Legislature(2021 - 2022)ADAMS 519
01/20/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Governor's Fy 2023 Operating Budget by the Office of Management and Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
January 20, 2022
1:35 p.m.
1:35:17 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen (via teleconference)
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
Representative Ben Carpenter
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor.
SUMMARY
OVERVIEW: GOVERNOR'S FY 2023 OPERATING BUDGET BY THE OFFICE
OF MANAGEMENT AND BUDGET
Co-Chair Foster reviewed the agenda for the afternoon
meeting.
^OVERVIEW: GOVERNOR'S FY 2023 OPERATING BUDGET BY THE
OFFICE OF MANAGEMENT AND BUDGET
1:36:17 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced the PowerPoint
Presentation: "Overview: FY 2023 Governor's Budget by the
Office of Management and Budget. He began on Slide 2 titled
Budget Lookback that depicted a summary of the revenue,
expenditures, and Permanent Fund Dividend information over
the previous years from FY 2019, FY 2022, and FY 2023. He
reported a 5.1 percent reduction in overall expenditures, a
5 percent reduction in the operating budget, and a 7.9
percent reduction in the capital budget. He elaborated that
there was a 2.2 percent reduction in agency expenditures
primarily from reductions in the University of Alaska
budget, changes in financing for Department of
Transportation and Public Facilities (DOT) projects, and
other reductions in agency operating budgets. He qualified
that the reductions were offset by increases in public
safety and natural resource development. He pointed to the
significant reduction in statewide operations of $146
million from decreased obligations to the state retirement
system due to high returns. He highlighted that the capital
budget was held to federal match money for federal programs
and was a baseline budget. Mr. Steininger commented that
the budget deficit of over one half a billion dollars was
closed, and the FY 23 budget was accomplished without a
deficient or draw on savings.
Co-Chair Foster clarified that the committee was currently
addressing the FY 23 budget and the last completed budget
cycle was FY 21. He wondered why the comparisons were made
to FY 19. He suspected that it was because it was the
governors first year in office. Mr. Steininger replied
that the FY 19 budget was the budget that was inherited by
the current administration. He noted that the table on
slide 2 and in presentation data used numbers from the
prior fall revenue forecast. He relayed that on January 19,
2022, the Department of Revenue (DOR) provided revenue
updated estimates to offer more current information. He
would update the information when possible, during the
presentation.
Vice-Chair Ortiz asked whether the change column [titled
FY 2019 to FY 2023 UGF Change] represented changes from
FY 19 compared to FY 23. Mr. Steininger replied in the
affirmative. He added that in following slides the
comparison was between FY 22 and FY 23.
Co-Chair Foster pointed out that the slide showed a surplus
of $27 million. He relayed that the number included $375
million in American Rescue Plan Act (ARPA) funds in which
case there could be a deficit of $350 million. Mr.
Steininger responded that the administration was using ARPA
State and Local Fiscal Recovery Funds (SLFRF) funding in
place of Unrestricted General Funds (UGF).
Representative Wool queried whether the FY 2022 Authorized
and Supplemental column represented the supplemental
budget that had not been adopted yet. Mr. Steininger
concurred that the numbers reflected the governors
proposed supplemental budget.
Mr. Steininger turned to slide 3 titled Budget
Objectives:
• 50/50 PFD with Constitutional Amendment
• FY2023 operating budget to address baseline needs and
priorities
Ensure a safe environment for individuals and
businesses
Public protection, permitting, and resource
development
• Continue efforts towards efficiency and operational
change
• Use FY2022 surplus and bonding to support a robust
capital investment
• Avoid a FY2023 deficit or draws from savings accounts
1:44:27 PM
Mr. Steininger turned to slide 4 titled FY 22 and FY 23
Revenues. He discussed available revenue. He pointed to
the top 3 lines on the chart portraying UGF revenues and
total revenue available from both traditional sources and
the Percent of Market Value (POMV) draw. He drew attention
to the 50 percent to 50 percent (50/50) POMV draw split
between the Permanent Fund Dividends (PFD) and government
services. He highlighted the Carry-forward and Adjustment
column. The summary was typically limited to prior year
appropriations available for expenditure in the current
year. However, in the current year it reflected the use of
the Statutory Budget Reserve through direct appropriations
in FY 22 that reduced the amount of UGF by $410.7 million
and the use of ARPA replacement funding. He informed the
committee that ARPA allowed SLERF to replace UGF by
offsetting revenue loss due to COVID 19. He elucidated that
SLERF funding was coded as UGF where it was replacing
funding that was not directly related to COVID response.
Effectively, the relief funding acted as UGF. He reiterated
that the revenue numbers on the slide were based on the
Fall Revenue Sources Book totaling $4.6 billion in FY 23
and $4.9 billion in FY 22. The updated figures provided by
DOR increased UGF revenue by $221 million in FY 22 and by
$467 million in FY 23. He noted the significant change,
which was the reason the department released the updated
estimates.
Co-Chair Foster relayed that DOR issued a caveat that it
did not favor relying on monthly updates because they were
variable. He wanted the committee to keep that in mind.
Representative Wool cited the $1.25 billion carryforward on
slide 4 and asked for an explanation.
1:48:23 PM
Mr. Steininger replied that the amount represented almost
entirely direct federal COVID relief to departments that
was appropriated in FY 20 and FY 21 that carried into FY
22. He added that community relief was included in the
figure.
1:48:56 PM
Representative Wool cited the $250 million in federal
revenue replacement in FY 22 and the $375 million amount in
FY 23. He deduced that the total was approximately $1
billion, and he wondered if the numbers reflected the
remaining amount used for revenue replacement. Mr.
Steininger replied in the affirmative and noted that in FY
23 $375 million was used for revenue replacement and the
remainder was expended in direct appropriations.
1:49:43 PM
Vice-Chair Ortiz referenced the $1.25 billion in direct
relief money from the federal government. He asked if the
amount was a one-time spending amount. Mr. Steininger
replied in the affirmative. He detailed that it was a one-
time revenue appropriation from the federal government that
could be expended over multiple years.
1:50:45 PM
Representative Rasmussen asked about the monthly revenue
forecast. She asked if the legislature would be getting
more accurate information with additional or monthly
reports since oil revenue was variable over time. Mr.
Steininger deferred the answer to DOR. He underlined that
the tables on the slide was based the information on the
fall revenue forecast. The monthly information was only
released because the revenue change was so drastic.
1:52:07 PM
Representative Rasmussen asked that from a budgeting point
of view whether it was more useful to have up to date real
time information on revenue and if it provided a better
picture of available revenue. Mr. Steininger thought it was
helpful especially with any dramatic changes occurring
after the revenue forecast.
1:53:06 PM
Representative Josephson asked if the administration would
be letting the legislature know what its plan was for the
additional revenues through amendments. Mr. Steininger
preferred to look at the need for expenditures rather than
available revenue for expenditure. The revenue information
was merely provided for a more accurate picture. He voiced
that the appropriations reflected the true needs of the
state and not expenditures based on available revenues.
Representative Josephson remarked that in some respects he
was aligned with Mr. Steiningers comments. He deemed that
the state could become $700 million wealthier over the
following months. He asked if the administration would save
the funding. Mr. Steininger indicated the following slide
would address the topic of surplus which would be deposited
into the general fund and swept into the Constitutional
Budget Reserve (CBR) according to the state Constitution.
1:55:52 PM
Mr. Steininger advanced to slide 5 titled FY 22 and FY 23
Expenditures. He noted a 2 percent increase in operating
expenditures between FY 22 and FY 23 [$103 million]. He
broke down the increase as $14 million in agency
operations, and a $36 million increase in large formula
expenditures such as Medicare and K-12 Education. He noted
that there was a decrease of $21.8 million in agency non-
formula items that were the day to day operations. The
decrease accommodated an increase in the amount of
Designated General Funds (DGF) that was swept.
Mr. Steininger moved to the statewide operations
expenditures. He noted a dramatic increase of roughly $90
million primarily for the payment of oil and gas tax
credits per the statutory calculation. It was offset by the
retirement system earnings which did well and decreased the
liability of the fund. He added that the ARM board did not
fund the retirement health system because it was
overfunded.
Mr. Steininger turned to the capital budget and noted a
decrease of $88.2 million in UGF by trying to achieve
capital needs elsewhere for other than core needs. He
relayed that before counting supplementals the capital and
operating budgets were essentially flat with an increase of
$15 million or zero percent change. He restated that the
total surplus was $27 million and including the current
revenue adjustment, the surplus for FY 23 would be roughly
$493 million.
Representative Josephson commented on the state's
retirement debt. He requested that the committee hold a
hearing on the status of the states retirement accounts.
Co-Chair Foster took note and thought a presentation might
be in order. He commented on the balanced budget in FY 23.
He thought the budget really reflected a $350 million
deficit because of the use of one-time ARPA funding. He
also wanted to maintain consistency going forward as to
whether the budget was based on fall and spring forecasts
or monthly forecasts. He questioned using monthly numbers
as a basis for budgeting and expressed some caution
regarding the size of the surplus in relation to the use of
one-time ARPA funding.
2:01:17 PM
Co-Chair Merrick asked how much SLERF funding was used in
the budget. Mr. Steininger recounted that the total amount
was roughly $504 million, and a future slide contained a
breakdown.
Representative Edgmon questioned the governors budgeting
process. He referenced some of the major expenditures in
the budget and noted that the budget did not utilize
savings but was concerned that it did not save any money.
He warned that he would very closely examine the layers of
the budget. He thought the state was building a budget with
anticipated money and no contingency factor. He thought the
budget reflected spending money the state had not earned
yet, used one-time federal funding for typical
expenditures, made promises that the FY 22 and FY 23 PFD
would be larger than in prior years, and everything would
work out fine. He cautioned that future legislatures would
need to pick up the tab. He believed that the budget
spent beyond its means. He acknowledged that the operating
budget was kept in check but worried that the budget spent
money the state did not have and made promises that were
unlikely to be kept.
Co-Chair Foster concurred with Representative Edgmons
comments.
2:04:30 PM
Representative Wool noted there were also items in the
FY 22 budget that were not funded including school bond
debt reimbursement, oil tax credits, etc. He acknowledged
that the budget proposed to backfill the PFD but thought
there were other items that were not funded in FY 22 and
not proposed in the supplemental or FY 23 budget that could
be backfilled.
Co-Chair Foster invited Mr. Steininger to correct him or
other committee members if inaccurate statements were made.
2:05:42 PM
Mr. Steininger replied that the budget was built off the
normal process based on the fall revenue projections and
was adjusted in March based on the spring forecast. He
countered comments that the budget was based on revenue
that was not earned relative to the normal budgeting
process, where it was always based on projections. He
admitted that although minor, there was a $27 million
surplus, and the budget was balanced. He offered that the
budget achieved the outcome without compromises on School
Bond Debt Reimbursement or the amount of the PFD payout. He
furthered that merely because the federal funding was one-
time funding it was available for expenditure, and it was
fair count it in a statement of surplus.
2:07:44 PM
Representative Edgmon asked about the state lawsuit
regarding the Higher Education Fund. He ascertained that if
the state lost the higher education lawsuit it would lose
$400 million deducted from the CBR. Mr. Steininger agreed
with the statement. Representative Edgmon maintained that
as a policy maker he had to consider factors like the price
of oil dropping to $45 per barrel in the fall of FY 23. He
did not want to put a budget together that merely made
things add up. He noted that it was not typical to use $375
million of one-time federal money for state money that
would be needed again the following year. Mr. Steininger
contended that the budget was not expending any funding
from the CBR, and he did not follow the logic that the
state would not use the SLERF funding for lost revenue due
to the pandemic. Representative Edgmon appreciated the
opportunity for spirited debate. He reiterated the
importance of contingency measures and money in savings due
to volatile revenue. He was concerned with the possibility
of a downturn. He did not view the budget as fiscally
responsible. He thought it was his duty to look beyond a
short term budget. He thanked Mr. Steininger for the room
to address his viewpoint.
2:11:09 PM
Co-Chair Foster thought it was appropriate to have debate
on the issue and stressed its importance. He thought the
big picture perspective was import when the subcommittees
would be dealing with the budget details.
2:12:14 PM
Representative Rasmussen thought that if the state had one-
time funding, she did not think it was inappropriate to
spend it. She thought Alaskans were still dealing with the
consequences of the pandemic. She was also concerned that
Alaskans might need help with interest rates and a tough
economy. She asked how long the state had to spend the
SLERF money. Mr. Steininger responded that the funding was
available through December 31, 2024. Representative
Rasmussen asked how much money was in the Permanent Fund
presently. Mr. Steininger did not have the figure but
thought it was greater than $80 billion. Representative
Rasmussen asked whether it was accurate to say that the
state had a significant amount of money in an account. Mr.
Steininger agreed that there was a substantial amount of
money in the Permanent Fund that provided the POMV revenue.
Representative Rasmussen opined that it was disingenuous
to state that the state did not have funding if a
catastrophic event happened, and oil tanked to $20 per
barrel. She guessed that there would be options and time.
The state could maneuver and fulfill all the government's
obligations in the current fiscal year. She hoped the
legislature would work with the governor.
Co-Chair Foster commented on the debate regarding one-time
funding. He shared an analogy of someone with weekly income
of $500 and the same in weekly expenses with $200 in
savings then their work hours were cut back and only made
$400 per week. One could say using $100 from savings would
balance the budget but eventually savings would run out and
not cover ongoing expenses after two weeks. He favored the
analogy because it illustrated the result of using one-time
funding to cover ongoing annual operating expenses.
Representative Josephson shared testimony from the Ways and
Means Committee that at current projections in the 10
year plan, even at low oil prices with prudent budgeting,
the path was predictable and sustainable. He agreed with
prior comments regarding sustainability and spending. He
was concerned with the public's expectations in the future.
He asked for a sense of how the FY 23 budget would play
out in FY 24 and FY 25. Mr. Steininger responded that in
FY 24 and several of the years in the 10 year fiscal
outlook the administration predicted deficits. He offered
that the deficit disappeared over time. He detailed that
there were many assumptions inherent in developing a 10
year outlook and it was a long time. The fiscal problems of
the state would continue to morph and change. He
acknowledged that in the FY 24 the state would be facing a
deficit of more than $100 million. He noted the changing
policy decisions involved in each years budget process.
Some funding was based on additional revenue and was
discretionary like school bond debt reimbursement and some
funding items were things the state should support no
matter what like public protection.
2:22:25 PM
Co-Chair Foster understood that the SLERF funding was real
money that should be used. However, he agreed with
Representative Josephson that it was not sustainable
revenue.
2:22:49 PM
Representative Johnson found the vast difference of opinion
surprising. She felt that the budget was well considered
and was impressed with the results. She thought that the
governor had listened carefully and included increases that
were not granted in prior budgets. She opined that the
budget reflected many sides across the political spectrum
and was masterfully crafted. She offered that the budget
did not include any of the forthcoming federal
infrastructure funding. She restated that overall, the
budget was well considered. She appreciated the effort.
2:24:59 PM
Vice-Chair Ortiz referenced the capital budget totaling
$1.67 billion. He asked whether the proposed amount was a
bonding package. Mr. Steininger responded that $308 million
of capital spending would be comprised of General
Obligation Bonds (GO) receipts if the bond package was
adopted and the bulk of the remainder reflected federal
funding. He indicated that it showed up as other funds on a
table in the presentation. Vice-Chair Ortiz asked if
bonding was recurring debt. Mr. Steininger responded in the
affirmative. Vice-Chair Ortiz suggested the possibility of
using some of the one-time funding for capital expenditures
instead of incurring debt. He offered that it was more
appropriate to use one-time money for one-time
expenditures. He asked whether his suggestion was possible.
Mr. Steininger understood the logic but deemed that in the
current low interest environment it would be an opportunity
to take advantage of low interest rates for bonding. He
shared that it was the reason the bond package was
introduced. He reasoned that while it added debt service to
the state of roughly $22.8 million over twenty years the
sum was manageable within the amount of debt that was
expiring. The bonding fit within the long-term fiscal plan
and was a good opportunity for the state.
2:28:04 PM
Representative Wool clarified that in FY 22 and FY 23 there
was a 50/50 PFD and a surplus. He deduced that looking
ahead to FY 24 and FY 25 when the price of oil was closer
to $70 per barrel coupled with a 50/50 PFD payout, the
state would be facing a deficit. He asked if he was
correct. Mr. Steininger responded in the affirmative and
noted the 10- year plan did show a deficit that would close
over time. He communicated that the 10-year outlook
reflected the December 15, 2022, Fall Revenue Sources Book
and did not consider the updated revenue forecast.
2:29:54 PM
Representative Rasmussen recalled that the state could not
use the federal money for certain infrastructure and
capital expenses. She asked if she was correct. Mr.
Steininger responded that he was not aware of any
restrictions on capital expenditures and did use some SLERF
funding in the capital budget. He noted the prohibition of
using SLERF funding to directly pay debt service. He
guessed that there was another pot of federal relief money
that had the restriction.
2:31:25 PM
Representative Edgmon admitted his previous comments were
combative. He emphasized that he wanted to find every
opportunity to save money for the rainy day that was
inevitable.
Co-Chair Foster referenced a bumper sticker that read,
please give me one more oil boom. He agreed with
Representative Edgmons remarks.
Representative Johnson agreed with Representative Edgmon
and was in favor of finding efficiencies. She reiterated
that the governor's budget was a great starting place.
2:33:26 PM
Mr. Steininger moved to Slide 6 titled Fiscal Summary -
Savings Balances:
FY2022 CBR beginning balance reflects an estimated
$490.4m swept CBR under Alaska Constitution Art. IX
Sec. 17(d). Audited amounts will be reported in the
FY2022 Annual Comprehensive Financial Report.
FY2023 budget includes $33.6m in UGF to replace fund
sources impacted by the CBR sweep. Fully supports all
associated programs.
Mr. Steininger communicated that the state had two primary
savings accounts: The Statutory Budget Reserve (SBR) and
the CBR. He elucidated that the SBR had an approximately
$70 million balance and was available with a simple
majority vote. The Constitutional Budget Reserve was
available with a super majority or three-quarter vote. The
balance was expected to grow over the FY 22 to FY 23
period. The current CBR balance of $1.17 billion was based
on pre-audited financial information. He explained that
due to the sweep, the only way to calculate the swept funds
was via a pre-audit. The swept amount was $490 million
under Article 9, Section 17 b of the states Constitution.
The balance would be updated once the financial statements
were audited. Mr. Steininger continued that the
administration had tried to build a budget that did not
rely on the savings accounts to meet the needs of state
programs. He reported that the budget contained $34 million
in fund change actions to shift from DGF that were swept
and transferred to UGF appropriations.
2:36:11 PM
Representative LeBon stated his understanding of the
states savings accounts. He asked for discussion regarding
how money flowed into both accounts and the sources of the
money. Mr. Steininger answered that the SBR balance was
directly appropriated by the legislature. He elucidated
that there was no automatic mechanism that deposited money
into the SBR. It was comprised completely of ad-hoc savings
deposited by the legislature. He noted that roughly $481
million was deposited and $410 million was spent leaving
the balance of $70 million. The CBR contained certain types
of revenues or earnings that flowed into it as automatic
deposits via constitutional provisions for things like
court settlements. He stated that $30 million and $60
million were deposited over two years. Representative LeBon
asked whether the CBR balance currently included swept
funds and if the largest swept amount was from the Higher
Education Investment Fund (HEIF). He answered in the
affirmative. He added that out of the $490 million pre-
audited balance, $400 million was from the HEIF.
Representative Josephson noted that there were scores of
sub funds that were swept. He wondered if the total of the
other swept funds was $33.6 million. Mr. Steininger
answered that the $33.6 million was the difference between
anticipated revenue into the sub accounts and the
appropriated need for the program. He provided the example
of alcohol taxes. If the amount collected was less than the
actual needs a fund change was necessary for the remainder.
The fund change would accommodate the difference between
projected revenue and expenditure need. He voiced that the
utilization was greater than $33 million, but that amount
was necessary to protect the programs.
2:39:50 PM
Representative Josephson cited the Spill Prevention and
Response (SPAR) fund and the HEIF. He had received
correspondence from concerned citizens regarding the two
funds. He asked it there were other groups that were
alarmed by having their funds swept. Mr. Steininger
responded that the transition to a post-sweep period of
the budget would take some time to figure out all the
implications of the sweep. He explained that the reason the
special funds existed was because the revenues were
somewhat volatile. The current fund change was predicted
for FY 23. He determined that it would be necessary to use
variable fund changes each year or reconsider how some of
the programs were financed. He concluded that it would
require time to look at the structure of some of the
programs to figure out how to support the programs without
the sweep. He added that many of the programs required
relatively small amounts of support.
2:41:53 PM
Representative Thompson wondered what the balances of
unspent money was in COVID relief accounts. He asked how
much money had been spent. Mr. Steininger would provide the
information.
2:42:43 PM
Mr. Steininger turned to slide 7 titled Capital Budget:
Baseline traditional FY23 capital budget
$157.4m UGF; $1.4b Fed
Minimum level capital budget for federal match and
core state functions
Use FY22 surplus for additional capital projects $93m
UGF
Projects that benefit from expedited construction
GO Bond financing for community projects $325.2m bond
issuance
Investment in key infrastructure to maximize public
benefit around the state
Approved by voters in Fall 2022 general election
Mr. Steininger reviewed the strategy used to increase
capital investments beyond the capital budget process. He
noted that $93 million in surplus was included in the
supplemental for capital projects. The supplemental capital
appropriations enabled obtaining contractors and getting
them working earlier. He relayed that with the oncoming
infrastructure spending in every state, Alaska would be
competing for contractors and crew. He thought it was
prudent to get some of the state's projects starting sooner
in order to attain commitments from contractors. Mr.
Steininger continued by discussing the state bond issuance.
The administration viewed it as a means of working on
community projects that would come online in the future due
to the need for voters' approval.
2:45:15 PM
Co-Chair Merrick asked if the $325 million was accurate or
updated. Mr. Steininger responded in the affirmative. The
bond issuance bill was drafted in the amount of $325
million. However, one bond project needed to be added to
the capital budget bill as an amendment and explained the
difference between the $325 million versus $308 million.
2:45:53 PM
Mr. Steininger addressed the graph on slide 8 titled FY
2023 Operating UGF. The graph was included to depict the
relative sizes of the departmental budgets. He noted a
change reflected in the separation of the Department of
Health and Social Services into the Department of Health
and the Department of Family and Community Services. He
reported that the retirement debt used to be the fourth
column but shifted down to the tenth column.
2:46:57 PM
Mr. Steininger moved to slide 9 titled FY 23 Agency
Operating Budget Changes. He indicated that the table
reflected the major changes in the operating budget. The
budget had $108 million in built-in cost drivers such as a
Reverse DOTPF One-Time Fed Relief totaling $10.9 million,
and a Medicaid increase in of $45 million. There was an
increase to the Medicaid budget of $45 thousand, Central
Service Rate Adjustments of $4.2 million, Salary
adjustments of 13 million, Restoring Funding for Sweep
Impacts of $33.6 million, and other small adjustments
totaling $1.1 million. He reported that there was $136
million in agency reductions. The largest was due to an
infusion of $63.4 million of federal subsidy for the Alaska
Marine Highway System (AMHS). He qualified that there was a
5 year rural ferry program included in the infrastructure
bill, which reflected the subsidy and was included in the
FY 23 capital budget as an exception because it only
required a small amount of state match money. He noted the
$16.8 million in the K-12 Formula program, and significant
reduction of $44.5 million in PERS/TERS and from the
passage of SB 55, which changed the way the state financed
retirement system obligations. He cited the targeted
reductions of $11.8 million. The chart concluded with
Targeted Investments in the amount of $42.6 million in
public safety and resource development and primacy issues.
He reiterated that the budget was flat showing a slight
increase of $13.9 million.
2:49:16 PM
Representative Wool referred to the $63 million for the
AMHS. He asked if the money was a one-time infusion or
spread over 5 years. Mr. Steininger responded that it was a
5 year program distributing $200 million nationwide, and
only two rural ferry programs qualified. The amount offset
$63.4 million UGF and offset the receipts from ferry system
ticket sales. The appropriation removed all but $5 million
of state money. Representative Wool queried whether the
appropriation was for FY 23 or whether it continued over 5
years. Mr. Steininger replied that it was a 5 year program
and would continue for 5 years. Representative Wool asked
if the total amount was $300 million over 5 years or how
much was anticipated over the following 4 years. Mr.
Steininger responded that the entire program was $200
million per year over 5 years. It was a nationwide program
with only two states competing for the funding.
2:51:59 PM
Mr. Steininger turned to Slide 10 titled Formula Cost
Drivers. He explained that formula cost drivers were state
programs where the amount of expenditure was based on
eligibility or other mathematical formulas resulting in a
state obligation. He commented that K-12 Education was
fully funded to the $5,930 base student allocation (BSA).
There was a small reduction in Average Daily Membership
(ADM) and an increase in correspondence students in the
amount of $19 million primarily because correspondence
received less funding than brick and mortar students. He
discussed the Medicaid program:
Medicaid
COVID-related enhanced federal match (FMAP) currently
expires at end of FY 2022
Pent up demand for services increases utilization
$45m UGF increment restores Medicaid state share to
pre-pandemic levels
Mr. Steininger conveyed that more than one-third of
Alaskans were on Medicaid due to the pandemic. The
administration hoped that recipients could transition to
other sources for health care needs.
2:54:42 PM
Representative LeBon cited slide 9 and the federal money
for the Alaska Marine Highway System. He deduced that the
funding was for operating costs and wondered if the funds
could be used for a capital maintenance fund and use state
money to operate the system to build up a maintenance fund
to build the system back up. Mr. Steininger responded that
the federal monies used in the FY 23 budget was only from
the rural ferry program. He explained that there were other
items in the infrastructure bill that the state was
eligible for but was awaiting clarity on the rules. Some of
the programs covered maintenance but the administration was
waiting for a directive on how the money could be spent. He
revealed that if the federal funds were slated for only 5
years, the administration wanted to transition the ferry
system to a system that was sustainable under full state
support. Representative LeBon thought the federal funding
was an opportunity to shore up the capital funding pool
to support maintaining the system over years. He commented
that he endorsed a shared approach of come capital and some
operating to the AMHS funding. Mr. Steininger commented
that one of the benefits of using the federal money
replacing passenger receipts left the $50 or $60 million in
annual revenue free for other things.
2:58:02 PM
Representative Wool asked if the ferry replacement fund had
been swept and was no longer available for the ferry
system. Mr. Steininger responded in the affirmative and
relayed that the vessel replacement fund was subject to the
CBR sweep.
Representative Josephson asked if the BSA was updated to
reflect the last 5 years of inflation and what was the
cost. Mr. Steininger offered to provide the information.
2:59:05 PM
Representative Edgmon thanked the congressional delegation
for getting infrastructure money to the State of Alaska and
specifically operational money for the AMHS. He believed
that the AMHS was a critical part of Alaskas
transportation chain.
Representative Rasmussen agreed with the previous speaker
and applauded the congressional delegation and Senator
Murkowskis leadership. She asked if the state had
increased ferry service in FY 23. Mr. Steininger replied in
the affirmative. He indicated that the rural program
allowed the system to run all of the vessels, maximize the
schedule, and increase service.
3:01:25 PM
Mr. Steininger moved to slide 11 titled Public
Protection:
Over $30 million operating UGF added for public
protection:
? Fully fund filled positions added in previous fiscal
years for Public Safety and Law: $1.3m
? 15 new Trooper positions
? 10 new Village Public Safety Officers and related
costs: $3.9m
? Add 14 DPS support positions so Troopers can focus
on policing: $1.8m
? Add positions for Rural Fire Investigations and
increase DNR wildland fire fighting capacity: $4.5m
? Add 30 Correctional institution support positions,
mental health treatment resources, and Hiland
Mountain booking: $4.1m
? Address trial backlogs $1.8m and defense capacity
$428.7k
3:03:49 PM
Representative LeBon asked where the 15 new trooper
positions would be sent. Mr. Steininger responded that most
of them would likely be stationed in the Matanuska-Susitna
Valley (Mat-Su). He pointed out that the department
preferred to start new troopers in urban areas and send
senior troopers to rural areas. Representative LeBon asked
why the Mat-Su Valley needed 15 new positions. Mr.
Steininger deferred the answer to the Department of Public
Safety (DPS). Representative LeBon inquired why Fairbanks
was not considered for new troopers. He understood that
some of the new troopers would be part of a mobile rapid
response unit that could respond in rural communities as
needed. He asked if that was still envisioned. Mr.
Steininger indicated that the 15 positions were added to
help with recruitment and retention issues. He deferred to
the department to relay its strategy for the deployment of
its troopers. Representative LeBon acknowledged the
struggles around trooper recruitment and retention. He
hoped that DPS was making progress on the issue.
Co-Chair Merrick reported she had a meeting with DPS and
relayed that she would address the issues in the DPS
subcommittee.
3:07:17 PM
Mr. Steininger continued with slide 12 titled Public
Protection:
People First Initiative UGF:
? Domestic Violence and Sexual Assault
? $3.5m for victim services provider grants
? $1.5m to reduce turnaround time on DNA testing and
increase forensics lab capacity
$1.0m for staff to provide victim services and
perpetrator intervention
Missing and Murdered Indigenous Persons
? Tribal liaisons and additional support for the
Missing Persons Clearinghouse $713.9k
? Homelessness
? Statewide homelessness coordinator, database and
data manager $866.3k
? Foster Care and Office of Children's Services
$1.4m for the Tribal Child Welfare Compact
Representative Edgmon asked where the tribal liaison would
be located. He heard they would be in the governor's
office. Mr. Steininger would provide the answer. He
furthered that the tribal liaison engagement would be
focused between the governors office and agencies.
Co-Chair Foster thanked the governor for the services being
in both rural and urban areas and the positive efforts
taken.
3:09:51 PM
Mr. Steininger discussed Slide 13 titled Resource
Development and State Primacy:
Invest in state primacy over resource management
Expand timber resource capacity $460.0k
$5.7m to assume primacy from the EPA over resource
development permitting
Resource Conservation and Recovery Act $830.0k
Clean Water Act Section 404 $4.9m
$4m to continue statehood defense efforts
Capital funding to develop mariculture and agriculture
industries to enhance food security and economic
development $50m
3:11:24 PM
Vice-Chair Ortiz referenced the Clean Water Act Section 404
at $4.9 million. He relayed that in the prior years
Department of Environmental Conservation (DEC) subcommittee
the agency was encouraged to hire for unfilled positions in
SPAR, which they failed to carry out. He asked if the $4.9
million created a new section in DEC. Mr. Steininger
confirmed that the administration was creating a new
section and taking on additional activity. He remarked that
currently the work was performed at the federal level. The
expenditure represented a significant increase in staff and
workload. However, the administration viewed it as a
benefit to Alaska in the long-term by bringing a state
focus to the decisions being made. Vice-Chair Ortiz asked
if the increment would be one-time only. Mr. Steininger
indicated the service would be ongoing and scale up over
time as the capacity increased.
3:13:38 PM
Mr. Steininger moved to slide 14 titled Improve State
Government Functions:
Executive Order for new Department of Family and
Community Services and Department of Health
DFCS for leadership focus to Children's
Services, Juvenile Justice, and 24-hour
facilities
DOH for leadership focus on public health
Medicaid, and public assistance
$434.3k UGF and $1.9m Total for new positions
Public Safety Communication Systems transfer to Public
Safety
This function is more aligned with DPS' mission
to ensure public safety
DPS has an existing division that can seamlessly
absorb these services
Net zero budget impact
Transfer Exxon Valdez Oil Spill Trustee Council from
ADFG to DEC
? Net zero budget impact
Invest in Department of Administration Information
Technology
"Pandemic Proofing" and avoidance of the next
major cyber-attack $28.9m UGF (capital)
Restructured how cost of investments in IT and
other central services are reflected in the
budget. Adds additional accountability for DOA
costs. $4.1m UGF
3:16:19 PM
Representative LeBon spoke of moving the communication
system from the Department of Administration (DOA) to the
Department of Military and Veterans Affairs (DMVA). He
wondered if the transaction was being reversed. Mr.
Steininger responded that it was currently being moved from
DMVA to DPS. He added that it became apparent it should be
housed in DPS.
Representative Wool cited food security and the $50 million
appropriation and wondered how the appropriation would be
spent. Mr. Steininger responded there were 2 separate
programs: $25 million in mariculture and $25 million in
agriculture. He expounded that the mariculture program was
primarily grant focused. The Division of Agriculture would
manage the $25 million for agriculture. There were multiple
objectives for the funding. He offered to provide
additional information to the committee or subcommittee.
3:18:48 PM
Mr. Steininger discussed slide 15 titled Federal Covid
Relief:
American Rescue Plan Discretionary Funding
$375.4m for revenue replacement
$20m in Fast Track Supplemental for public health
response
$37.4m FY2023 Operating investments
$10m for workforce development
$22.8m to the University of Alaska for
critical economic development
Drone Research $10m
Critical Minerals and Rare Earth
Elements $7.8m
Heavy Oil Recovery Method Research $5m
$3.5m for Domestic Violence and Sexual Assault
Victim Services
$1.1m to continue priority DNA collection
activities in Corrections
$72m in Capital projects
$64m of Coronavirus Capital Project Funds
Allocated
$47.9m remaining to allocate
3:21:21 PM
Representative Johnson asked for some examples of the $64
million. Mr. Steininger replied that the money was
allocated in the proposed capital budget but not yet
appropriated. He delineated that there were 3 proposed
projects. First, a student Information Technology program
for the University of Alaska. Secondly, an appropriation
for the fire facility in Eagle River built around a
community center concept. The third project was for Health
Information Systems for DHSS.
3:22:26 PM
Vice-Chair Ortiz asked if there was a list of projects that
made up the $72 million in capital projects. Mr. Steininger
would provide more detailed information in a future capital
budget presentation.
3:23:05 PM
Mr. Steininger continued to slide 16 titled FY 23
Statewide Operating Items. He noted an increase of $60
million UGF for Debt Service due to the increment in School
Bond Debt Reimbursement. He highlighted the significant
reduction in Retirement Assistance Payments for $116
million. He reported that there was a substantial increase
in Fund Capitalizations and Transfers due to the payment of
the full statutory appropriation of Oil and Gas Tax Credits
in the amount of $145 million. The chart showed a decrement
of $34 million in the Disaster Relief Fund; however, the
request was in the current supplemental budget for
continued work for the earthquake disaster in 2017. There
was an increase in the REAA fund that went hand-in-hand
with School Bond Debt Reimbursement and was fully funded at
$15.6 million. He pointed to the statutory designation of
Other showing a $14.3 million reduction and indicated it
was due to a recategorization of funds from UGF to DGF and
was not truly a reduction.
3:25:23 PM
Mr. Steininger moved to slide 17 titled SB 55/Retirement
Contributions:
Strong investment performance in FY21 resulted in
significant savings for the public employee retirement
systems
Investment performance reduced the State's required
contribution to PERS/TRS systems by $75.4 million UGF
Avoiding overcontribution to PERS/TRS health trusts
saved $71 million UGF
SB55 year two fiscal note reduction of $14.7 million
UGF by shifting to other fund sources
Total FY23 retirement savings: ($161.1 million UGF)
3:25:58 PM
Vice-Chair Ortiz asked about the $161 million reduction in
contributions to the retirement fund. He wondered if the
state eliminated its unfunded lability. Mr. Steininger
answered that the states funding ratio was less than 100
percent and the state maintained its obligation above the
normal costs of paying into the retirement system. The
strong investment returns considerably decreased the
obligation. The state had been closing the gap between the
liability and the assets available. He deferred further
answer to the Division of Retirement and Investments.
3:27:17 PM
Mr. Steininger addressed slide 18 titled Other Statewide
Items: on
Fully fund municipal school bond debt reimbursement
$79.0m UGF
Fully fund rural school construction contribution
(Regional Educational Attendance Area fund) $32.8m UGF
Full community assistance deposit of $30m from PCE
Full funding for oil and gas tax credits of $199m UGF
3:28:03 PM
Mr. Steininger continued to the final slide 19 titled
Federal Infrastructure Investment and Jobs Act:
Infrastructure Investments and Jobs Act
Enacted November 15, 2021
5-year reauthorization of established federal
programs and new programs
New program details still pending Some program
funding appropriated in the bill, others awaiting
an FFY22 budget
Maximizing use in Alaska Marine Highway System to
preserve UGF and transition to a sustainable
system
Remaining funds to be addressed when further
guidance is received
Mr. Steininger cautioned that the administration was
attempting to determine how the IIJA funding could be used
but the details were actively changing, and the guidance
was not yet available. He reiterated that except for the
AMHS funding, none of the money was appropriated in the FY
23 budget.
Representative LeBon asked if the school bond indebtedness
payment was reimbursing at the statutory amounts and not
more. Mr. Steininger replied in the affirmative and added
that it depended on the year the municipality entered into
the debt, which guided the percentage of payment according
to statute. The $79 million represented the statutory
obligation under the program.
3:30:16 PM
Representative Edgmon referred to slide 19 and the IIJA
funding. He wondered what the process to distribute the
funding was and if the administration would submit a
proposal or amendments. Mr. Steininger ascertained that as
more guidance for the funding was known the committee
should expect amendments for some of the items, but not all
the items. There were many questions that need to be
answered and at the current stage of understanding there
were no amendments ready to offer. Representative Edgmon
asked if the administration would work with the legislature
and work through the appropriations process or would some
of the funding go through the Revised Program Legislative
(RPL) process in the Budget and Audit Committee. Mr.
Steininger responded that the administration was happy to
work with the legislature and would present additional
information regarding IIJA. He reiterated that more
guidance was needed from the federal government. He noted
that the funding was different than the prior COVID relief
money that was meant to respond to an emergency and was
more open ended. Representative Edgmon thought he had
heard the governor had appointed an individual to oversee
the activity. He wondered whether the person would be
placed in Juneau during session. Mr. Steininger responded
that the administration was ready to work with the
legislature and would make itself available whether in
person or other means. Representative Edgmon found it
dramatically underwhelming regarding the focus and
inertia that was not being generated towards the
generational opportunity being afforded Alaska. He
reiterated his thanks for the efforts of the congressional
delegation and specifically Senator Murkowski. He was
surprised that the issue was not a major focus.
3:35:12 PM
Representative Thompson referred to slide 18 and cited the
$30 million for community assistance programs from PCE. He
recalled that community assistance used to be funded
through UGF. He wondered why the money was not used to
reduce the costs of power in rural communities. He asked if
his assessment was correct. Mr. Steininger replied that the
$30 million was based on the statutory formula waterfall of
how the earning should be used. He detailed that first it
covered the PCE program itself at $32 million, then paid
the Community Assistance Fund and finally supported other
programs that invested in infrastructure in the state. The
capital budget contained further PCE appropriations per the
statutory calculations that covered programs through the
Alaska Energy Authority (AEA) and others. Representative
Thompson asked if the $30 million payout for Community
Assistance was statutorily mandated. Mr. Steininger replied
in the affirmative.
Co-Chair Foster asked whether there was sufficient funding
to pay the $30 million from the waterfall from the PCE
earnings. Mr. Steininger answered in the affirmative and
noted that if the fund earned more than the waterfall needs
the balance would remain in the fund.
Co-Chair Foster reviewed the agenda for the following day.
He thanked Mr. Steininger for appearing before the
committee and appreciated the robust discussion.
ADJOURNMENT
3:38:42 PM
The meeting was adjourned at 3:38 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 22.01.20 OMB FY23 Budget Overview HFIN.pdf |
HFIN 1/20/2022 1:30:00 PM |
|
| HFIN - OMB 1.20.22 Attachment 1 - Economic Recovery Mariculture Incentive Grant Program.pdf |
HFIN 1/20/2022 1:30:00 PM |
|
| OMB Response to 01.20.22 HFIN Budget Overview Questions.pdf |
HFIN 1/20/2022 1:30:00 PM |