by institutions for
eligible costs. Students had received $3.9 million through
the university and $35,700 through AVTEC. Additionally, the
university received $2.6 million allocated to minority
serving institutions.
Mr. Steininger addressed higher education relief details
under the CRRSA Act on slide 9. He reported that under
CRRSA the amounts were extended, but a larger portion went
to the institutions. He stated that the institutions had
been greatly impacted in terms of revenues from enrollment,
student housing, and other areas that changed the way
business was done due to COVID by eliminating some
congregate settings. The university had received $17.4
million from CRRSA of which $3.9 million went to students.
He stated that rather than 50/50 a flat amount went to
students.
Mr. Steininger highlighted that AVTEC had received over
$250,00 of which, $35,700 went to students. He noted that
the administration had included a supplemental
appropriation of $750,000 to AVTEC in the supplemental
budget. He remarked that even with relief coming in from
higher education items as well as other cost saving
methods, the loss of revenue to AVTEC had been significant.
The agency required additional funds to operate its
facility even after the receipt of federal funds. He stated
that unfortunately because CRF had restrictions on revenue
replacement, the state was unable to tap any other federal
COVID relief efforts to satisfy the need. He explained that
the supplemental request was not duplicative of the federal
amounts.
2:36:26 PM
Representative Wool looked at the first $7.9 million
federal appropriation to the University of Alaska where
students had received $3.9 million. He understood funding
had gone to students due to the disruption of the semester
and many students had to go home. He asked about the
reasoning for the second appropriation of $3.9 million to
students. He stated his understanding that enrollment at
certain campuses had even increased.
Mr. Steininger answered that it had been a federal
requirement of the monies. He did not know the federal
justification for the specific funding. He would follow up.
Mr. Steininger turned to slide 10 and addressed K-12
education relief details. He highlighted two different
funds related to education relief. The first was the
Elementary and Secondary School Emergency Relief (ESSER)
that brought in $38.4 million under the CARES Act, which
was distributed to school districts (referred to as local
education agencies on the slide). Additionally, $3.8
million was allocated to the state education agency DEED.
He noted there was a cap of $192,000 for administrative
expenses. He explained there were rules around the funding
related to how it could be used that were different than
the rules surrounding some of the other programs. There
were restrictions on use for administrative expenses and
the types of grants the department could issue.
Mr. Steininger addressed the second fund on slide 10 called
the Governor's Emergency Education Relief (GEER) that
brought in $6.5 million from the CARES Act. He explained
that the money was more open-ended in terms of its
application to specific education related items and was
more at the discretion of the state than the ESSER funding.
He detailed that $3.7 million had been used for grants to
school districts to help fill the gap between vetoed
education funding and the amount available to districts.
Additionally, $1.5 million was allocated to the university
to cover added COVID impacts above and beyond impacts
covered by the CARES Act. The funding had also been used
for competitive grant awards to education-related entities
and the Alaska Native Science and Engineering Program. He
noted the next slide covered similar programs under CRRSA.
2:40:05 PM
Mr. Steininger moved to slide 11 and addressed education
relief details included in CRRSA. He relayed that the same
programs [shown on slide 10] received additional funding in
December. There was $159.7 million in ESSER funds for local
education agencies and the state education agency. He noted
he had inadvertently misstated the figure as $130 million
earlier in the meeting. Local education agencies received
$143.7 million of the funding and DEED received $15.2
million for education-related grants with a cap on
administrative expenses. The GEER received another $2.8
million and emergency assistance for non-public schools
received $2.4 million [slide 11 shows the number at $5.4
million] with caps on administrative expenses.
Representative Josephson stated that CRRSA was the December
27 act, which was very recent. He asked for verification
that the 53 local school districts had received $143
million.
Mr. Steininger agreed.
Representative Josephson asked what the money could be
spent on within education.
Mr. Steininger deferred the question to DEED.
2:42:03 PM
LACEY SANDERS, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, OFFICE OF MANAGEMENT
AND BUDGET, OFFICE OF THE GOVERNOR (via teleconference),
replied that all CARES Act and CRRSA funding [directed to
education] was to address the impacts of the COVID-19
pandemic. The recent CRRSA included an expanded list of
available activities to address learning loss and summer
programming such as summer school and school repairs to
prevent the spread of the virus and improve air quality.
She summarized that the CARES Act and CRRSA were aimed at
reducing COVID-19 impacts, but CRRSA was expanded
specifically for learning loss.
Vice-Chair Ortiz asked if there was a breakdown showing the
amount received by each district throughout the state.
Ms. Sanders answered in the affirmative. The department's
website and documents to be provided to the committee
showed a breakdown on the CARES Act funds and CRRSA by
school district. She noted that the authority for districts
to spend the funding was fairly broad, which gave the
school districts the ability to determine how to use the
funds within the federal guidance.
2:44:36 PM
Representative Wool referenced an earlier conversation
where it had been discussed that Alaska was deficient 2,000
students. He had stated that his district had lost 2,000
students to home schooling outside the district. He stated
that the enrollment loss translated to about $20 million.
He asked for verification the federal funding could be used
to cover the loss. He asked if districts had not yet
received the funding, which was causing some panic.
Ms. Sanders responded that the original CARES Act had
passed in March [2020]. The department had been working
with school districts to get their applications and budgets
as early as FY 20. She reported that school districts had
been able to use the funding. The department had been
working with districts most recently on their FY 21
applications. She noted the funding was available for an
extended time period through September 30, 2022. The
department had just been able to get the applications for
the CRRSA funding in mid-February and it was now working
with school districts to make sure the money was available
and approved. The CRRSA funding had an extended time period
through September 30, 2023. She believed there was a lot of
planning that districts needed to do as they looked at
their current budget based on the formula and determined
how to use the federal funds over the next several years.
2:47:16 PM
Mr. Steininger turned to transportation relief details on
slide 12. Under the CARES Act the department had received
funding from the Federal Aviation Administration (FAA) and
the Federal Transit Administration (FTA). Under CRRSA the
department had received funding from the FTA and the
Federal Highway Administration (FHWA). He detailed that the
$82.5 million from the FAA was focused on maintenance and
operations of state airports. He detailed that $49.4
million had come in to aid the state with its management of
a large number of rural airports. Additionally, $33 million
went to the Alaska International Airport System for
operations and maintenance of international airport systems
in Anchorage and Fairbanks. He detailed that the funding
was fairly open ended as long as it was related to
operation and maintenance of the airports. He noted that
the funding offset a significant amount of general fund
spending.
Mr. Steininger highlighted that the governor's FY 22 budget
included use of the federal FAA funding to offset fund
spend in maintenance and operations for DOT. He noted the
FTA money was narrower in scope toward transit related
activities including the Alaska Marine Highway System
(AMHS). He detailed that money from the grant had also gone
to the railroad and municipal transit throughout the state.
Under CRRSA the FTA amount had been increased to $55.8
million directed to communities with transit authorities
and the state transit including the railroad and AMHS. The
FTWA added $124.4 million, and the state had received the
federal spending guidance the previous week outlining how
the money could be utilized. Thus far, the funding had been
utilized to reopen some maintenance stations on highways to
cover snow clearing and other related activities. A portion
had not yet been allocated to a specific purpose. He
informed the committee that the governor's budget
amendments included a capital project identifying the
amount of money available, but it did not specify exactly
where the funds should be spent as the guidance document
had not yet been received.
Representative LeBon looked at the piece for the Alaska
International Airport System of $33 million. He recalled
that approximately $27 million to $28 million went to the
Anchorage airport and about $5 million went to the
Fairbanks airport. He asked if his statement was accurate.
Mr. Steininger answered that he did not have the specific
information. He explained that the FAA allocation had
included a list of every airport in the country including
an associated dollar amount. He detailed that the funding
had gone to whoever owned and managed the airports and it
could be redistributed within the airports they owned. For
example, DOT managed over 100 airports and the department
did not have to spend to the dollar what the distribution
had been for each airport. Similarly, the Alaska
International Airport System could distribute the money
between the two airports differently than it had been lined
out in the list.
Representative LeBon recalled that Merrill Field had
received about $18 million in funding. He asked if the
funding was from the rural airport system allocation of $49
million.
Mr. Steininger believed Merrill Field was outside of the
$49.4 million. He noted that DOT was available online for
more detail.
Representative LeBon remarked asked what formula directed
$18 million to Merrill Field while only directing $5
million to the Fairbanks International Airport.
2:52:34 PM
DOM PANNONE, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF TRANSPORTATION AND PUBLIC FACILITIES, OFFICE OF
MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR (via
teleconference), replied under the CARES Act allocation
formula there were a number of variables the FAA looked at
including debt services, operating expenses, and revenues.
He explained that Merrill Field's number had come out where
it did due to the formula used by the FAA. He added that
Merrill Field was not owned, operated, or managed by the
state.
Representative LeBon asked if Merrill Field had received
about $18 million from the CARES Act.
Mr. Pannone replied that the number sounded like it was in
the ballpark.
Representative LeBon expressed his hope that the Fairbanks
airport would be allocated under the same formula as
Merrill Field.
Representative Josephson asked if the sums shown on slide
12 were direct grants the governor could allocate. He asked
if RPLs had been done for any of the items on the slide.
Mr. Steininger answered that RPLs had been done for CARES
Act items to allow DOT access to the funds. He elaborated
that RPLs had been done for CRRSA funds to reopen some of
the maintenance stations. The remainder of the funding was
subject to legislative appropriation.
Representative Josephson asked for verification that the
$122 million [in FHWA funds shown at the bottom of slide
12] was in the hands of the legislature to appropriate as
long as session was underway. He stated his understanding
that because the governor had not yet spent the funding, it
was in the hands of the legislature to speak to first.
2:55:02 PM
Mr. Steininger replied, "Roughly speaking, yes." He
elaborated that OMB did not have the information specifying
what the grants would be when it had developed the budget
in December. The administration had released budget
amendments that would cover the continued operation of the
maintenance stations included in the RPL package. The
administration had not put forward a specific proposal on
the additional FHWA funding. He explained that the guidance
document specifying how the funds could be spent had not
been available at the time. The administration believed the
maintenance station support would be allowable, but it had
not been certain what the other funding boundaries were.
The administration had identified the amount available but
did not make a specific recommendation in its budget
amendments. The funding was up for legislative
appropriation. He stated that once the FHWA guidance
document was understood, the administration would likely
come forward with a recommendation.
Representative Josephson reasoned that there must be a
funding deadline. Consequently, he believed it would be
negligent if the funds were not included in the capital
budget before May. He asked for verification that it was
necessary to find a way to use the funding on something
meaningful that adhered with federal guidance.
Mr. Steininger agreed. He elaborated that knowing the
amount of money during the legislative process provided the
information to have an appropriation for the funds rather
than needing to utilize the Legislative Budget and Audit
(LB&A) process. He stated that the LB&A process had been
used heavily the previous year because the administration
did not have information about the money coming in before
the legislature adjourned. He noted that it was not the
case in the current situation.
2:57:27 PM
Representative Johnson looked at slide 12 related to grants
for airports. She asked if municipal airports (e.g., in
Kenai and Palmer) received money through the state or
directly from the federal government.
Mr. Steininger answered that the formula had been done by
the FAA and had been outside of the state's control. For
example, the allocations for specific airports like Merrill
Field versus Fairbanks International Airport had not been
decided by the state but were based on a federal formula.
He confirmed that other municipalities that owned and
operated their own airports (e.g., the Juneau International
Airport was run by the city) received allocations through
the formula as well. He relayed the list was available
online.
Representative Wool recalled from meetings the previous
year that the calculation for airports (Anchorage and
Fairbanks in particular) had been somewhat based on loss of
revenue and loss of airline and cargo traffic. He asked if
Anchorage had experienced a loss or increase in cargo
traffic during the pandemic. He considered that many people
had ordered goods during the pandemic and wondered if
perhaps the anticipated loss of revenue had not
materialized.
Mr. Steininger deferred the question to DOT.
Mr. Pannone replied that CARES Act funding allocated from
the FAA for international airports were used largely to
keep operations at status quo and had been used for debt
service payments. He shared that the department's deputy
commissioner had a great presentation on an increase in
cargo traffic and a decrease in passenger traffic and how
the airport relies heavily on revenue derived from
passengers. He offered to present the information at
another time.
Mr. Steininger relayed that OMB would include the
statistics in its answers to questions.
3:00:43 PM
Ms. Harbour turned to slide 13 and discussed community
relief grants. She highlighted that 45 percent of the
state's Coronavirus relief funds went to community relief
grants to enable local governments to meet the unique needs
in their communities for residents and businesses. The
slide included information as of February 26. She informed
the committee that the January 31 expenditure reports from
communities were not due until the current week; therefore,
the information in the slide was not the most current. She
added that within a week OMB should have more information
from communities. She reported that as of February 26 there
were 26 communities that had not entered into a grant
agreement with the state. She detailed that when
Coronavirus relief funds were first available, a number of
communities chose not to enter into an agreement because of
the tight expenditure timeline and due to concerns about
eligibility of expenditures. The administration was
currently working through the process with a number of
communities that had indicated they were ready to enter
into an agreement because the expenditure deadline had been
extended. She noted that the funding that had not been
granted was approximately $2.3 million and OMB anticipated
the number would shrink.
Ms. Harbour continued to review slide 13. She highlighted
that 37 communities had grant agreements with the state but
still had payments pending. She explained that the state
had split the payments into three tranches. To ensure
communities were spending the funding, they were required
to spend up to 80 percent of the previous tranche prior to
receiving the next allocation. She reported that 50
communities had fully expended their funding as of December
30.
Ms. Harbour moved to slide 14 showing community spending by
category as of February 26. She noted that new reports were
expected in the current week and the numbers would be
updated. She relayed that $504.6 million had been spent
including 35 percent on payroll for public health and
safety, 22 percent for small business assistance, 15
percent for other economic support, 8 percent for housing
support, 7 percent for public health expenses, 6 percent
for medical expenses, 2 percent for other payroll and much
smaller percentages for other categories including
facilitating distance learning, administrative, improving
telework capabilities, food programs, testing and contact
tracing, and nursing home assistance.
3:03:46 PM
Representative Rasmussen stated that one of the
controversial issues in Anchorage was the local
government's decision to spend about one-third of the
funding on homeless housing. She believed the figure was
about $60 million. She wondered where the expenditure was
reflected in the chart [on slide 14].
Ms. Harbour did not believe the expenditures were incurred
as originally intended; however, if they were, they would
be included in the housing support category.
Representative Rasmussen looked at slide 7 showing a
breakdown of small business relief and community grants.
She asked if the state felt that the small business relief
program was functional and could serve the entire state
rather than "bypassing" the money to various communities.
She asked if state was equipped to handle distributing the
funds if more money came in rather than putting small
business relief out to individual communities.
Mr. Steininger answered that under the CARES Act
distribution relief had been given to small businesses in
multiple ways. He highlighted the state Alaska CARES
program run through DCCED by Alaska Industrial Development
and Export Authority (AIDEA). Additionally, there were
smaller programs within communities. He detailed that small
business assistance of $109 million [on slide 14] was in
addition to the $290 million that went to Alaska CARES. He
stated there had been a bit of a mix between the two. He
explained that when the state had been making decisions in
the spring the previous year it had tried to send the funds
to smaller political subdivisions to allocate based on
their individual community needs. Simultaneously, the state
had aimed to balance the statewide approach through things
like Alaska CARES. He believed the balance had been good in
terms of allocating money through DCCED with a statewide
perspective, while also providing independent allocations
for personal business relief. He thought the combination of
the different methods had been successful. He added it was
difficult to speculate how additional funding coming into
the state would be allocated. He noted it would depend on
how much discretion the state got from the federal
government and what other resources were available for
small businesses. He believed the administration would want
to retain the ability to balance between the two methods.
3:07:55 PM
Representative Rasmussen believed the more the state could
streamline the process to get money out to communities the
better. She hoped her colleagues shared the view. She noted
that Southeast Alaska would be impacted in a major way by
the decisions related to cruise ships. She asked if the
state could handle distributing more money directly to
small businesses and bypassing communities. She thought it
would eliminate confusion for small business owners trying
to navigate applications. She reasoned housing the process
in one place would benefit the public and provide
transparency to policy makers to see how the money was
moving around.
Ms. Harbour moved to state agency COVID-19 expenditures by
type on slide 15. She noted that the expenditures were
reported monthly to the legislature. The majority of the
expenditures incurred by the state related to COVID had
been supported with federal funds and the majority had gone
out in the form of grants to communities and small
businesses. However, the state had incurred expenditures on
state funds in other categories including COVID leave. She
elaborated that one of the federal acts had expanded family
medical leave and other leave programs for all employers
including the state. She explained it was a mandate that
CRF funds were able to cover. There were other COVID-
related payroll costs and a number of agencies had to focus
on COVID mitigation and response across the board. She
highlighted modest travel expenses related to COVID, $137
million in services costs, about $40 million in laboratory
supplies, $38 million in other supplies, and a modest
amount for capital outlay and equipment.
3:10:58 PM
Representative Johnson referenced the document titled
"Federal Funding to Alaska for COVID-19 Response" and
highlighted the row labeled "fisheries stimulus thru DCCED
(anticipate $50K to ADFG for assistance." She observed the
federal funding for the item was $50 million. She then
pointed to an item near the top of page 2 labeled "COVID-19
Fishery Relief thru Pacific State Marine Fisheries
Commission - expected AK request." She asked if the two
items were separate amounts for a total of $100 million.
She asked about the impacts on fisheries thus far.
Additionally, she asked what the federal funds would be
used for.
Ms. Harbour answered that the two federal appropriations
for fisheries relief were separate. She detailed that the
appropriation received under the CARES Act was $50 million
and the administration expected the second appropriation
under CRRSA to be about the same amount. She pointed out
that the administration had expected the funds to go
through DCCED, but that had not been the case. She
elaborated that the funding was awarded directly by the
Pacific State Marine Fisheries Commission and applicants
had to apply with the commission. She relayed that the
Department of Fish and Game (DFG) had a guidance letter to
fisheries participants on how to apply. She noted that the
applications were available online as of the current day.
Ms. Harbour advanced to slide 16 titled "State COVID-19
Lost Revenue Estimates." The Department of Revenue
estimated the total revenue loss including petroleum and
other revenue to be approximately $500 million in FY 20,
closer to $600 million in FY 21, and $576 million in FY 22.
She noted that the loss varied significantly from program
to program. The university had been hit significantly as
students had to leave and tuition was refunded. She
detailed that the university lost $9.3 million in FY 20,
$31.6 million in FY 21, and $22.5 million in FY 22. The
Alaska Marine Highway System had been hit significantly
with revenue losses. The commercial passenger vessel
revenue to the state was down due to the absence of cruise
ships. She administration assumed cruise ships would be
back online in FY 22. She noted that the numbers reflected
estimates and if cruise ships operated in 2021, the revenue
loss would not be realized. She noted the slide only showed
major program losses. The full report showing losses by all
agencies broken out by fiscal year was available and could
be provided to the committee.
3:14:53 PM
Representative Josephson remarked that the presentation had
been enormously helpful. He looked at slide 16 that showed
$50 million per fiscal year, yet the administration
believed was 10 times more. He asked for an explanation.
Ms. Harbour answered that the number at the top of the
slide was from DOR and reflected total estimated revenue
[loss] including oil and gas taxes. She explained that the
table on the lower portion of the slide reflected the
impacts to state agency program revenue.
Representative Wool asked if revenue loss labeled
"petroleum and other" was mostly petroleum.
Ms. Harbour replied in the affirmative. She noted that
petroleum had been the most significantly hit related to
COVID.
Mr. Steininger clarified that the petroleum and other
related to UGF revenue, while the program revenue primarily
showed up as designated general funds (DGF) in most agency
budgets related to fees and usage charges. For example, the
Fish and Game Fund was impacted by tourists not purchasing
fishing licenses.
Representative Wool asked for clarity on the petroleum
revenue loss. He highlighted that production had been
roughly the same. He understood the pipeline had throttled
down for about one month. He remarked that there had been a
decrease in oil price and a supply glut. He noted the chart
[on slide 16] showed fairly constant revenue loss [from FY
20 through FY 22]. He wondered how the loss was all COVID
related. He highlighted that some of the oil price drop
happened prior to COVID. He understood there was a large
drop in oil price, but it was currently in the $60 [per
barrel] range. He asked how the three-year $500 million
[per year] decline was attributed to COVID.
Mr. Steininger answered that there were many factors that
went into oil price, production, and revenues. He detailed
the DOR released its annual fall revenue forecast in early
December. He explained that OMB had compared the fall 2019
revenue forecast - that had come out just before COVID
started to impact things like oil demand in China - to the
most recent revenue estimates from December 2020. He
elaborated that most of the impact to revenues was related
to price declines in 2020 where prices had gone negative
for some metrics on oil. He relayed that most of the
impacts, while not fully tied to the virus, were the result
of changing global market conditions.
Mr. Steininger stated that projecting volatile revenue out
into the future became difficult and was more art than
science. He noted that the 2019 pre-COVID projection was
the last one available to compare to. He expounded that as
they got further from the event a divergence would start to
occur and losses would no longer be as attributable to
COVID. He added given that the world was still experiencing
COVID in a very real way, many of the impacts to price and
demand for oil were still related to the pandemic. He
stated that whether or not the full $576 million [in FY 22]
represented on the slide was entirely attributable to COVID
was an academic question. He noted it was the data that was
available.
3:20:31 PM
Representative Wool remarked that the cruise ship industry
would be purchasing oil as it was expected to bounce back
in FY 22. He stated there would be a return from a pre-
COVID world in the cruise ship industry. He remarked that
the 10-year forecast was fairly flat, which he imagined did
not only look at the one year of COVID. He referenced Ms.
Harbor's statement about the university returning student
tuition, which he surmised occurred in FY 20. He noted that
students were in school in FY 21. He stated that there had
been tuition reimbursement from March to May. He thought
the funding had been covered in the money the students
received. He reasoned that FY 21 and FY 22 would not have a
tuition reimbursement; however, he observed that the loss
increased in FY 21 and remained high in FY 22 [shown on
slide 16].
Ms. Harbour replied that funding to students did not cover
the University of Alaska's loss of tuition. She explained
that the funding had gone to students to cover their cost
to travel home and other. She detailed that the university
had received about $7.9 million. She elaborated that $3.9
million of the total had gone to students for their costs,
yet the university still had to reimburse the students,
which resulted in lost revenue. In terms of cost estimates
from the university there were details including
cancelations in housing and restricted occupancy for
auxiliary services (e.g., housing and dining), the
university projected continued lost revenue associated with
capacity issues and other COVID compliance requirements.
She explained that the university did not know when the
impacts would end, which was part of the lag.
Representative Josephson looked at slide 9 and $17.4
million to the university under CRRSA to offset enrollment
and housing losses. He asked if the funds would help
ameliorate the $31.6 million [in lost revenue] reflected in
the current fiscal year [FY 21].
Ms. Harbour answered that the university could use funds it
did not have to pass to students to cover its costs. She
stated there had been COVID related costs and lost revenue.
She explained that the university had $31.6 million in lost
revenue in addition to any COVID costs incurred by the
university to make dorms compliant and other.
3:23:57 PM
Representative Josephson thought it sounded like along with
severe cuts that had come from the compact, the university
had other losses that were not satisfied.
Ms. Harbour asked for clarification on the question.
Representative Josephson thought it sounded like the
university had other losses that were not covered by all of
the federal generosity.
Ms. Harbour replied affirmatively.
Representative Rasmussen referenced the conversation about
government agencies that had been impacted by COVID and not
made whole. She thought it would be interesting to know
whether the state had information on the number of small
businesses impacted and the number of Alaskans who had not
been able to work. She did not believe Alaskans had been
made whole. She remarked that the information would be
helpful.
Mr. Steininger confirmed that it was definitely the case.
He considered the loss to the state's GDP compared to
incoming federal relief funding in the past year. He
relayed there was still a very significant loss to the
state's overall economy even with the $6.3 million in
federal funds. He stated the loss was in the billions of
dollars and was borne by small and large businesses and
individuals. He remarked that while the focus of the
presentation was on state finances, which was OMB's daily
focus, it was important not to lose sight that the relief
had not satisfied the loss outside of the state system
either.
3:27:27 PM
AT EASE
3:37:33 PM
RECONVENED
KELLY TSHIBAKA, COMMISSIONER, DEPARTMENT OF ADMINISTRATION
(via teleconference), introduced herself.
LESLIE ISAACS, TS'AANG GAA'Y, ADMINISTRATIVE SERVICE
DIRECTOR, DEPARTMENT OF ADMINISTRATION, OFFICE OF
MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, introduced
himself as Ts'aang Gaa'y from the Koos Gaa Dee
(Eagle/Frog/Beaver) clan. He shared that he is from the
village of Klawock located on Prince of Wales Island. He
was honored to testify before the committee. He introduced
a PowerPoint presentation titled "Pandemic Preparedness
Plan Program Allocations: Alaska Department of
Administration," dated February 9, 2021 (copy on file). He
began on slide 2 titled "CARES Act Funding." He shared that
in April 2020, the governor had asked the Department of
Administration (DOA) to prepare a plan to deal with the
COVID outbreak. As a result, DOA had developed the Pandemic
Preparedness Plan (PPP), which included Phases I through
III and a final quality assurances (QA) phase. He noted the
department believed the QA phase was the most important
phase of the plan. He explained that the QA phase allowed
DOA to set up assurances that the state's investment in the
plan would be well utilized. The governor had asked the
department to make certain it could ensure worker safety
and maintain continuity of government services and
operations.
Mr. Isaacs continued to review slide 2. He reported that
DOA had received $58,180,000 million, which was less than 1
percent of the federal funds discussed in the OMB
presentation. The expenditures for Phases I through III
accounted for $52,842,529, which included the amount DOA
expected to spend in FY 21. He stated that the amount put
the department under budget by $5.3 million. The department
had informed the governor and OMB that it had the
unallocated and unspent funds available if they were needed
elsewhere.
Mr. Isaacs informed the committee that Phase I evaluated
the state's existing core services. The department looked
at which services and processes could be digitized. Phase
II looked at the state's telework infrastructure and
AspireAlaska, the state's digital performance management
system and learning management system for supervisors. He
stated that Phase III was more convoluted and pertained
primarily to the Office of Information Technology. He
relayed there were numerous things that needed to be done
to enable teleworking. He noted that the things done prior
to his hire date in August allowed him to be a permanent
teleworker from his village in Klawock. He shared that his
eight children and sixteen grandchildren all attended
school in Klawock, which helped with economic development
in the villages. Phase III also included the Service
Management System: AlaskaNow. The system would automate
over 160 manual processes across the state including
onboarding, recruitment, and time sheets.
3:44:32 PM
Mr. Isaacs turned to slide 3 outlining the six phases of
Alaska's PPP Plan. He noted that because December 30, 2020
had been the finish line for the initial use of Coronavirus
Relief Funds (CRF), Phases IV through VI had to be taken
off of the plan to be completed. He explained that if DOA
was given additional CRF funds to continue it would have
the ability to implement Phases IV through VI. He
highlighted that the all of the CARES Act requests were run
through the department's Division of Finance to ensure the
state was adhering to CRF rules. He noted that the
expenditure rules changed frequently in the beginning.
Mr. Isaacs looked at slide 5 showing a map highlighting
states with similar CRF expenditures aimed at improving
telework and keeping workers safe. He noted that Missouri
and Oklahoma had been added to the slide deck.
3:47:19 PM
Mr. Isaacs advanced to slide 6 titled "Quality Assurance."
He discussed that QA had been set up first as a priority to
ensure all PPP projects were completed and that legislators
received value for their investment. He shared that one of
the department's main contractors was Wostmann and
Associates in Juneau. The firm had been hired to ensure all
of the work being done was beneficial and complete for the
state. He noted that DOA had established a governance team
to ensure project success and effective, realistic project
management and execution. He stated it was a new way for
DOA to work with other departments to make certain they
were on board with the way DOA was proceeding with
projects.
3:48:41 PM
Mr. Isaacs turned to slide 7 and stated that core services
evaluation under Phase I was complete. He detailed that
under Phase I, DOA assessed and analyzed what the state was
doing and how it could modify tasks, services, and business
processes in order to be best performed from home offices
in a telecommuting environment. Phase I also identified and
prioritized a list of 128 tasks, services, and business
processes that could be modified for improved function
during the pandemic. The initiatives were the substance of
the PPP Phases IV through VI. Slide 8 highlighted 23 of the
128 projects identified in Phase I.
3:50:05 PM
Mr. Isaacs spoke to Phase II referred to as the Pathway
Project (slide 9). He detailed that the Pathway Project had
enabled the department to launch AspireAlaska aimed at
automating, training, and performance management. He
elaborated that the program offered over 2,000 online
training courses to employees, facilitating remote learning
and professional development; and enabling the state to
manage employee development, create career progressions,
and develop mastery paths. He highlighted a list of
objectives on the right side of the slide. He relayed that
the program had allowed people like himself to telework
from villages that have a reliable high-speed internet
connection. He shared that one of his coworkers reported
meeting [virtually] via Teams messaging more often than in
person during the pandemic.
Mr. Isaacs addressed Phase III focused no enabling
technology including connectivity, collaboration, security,
productivity, and automation (slide 10). He referenced an
earlier question by a committee member about how much of
the department's budget had been replaced by CRF funds. He
reported that the department had not replaced any of its
operating expenditures with the exception of hiring short-
term non-permanent help when it had procured and deployed
4,300 laptops for employees to telework.
3:52:56 PM
Mr. Isaacs spoke about the fiscal responsibility DOA had
shown through Phases I through III of the PPP plan. Phase I
had a total allocation of $780,000 and the department had
come in slightly under budget with a remaining balance of
$3,758. Phase II had a total allocation of $11.4 million
and there was currently a remaining balance of $3.69
million. He explained that Phase III had the broadest reach
in terms of the enabling technology and DOA planned on
using the full allocation of $41.4 million. He stated that
according to the Division of Office of Information
Technology, the division could use more funding if
received.
Representative Edgmon asked for verification that Mr.
Isaacs did his entire job teleworking.
Mr. Isaacs replied in the affirmative.
Representative Edgmon thought it was impressive. He asked
for verification that the concept of teleworking had been
brought on by the pandemic and it had grown into a model
that other state agencies may be able to use.
Mr. Isaacs answered affirmatively. He stated that
teleworking and the ability to hire qualified people to
fill state positions who live in rural villages was the
silver lining to the pandemic. He relayed that without the
pandemic it would not have made his personal situation
possible.
Representative Edgmon asked if Mr. Isaacs would have the
ability to continue working from his village after the
pandemic.
Mr. Isaacs replied that he had been told he would be a
permanent teleworker. He noted that if leadership changed
with an election there was potential for the situation to
change. As things currently stood, he would continue serve
the people of Alaska from his village in Klawock.
3:56:15 PM
Representative Edgmon asked how significant the cost
savings could be by full implementation of Phase III. He
was trying to understand the magnitude of order.
Mr. Isaacs responded that DOA was working with OMB to do a
space study analysis of leased space throughout the state.
The department would work with other departments to
determine how many of their staff could be permanent
teleworkers and what those savings may implicate for the
state. He relayed that the DOA commissioner supported
teleworking. He added that supervisors had to approve
whether a position was teleworking capable. He explained
there were some positions within DOA that did not fit the
telework model, simply because handling paper was required.
However, there were many things the enabling technology
allowed work to be digitized.
3:58:27 PM
Vice-Chair Ortiz thanked Mr. Isaacs for his presentation
and was glad to hear a person from the community of Klawock
could work from home. He asked if there was a certain point
where there was an evaluation of the impact on the overall
quality and delivery of services from people working from
home. He wondered if teleworking would bring overall
positive benefits to the state in the delivery of services.
Commissioner Tshibaka answered that the department had done
a survey in 2020 to determine how telework was impacting
the departments during the pandemic. The department had
found across the board from employees, supervisors, and
executive management that more was being achieved with
telework; however, some of the concerns expressed were
about the loss of things like trust, collaboration, and
values that came with culture. She explained it was part of
what was sacrificed when people did not see each other in
person. She stated that with the ability to move back into
offices it would be necessary to assess how often to bring
teleworkers in in order to reclaim some of the in-person
values that were important to developing workforce.
Commissioner Tshibaka shared that she had experience
creating staggered work schedules and in-person meetings
where employees worked on a project for a specific purpose,
while still achieving the maximum benefits of telework. She
reported that DOA intended to continue using surveys and
polls to measure what was happening in the workforce. She
explained it was part of the continued effort of the
Pathway Program under the Phase II implementation
throughout 2021. The department was continuing to measure
workforce through its performance plan.
Commissioner Tshibaka noted that the department had to
change the way it did performance planning and metrics
because previously employees had been measured on things
like number of work hours or number of hours in the office
and less on things like outcome. She furthered that the
method had been changed to match a telework workforce.
Supervisors had expressed they did not know what their
employees were doing, which put them in a tenuous spot. She
expounded that 7,000 employees had gone through the Pathway
Program the past year, which provided a much better idea of
exactly what employees were doing from their telework
location. The work could be measured daily, weekly, and
throughout the performance year cycle.
4:01:58 PM
Vice-Chair Ortiz asked how much telework was being done by
people living outside Alaska resulting in resources,
salaries, and money being circulated in areas outside the
state.
Commissioner Tshibaka answered that about 55 to 60 people
across all of the state departments were working out-of-
state. She relayed that telework agreements had to be
approved by commissioners. She elaborated that the
department was almost finished revising the telework policy
that would further limit out-of-state telework agreements.
She explained that because of the change in the nature of
COVID (i.e., there was a vaccine available and the number
of cases had decreased) the department felt comfortable
limiting out of state telework to individuals needing to
leave the state to care for someone who was sick or for
their own medical care. She clarified that exempt employees
were required to get commissioner approval, while
bargaining unit employees were required to get their
union's approval as well. She communicated that the
standard for getting an out-of-state telework agreement
would be high going forward.
Mr. Isaacs added that one of his duties was to sign off on
the telework agreements. He informed the committee that
currently, agreements were being approved and reviewed on a
quarterly basis.
Representative LeBon remarked that he did not believe there
should be any state employees working from out-of-state. He
understood it happened, but he hoped the commissioner would
take a hard look at the issue. He stated that the private
sector dealt with worker's compensation within the office.
He referenced the statement that 7,000 state employees were
working from home. He asked if an employee was injured at
home if it was a worker's compensation event.
Commissioner Tshibaka answered that it depended on what a
person was doing and where and when the activity took
place. She explained there were several factors that came
into play. For example, she was currently in her work
location and would be covered by worker's compensation if
she were to get hurt. She reported that the state's
worker's compensation claims had decreased dramatically
since there had been a high increase in telework, which was
positive news for the state.
4:05:41 PM
Representative Edgmon recalled the committee had been told
recently there were approximately 20,000 state workers. He
asked for verification that 7,000 state employees were
currently teleworking.
Commissioner Tshibaka responded that the current number of
state employees teleworking ranged between 5,300 to 6,000.
She noted that the number fluctuated depending on the need
at the time. She used the Public Defender Agency under DOA
as an example. She explained that depending on what the
court was doing and depending on their clients' needs there
would be more attorneys in the office meeting with clients
or more would go home. She expounded that it also depended
on what was happening in the office in terms of health. She
explained that there had been a health scare in one of
DOA's offices and employees who had all been in the office
the previous week were all out of the office during the
current week. She reported the peak number of teleworkers
had been about 6,000 during COVID. The 7,000 number
reflected the number of positions that went through the
Pathway Project (a new performance planning development
system), resulting in a revised performance plan system
that was teleworkable.
Representative Edgmon thought Alaska was on the vanguard of
the effort nationwide. He asked for the accuracy of his
statement.
Commissioner Tshibaka replied that when DOA had started the
process, only one other state had started to use money for
telework capability. The department had also identified
that most of the other states had already started
teleworking. When the State of Alaska started at the
beginning of COVID, less than 1 percent of its employees
were teleworking. She elaborated that there had not been a
telework infrastructure in Alaska, heightened VPN capacity
for cybersecurity on the state's network, or deployed an
extensive amount of state laptops [prior to the pandemic].
She reported that prior to the pandemic the state did not
have DocuSign to enable documents to be signed digitally.
She explained that the state had to set up an
infrastructure that none of the other 49 states had to set
up from scratch. Additionally, the work had to be done on
an expedited timeframe because the original guidance
mandated being done by December 30.
Commissioner Tshibaka referred to setting up numerous
information technology deployments on the tight timeline
under budget and without error as a government miracle. She
stated that all of the credit went to the government
employees working in DOA who had worked around the clock to
get the work done. She believed states had been surprised
Alaska had been able to pull off such an extraordinary feat
in changing its business practices. Additionally, other
states had looked at Alaska and determined they could
follow a similar process because it ensured worker safety.
She added that the state had not lost a single day of
operations because of the work the DOA employees had done.
Additionally, there had not been super spreader events in
state buildings because of the high number of teleworkers.
She remarked that the two items were big wins the DOA staff
had added to the Coronavirus response.
Representative Josephson asked if the $53 million spent was
entirely federal funding.
Commissioner Tshibaka confirmed that the money was entirely
comprised of Coronavirus funding.
4:09:56 PM
Vice-Chair Ortiz looked at slide 8 showing 23 of 128
projects identified in Phase I. He looked at the DMV
[Division of Motor Vehicles] category and asked for detail
about the project in relationship to car titling, driver's
license knowledge tests, and other.
Mr. Isaacs deferred the question to the commissioner. He
stated that the work had been done prior to his hire date.
He shared that he had recently bought his wife a new car.
He provided his experience with DMV and stated that the
current process worked very well.
Commissioner Tshibaka answered that the 23 projects
highlighted on slide 8 were the top projects identified by
the department that would bring an easy return on
investment by converting work currently done in person to a
digitized process. The DMV projects identified could be
digitized and would not require in person work.
4:11:58 PM
Vice-Chair Ortiz had heard some concerns from his
constituents that some individuals may not have the
knowledge or access to digital processes. He stated that
some constituents had been very frustrated by the change.
He asked if the department had heard similar things.
Commissioner Tshibaka answered in the affirmative. She
clarified that customers would still have the ability to go
to DMVs for in-person service. She explained that the
project created an alternative access point. She detailed
that currently no one had the option to access the three
services digitally. The goal was to offer alternative
options. She reported that the services were currently
creating lines, backlogs, and delays at DMVs. She stated
they could clear out a lot of traffic from the DMV by
making an online option available. She shared she had been
working with other stakeholders and partners to determine
when internet would be available across the state. She was
hearing from partners that within two years there should be
internet available across the state regardless of location.
She stated it was something she was considering when
pushing digital initiatives for the state. She agreed it
was unfair that digital services would only be available to
people living in places with internet. She reasoned that if
it took about one to two years to provide digital options,
it synced with the timing when internet access would be
available to everyone.
Vice-Chair Ortiz appreciated the efficiencies being found;
however, he stated it was one thing to say that individuals
could still come in if there continued to be an open DMV
office. He had seen a list of six or seven DMV offices
slated for closure. He was concerned about how people
without digital access could access the services.
Commissioner Tshibaka answered that the department's
proposal was to transition those DMVs to public private
partnerships. She used the partnerships the U.S. Postal
Service had with FedEx as an example. The administration
would transition the DMVs to private partnerships so there
would be DMV services available in those communities. The
idea was to eliminate the cost to the state while
continuing to provide services to community members. She
elaborated that people who did not want to use the private
partnership could drive to a state DMV up the road or
access services online or via mail.
Representative Josephson noted there was concern by
Alaskans about shifting to a public/private partnership. He
remarked that some Alaskans were aware that DMV was a money
maker for the state. On the whole he believed the public
was satisfied with the services they were getting. He
shared Vice-Chair Ortiz's concerns.
4:16:20 PM
Commissioner Tshibaka answered that she understood the
concerns. She highlighted that the ideas were proposals
offered to the legislature as the policy making body. She
believed the state was facing a significant challenge with
a budget [gap] exceeding $2 billion. She detailed
commissioners were all given the task of coming up with
cost savings to bridge the gap. She reported that the
department was trying to come up with cost savings ideas
without eliminating services. She asked the legislature to
consider the private partnership in each location
individually because the situation in each location was
unique. She understood that everyone involved was
struggling with the challenges of how to bridge the gap.
She noted that one side of the bridge pertained to revenue
and the other side pertained to the cost of government.
There were other proposed solutions including digitizing
128 other initiatives. She noted it would cost $25 million
to make the changes, but once implemented it would save $89
million per year. She stated there were different things
that could be done within the department to achieve the
goals and the items in the presentation were all just
ideas.
Mr. Isaacs shared that when he got his driver's license
when he turned 16, he had gone to Craig where the
DMV was a public/private partnership with the City of
Craig. He stated that the proposed model was not new to the
State of Alaska DMV and was tried and true for many years.
HB 69 was HEARD and HELD in committee for further
consideration.
HB 71 was HEARD and HELD in committee for further
consideration.
Co-Chair Merrick reviewed the schedule for the following
morning.
ADJOURNMENT
4:18:54 PM
The meeting was adjourned at 4:18 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AK CRF Allocations and Expenditures as of 2.26.2021.pdf |
HFIN 3/1/2021 1:30:00 PM |
OMB/DOA - HFIN |
| COVID-19 Federal Funding to AK 2.5.2021.pdf |
HFIN 3/1/2021 1:30:00 PM |
OMB/DOA - HFIN |
| HFIN OMB COVID Funding Overview 2.26.pdf |
HFIN 3/1/2021 1:30:00 PM |
|
| HFIN-DOA-PPP Presentation 3-1-21.pdf |
HFIN 3/1/2021 1:30:00 PM |