Legislature(2025 - 2026)ADAMS 519
01/23/2026 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Governor's Fy 27 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 23, 2026
1:35 p.m.
1:35:29 PM
CALL TO ORDER
Co-Chair Josephson called the House Finance Committee
meeting to order at 1:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Elexie Moore
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Nellie Unangiq Jimmie
ALSO PRESENT
Lacey Sanders, Director, Office of Management and Budget;
Bonnie Jensen, Administrative Services Director, Department
of Fish and Game.
SUMMARY
OVERVIEW: GOVERNOR'S FY 27 OPERATING BUDGET BY THE OFFICE
OF MANAGEMENT AND BUDGET
1:35:38 PM
Co-Chair Josephson reviewed the meeting agenda.
^OVERVIEW: GOVERNOR'S FY 27 OPERATING BUDGET BY THE OFFICE
OF MANAGEMENT AND BUDGET
1:36:37 PM
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
introduced the PowerPoint presentation, "Overview of the
FY2027 Governor's Budget" dated January 23, 2026 (copy on
file). She began on slide 2 and gave a brief overview of
the FY 26 budget. She stated that she would walk through
the operating budget, the capital budget, and the
supplemental appropriations that were included in the
budget on December 11, 2025. She explained that she would
start with reviewing the FY 26 budget from the previous
year. At the time the FY 26 budget was signed, the spring
revenue forecast assumed an oil price of $68 per barrel and
included a total unrestricted general fund (UGF) budget of
just over $6 billion. The result was a projected surplus of
approximately $141 million.
Ms. Sanders explained that during the FY 26 budget process,
the administration worked with the Department of Revenue
(DOR) to assess market conditions related to oil prices.
She stated that when the budget was passed, oil prices were
already declining significantly. The decline drove much of
the work conducted during the veto review process with the
governor to determine a level of spending that would be
sustainable in future years. She suggested that committee
members might recall that the former DOR Commissioner Adam
Crum issued a letter outlining multiple scenarios regarding
oil prices at the time.
Ms. Sanders stated that the fall revenue forecast was
released in December of 2025. She noted that the committee
had received presentations from both the Department of
Natural Resources (DNR) and DOR regarding production and
revenue forecasts. She explained that the fall forecast
included an oil price of $65.48 per barrel, which
represented a decrease of $2.52 from the previous spring
forecast. She stated that the decrease resulted in
approximately $193 million less in revenue available to the
state. Based on the fall forecast, the state faced an
overall deficit of approximately $52 million before
accounting for any supplemental appropriations. The
presentation also included a brief snapshot of the
supplemental appropriations that were included in the
budget on December 11, 2025, for the purpose of comparison.
She stated that the supplementals totaled $294 million and
noted that she would discuss the items in more detail on
later slides.
Ms. Sanders relayed that if the state had continued at $68
per barrel as projected in the spring, the overall deficit
would have been $153 million. The total overall deficit in
the fall of 2026 was $346 million, which included the $52
million deficit related to oil and the additional
supplementals that were presented.
1:40:28 PM
Representative Bynum asked if the fall oil price of $65.48
took into consideration the account fluctuations prior to
the forecast. He asked whether the $65.48 figure accounted
for previous fluctuations as well as assumptions going
forward for the remainder of the fiscal year.
Ms. Sanders responded that DOR was responsible for the
revenue forecast and incorporated actual oil prices that
had occurred leading up to December. The revenue forecast
was based on the actual prices and a projection for the
remainder of the year. She noted that oil prices had been
as low as $60 per barrel and were approximately $65 per
barrel at the time of the meeting. The department tracked
prices closely and an updated spring forecast would be
issued later in March of 2026 to capture December, January,
and February prices.
Ms. Sanders advanced to slide 3 and explained that the
spring 2025 forecast projected approximately $67 per barrel
for the FY 27 budget. She noted that the fall forecast
reduced the projection by $5 to $62 per barrel, which
represented an approximate $119 million decrease in UGF
revenue projected for the following year. During budget
development discussions with the governor, the focus had
been on how to move forward in light of declining oil
prices and uncertainty at the federal level. She stated
that the governor directed the administration to start from
the base budget and focus on contractual obligations and
statutory requirements. She noted that the result was a
"slim" budget for the year.
Ms. Sanders explained that the base budget approach
involved removing onetime items from the prior year budget
totaling approximately $46 million. She explained that $55
million had been added for contractual agreements and
approximately $22.8 million had been added for statutory
obligations such as debt and retirement. She relayed that
the result was an overall FY 27 budget of just under $6.1
billion. She noted that the budget reflected a surplus of
$269 million using the spring forecast and $150 million
using the fall forecast. She shared that the governor's
proposed budget for FY 27 included the statutory Permanent
Fund Dividend (PFD). The dividend reflected a $1.7 billion
increase over the prior year's dividend amount, which
resulted in an overall deficit of approximately $1.5
billion. She noted that the governor's proposed budget drew
from the Constitutional Budget Reserve (CBR), which had a
balance of approximately $3 billion. She advanced to slide
4 which provided a brief snapshot of the fiscal summary.
She explained that the summary reflected UGF only.
1:45:50 PM
Representative Hannan commented that she did not see a
slide specifically addressing the supplementals and noted
that only some calculations of the base budget appeared to
exclude the supplementals. She asked for clarification in
order to track the surplus and deficit calculations.
Ms. Sanders responded that she would walk through each
supplemental item and explain whether it was incorporated
into the proposed FY 27 budget.
Ms. Sanders moved to slide 5, which provided a visual
representation used each year to compare the FY 26 and FY
27 UGF budgets from least to greatest. She noted that the
Legislative Finance Division (LFD) maintained its own
version of the graph that was commonly referred to as the
swoop graph. The graph also highlighted formula-funded
programs for the current year. She added that the
presentation always emphasized that the K12 foundation
formula and Medicaid comprised a substantial portion of the
budget.
Ms. Sanders continued to slide 6 and stated that she would
walk through several budget highlights. She noted that the
House Finance Committee (HFC) and the finance subcommittees
would review each agency budget in greater detail during
the budget process. She began by reviewing the Department
of Administration (DOA) and explained that the Division of
Personnel (DOP) had completed the statewide information
technology classification study and was working on the
associated implementation plan. She stated that the budget
included an increase to address the estimated cost. She
explained that the Office of Management and Budget (OMB)
had completed the estimate based on DOP's allocation of
positions affected by the classification changes. The
division was implementing the study using a phased
approach.
Ms. Sanders relayed that there was a significant change
involving the transition of Shared Services of Alaska (SSA)
back to individual departments, including accounts payable.
She explained that the transition was occurring statewide
and that employees were returned to their respective
agencies. She stated that services would again be performed
at the department level. She noted that a departmental
review and survey identified duplication and redundancies
in the centralized process. The change was intended to
expedite travel reimbursements and other transactions. She
noted that corresponding changes appeared throughout the
budget for all departments.
Ms. Sanders added that payroll services were also being
transitioned back to eight departments. As part of the
survey, there was a query about how payroll services were
being performed. The survey revealed that many agencies
with more complex and technical payroll contracts preferred
to have the employees returned to the departments to
maintain a centralized focus on payroll processing for
their respective agencies. She noted that agencies such as
the Department of Corrections (DOC) had contracts that
tended to be more complex. The employees in the payroll
positions would move from DOA back into the respective
departments, and payroll would be processed within those
departments. She stated that DOA would continue to lead the
process, provide support for administrative functions, and
ensure consistent application of rules across agencies.
1:51:06 PM
Representative Tomaszewski asked how the process would work
in terms of positions. He wondered whether each department
would need additional positions to process payroll and if
the positions in DOA would be eliminated.
Ms. Sanders responded that the Division of Finance (DOF)
had identified the positions that would return to the
departments. Each department taking on payroll would
determine its organizational structure for either the
returning employees or the vacant positions being
transferred. She explained that a group of positions with
current employees would remain in DOF to process payroll
for agencies whose services were not returned. She
emphasized that no new positions were being added and
described the process as a reorganization rather than an
expansion.
Representative Stapp asked whether there was a plan to
document best practices or conduct an after-action review
for the payroll decentralization. He noted that the process
of centralizing and decentralizing services had occurred
multiple times and suggested that future efforts could
benefit from a record of what worked and why changes were
made.
Ms. Sanders responded that in her over 20 years of service
with the state, she had observed multiple organizational
shifts and reversals. She agreed that it was a good
opportunity to document the experience to prevent the
problem from reoccurring in the future.
Representative Galvin asked for clarification about the
phased implementation of the new classification study. She
asked for more information on the timing and proportion of
changes planned for FY 27 and subsequent years.
Ms. Sanders responded that the salary study had been
completed and DOA was working on next steps. She explained
that the statewide information technology classification
study was incorporated into the FY 27 budget, including the
associated costs, and that implementation would proceed in
phases to manage adjustments across agencies. The phased
approach meant that DOP began with classes that did not
have an associated cost change. She explained that the
intent was to break the large study into groups as the
process moved forward, so that by July 1, 2026, employees
would be placed in their correct classifications, or as
close as possible.
Representative Galvin asked whether the approach involved
no change in funding and only a change in classification.
She wondered whether the intent was to ensure employees
were appropriately titled based on their duties.
Ms. Sanders responded in the affirmative.
1:55:53 PM
Representative Hannan remarked that the budget books for
the finance subcommittees she chaired reflected a different
situation. She noted that the information technology (IT)
classification study for the Department of Environmental
Conservation (DEC) and the Department of Transportation and
Public Facilities (DOT) included increments for
implementation of the IT classification study. She
understood that the IT reclassification and the salary
study were two separate efforts and that the IT
reclassification was included in the base budget for FY 27
across departments as submitted.
Ms. Sanders responded that Representative Hannan's
understanding was correct. She clarified that she had been
referring to DOA beginning its work in the current fiscal
year on classes that did not have an associated cost.
Representative Hannan asked whether Ms. Sanders'
explanation applied to the salary study.
Ms. Sanders responded that she had been referring to the IT
study and explained that it was being broken into phases.
Representative Hannan stated that the budget books she had
reviewed showed an increase. She clarified that she was
referring to FY 27.
Ms. Sanders responded that Representative Hannan's
understanding was correct.
1:57:27 PM
Ms. Sanders continued on slide 6 and explained that the
December 11 budget included the transfer and establishment
of the Department of Agriculture. She stated that the
budget books reflected the transfer of funding and
positions from DNR to the new Department of Agriculture.
Representative Hannan understood that at the time the
budget was developed, the governor intended to implement
Executive Order (EO) 137. She noted that a court order
prohibited implementation and the Department of Agriculture
did not legally exist. Although an appeal was pending
before the Supreme Court, it was not on an expedited
schedule and it was unlikely the matter would be resolved
before the budget process concluded within the next 120
days. She asked whether OMB would amend the budget to
reflect the situation.
Ms. Sanders responded that no amendment was planned. She
explained that the governor had moved forward with the
appeal and she would defer to the Department of Law (DOL)
for legal questions.
Representative Hannan asked which committee member oversaw
the DNR budget.
Co-Chair Josephson responded that it was Co-Chair Schrage.
Ms. Sanders continued to review the Department of Commerce,
Community, and Economic Development (DCCED). She
highlighted two items, beginning with the $2.2 million
associated with the Alaska Gasline Development Corporation
(AGDC) for operating funding related to the Alaska
liquefied natural gas project (AKLNG). She explained that
the amount was the same as the prior year, had previously
been carried forward as a one-time item, and was restored
for FY 27. Additionally, there was funding for the Power
Cost Equalization (PCE) program within the Alaska Energy
Authority (AEA) that totaled $44.3 million.
2:00:06 PM
Ms. Sanders continued on slide 7 and began with detailing
budget highlights under Department of Education and Early
Development (DEED). She explained that pupil transportation
was funded using the full statutory formula funding for
school districts. There was an increase of $3.3 million and
$1.6 million from the Higher Education Investment Fund
(HEIF) for the Alaska Performance Scholarship (APS) and the
Alaska Education Grants (AEG). She further noted that the
bill included a one-time appropriation of approximately
$129 million to recapitalize HEIF in the amount used to
cover the deficit in prior closed fiscal years. She
emphasized that it was a one-time appropriation, was not
carried forward into the following year, and was funded
from the Constitutional Budget Reserve Fund (CBRF).
Ms. Sanders continued to discuss highlights within the
Department of Health (DOH). She stated that the Senior
Benefits Payment Program (SBPP) continued to be fully
funded based on the statutory formula. She noted a $2.7
million increase in federal receipts associated with
several grants within the Division of Public Health (DPH),
which increased receipt authority to allow those funds to
be distributed and utilized. She also noted an increase in
federal authority to support the Crisis Contact Center
(CCC) in FY 27.
Ms. Sanders addressed the Department of Labor and Workforce
Development (DLWD) and stated that the budget included a
$1.4 million increase in UGF to support the Workers' Safety
and Compensation Administration (WSCA) account. When the
reverse sweep was not completed several years earlier, the
balance of the account was swept into the general fund. She
stated that the division had reduced workers' compensation
rates over the years, resulting in reduced revenue to the
account and a shortfall for ongoing operations.
Co-Chair Josephson asked whether DOH had indicated that a
supplemental item for Medicaid cost overruns would be
submitted as an amended supplemental. He noted that the
item was estimated at approximately $34 million.
Ms. Sanders responded that by December 15 every year, DOH
transmitted a Medicaid projection. She explained that the
timing did not allow the item to be included in the budget
at release and that a supplemental was brought forward
annually based on the projection. She confirmed that a
Medicaid supplemental would be submitted.
Co-Chair Josephson asked whether OMB would amend the
supplemental budget in early February to include additional
Medicaid funding.
Ms. Sanders responded that statute required the governor to
transmit the supplemental request to the legislature by
February 3. She stated that a bill would be submitted on
that date that would include all supplemental costs,
including Medicaid, consistent with prior practice. She
added that an updated Medicaid projection would be provided
to the legislature by February 15. She acknowledged that
the timing was not ideal.
Co-Chair Josephson asked for more information about the
increased draws on HEIF. He understood that the governor
wanted the legislature to restore funds drawn in the amount
of approximately $130 million in the current fiscal year.
He asked which entity should be consulted regarding the
longevity of the fund in its current depleted status and
whether the inquiry should be directed to OMB or DEED.
Ms. Sanders responded that OMB could coordinate a response.
She stated that projections were monitored and that LFD
maintained its own projections. She noted that OMB worked
closely with DOR and had projections regarding the impacts
of not returning funds to HEIF. She stated that the impacts
would begin in FY 28. The increases for APS and AEG were
due to legislative changes and increased utilization of the
programs. She explained that the increases were projections
based on student eligibility and that actual outcomes could
vary based on utilization.
2:06:16 PM
Ms. Sanders moved to slide 8. She stated that the budget
included two deposits under the Department of Military and
Veterans Affairs (DMVA): a $40 million supplemental and a
base FY 27 deposit of $33 million, of which $24 million was
UGF. She relayed that the state had experienced an increase
in disasters impacting Alaska, such as Typhoon Halong and
continued impacts from the recent winter storm in
Southeast. She explained that the budget used a 10-year
average for FY 27 as the methodology for the disaster
relief deposit. She remarked that it was not possible to
predict future disasters and the associated costs.
Co-Chair Josephson commented that the committee would
request a comprehensive accounting of federal
reimbursements and unreimbursed costs prior to the end of
the legislative session. He asked whether a summary could
be provided identifying which departments incurred costs,
including DEC, DOT, and DMVA.
Ms. Sanders responded that a summary could be provided. She
stated that DMVA was working with the federal government to
determine reimbursable and nonreimbursable costs. She added
that departments had been asked to track their disaster
response costs and she reiterated that the information
could be compiled.
Representative Hannan asked about the use of a 10-year
average for disaster relief funding. She stated that the
legislature had used a five-year average in the prior year
and speculated that the five-year average was higher than
the 10-year average. She asked whether the administration
had calculated the difference. She understood that disaster
relief remained underfunded.
Ms. Sanders responded that she did not have the difference
between the five-year and 10-year averages currently
available. She confirmed that the legislature had used a
five-year average in the prior session. She stated that the
difference could be provided, but emphasized the inherent
unpredictability of disaster-related costs. She stated that
the administration was attempting to apply a consistent
methodology moving forward.
Ms. Sanders continued to DNR's notable budget highlights.
She explained that DNR was maintaining programs that were
previously included in the capital budget. The
administration reviewed the proposed capital items to
ensure that the items were truly capital appropriations and
to determine if certain items should instead be reflected
in the operating budget as ongoing operational expenses.
She explained that the budget included the continuation of
the National Historic Preservation Fund (NHPF) grant and
the Critical Minerals Mapping Initiative's (CMMI) Earth MRI
Program. She stated that both were federally funded
projects. She noted that NHPF required a $1.3 million state
match. She explained that the items were previously
included in the capital budget and were now reflected in
the operating budget.
Ms. Sanders addressed the third bullet under DNR which
related to the Fire Suppression Fund (FSF). She stated that
two disaster declarations had been transmitted to the
legislature during the year, totaling $55 million. The
amount included for FY 27 was $47.5 million. She noted that
projecting fire seasons across the state remained difficult
but depositing fire funding into FSF helped reduce
recurring funding challenges and allowed for smoother
budgeting across fiscal years. If excess funding were ever
available, it would carry forward to the following year.
She added that DNR continued to work with partner agencies
on reimbursement processes that were often delayed.
2:12:09 PM
Ms. Sanders then discussed the items under the Department
of Public Safety (DPS). She stated that funding for body
cameras and car camera operations and equipment had
previously been included as a capital project and was now
moved into the operating budget. She explained that the
funding supported ongoing maintenance, replacement of
damaged equipment, and continued operation of the program.
The budget also included a $550,000 increase to expand
training and certification support for law enforcement
officers and village police officers. She noted that some
participants paid to attend training provided through the
academy.
Representative Stapp asked about the $1.3 million allocated
for body and car cameras. He asked how many officers and
vehicles were included.
Ms. Sanders responded that statistics could be provided.
She stated that the funding supported operational costs as
well as data storage requirements. She would follow up with
a detailed breakdown.
Representative Stapp asked whether the funding included
software costs.
Ms. Sanders confirmed that software was included.
Co-Chair Josephson asked if the budget treated the $55
million in funding for fire disaster declarations funding
as requiring ratification.
Ms. Sanders responded that following discussions with LFD
Director Alexei Painter, the administration did not submit
a transaction for the items because the funding had already
been approved by the legislature. She stated that the
amounts would be incorporated into the supplemental summary
of overall changes as previously appropriated funding. She
explained that the legislature could take additional action
if it chose to ratify the approvals. She stated that prior
budgets had not included a specific line item for disaster
declarations and explained that the administration sought
to avoid double counting or presenting the funding as a new
request.
Co-Chair Josephson agreed that accurate characterization
could be important for future legislatures and
administrations. He stated that ensuring payment was the
primary concern and the legislature had other "battles to
fight."
Ms. Sanders continued to slide 9 and discussed budget items
under DOT. She explained that several reductions occurred
across the department during the prior session and that the
budget included increments to restore funding levels to
where they were prior to the reductions. There was $5.2
million to restore funding levels for highways, aviation,
and maintenance, $1.3 million to replace one time funding
used in the prior year from the Alaska Housing Capital
Corporation, and an increase of $1.8 million in motor fuel
tax receipts for statewide guardrail and roadside hardware
repair. She added that the budget also included $420,000 in
motor fuel tax receipts for statewide wayside maintenance.
Ms. Sanders continued to statewide items. She reiterated
that the recapitalization of HEIF under DEED was included
in the amount of $129.6 million. She added that the
governor's budget included $2.3 billion in general funds to
provide the full statutory PFD of approximately $3,600 per
Alaskan and included $1.4 billion for Permanent Fund
inflation proofing from the earnings reserve account (ERA)
into the Permanent Fund principal.
2:16:45 PM
Representative Tomaszewski asked for more information about
maintenance needs on the Dalton Highway and noted that
there had been prior discussion regarding 80-foot sections
of pipe. He asked whether additional maintenance funding
was anticipated in the next budget.
Ms. Sanders responded that no additional funding was
currently directed outside of the federal programs
administered by DOT. She acknowledged that the area
required extensive work and maintenance.
Representative Tomaszewski asked for confirmation that
there was nothing planned.
Ms. Sanders confirmed that no additional funding was
presently planned.
Co-Chair Josephson asked for more information about the
statewide guardrail and roadside hardware repair funding.
He noted that LFD had reported that the appropriation could
exceed available motor fuel tax revenue. He asked whether
the item should be funded as a supplemental or through
general funds.
Ms. Sanders responded that the item was treated as a
receipt authority. She stated that if revenue was not
collected or was insufficient, the funds could not be
spent. She explained that the revenue source would need to
be closely monitored to ensure alignment with project
activity. She would follow up with DOT because there might
be a difference in information between the administration
and LFD.
Ms. Sanders moved to slide 10, which provided a brief
snapshot of the capital budget for FY 27. She stated that
the governor's direction was to provide the bare minimum
for capital projects and ensure that the funds provided the
match expected from the federal government. She explained
that the general fund match totaled $128 million,
representing approximately 82 percent of the capital
budget. She noted that the majority of the funding was
allocated to DOT. She stated that just over $20 million was
included for DOR. She would detail each project relating to
the Alaska Housing Finance Corporation (AHFC) and matching
projects for federal wastewater under DEC.
2:20:06 PM
Ms. Sanders continued to slide 11 and reviewed significant
budget items within DCCED. She explained that the budget
included a $15.3 million capital project using Ocean Ranger
receipts to be appropriated to AEA for a cruise ship port
terminal electrification project. She stated that she did
not recall which project or communities were next, but DEC
would administer the project through AEA.
Ms. Sanders addressed DEC items. She explained that federal
programs were included for the availability of safe water
and wastewater infrastructure projects, as well as the
Alaska Clean Water and Alaska Drinking Water grant funding.
She stated that the programs had a required state match.
Ms. Sanders next addressed the Department of Fish and Game
(DFG). She explained that the budget included a
continuation of $3.3 million for the Gulf of Alaska Chinook
Salmon Program, $825,000 for the Alaska Marine Salmon
Program, and $6.8 million in federal receipts for Pacific
Coastal Salmon Recovery Fund activities.
Co-Chair Josephson asked for more information about the
nexus between the Ocean Ranger Program and air quality
improvements in ports of call.
Ms. Sanders responded that Ocean Ranger receipts could be
used for four projects associated with the cruise ship
industry. She understood that a federal law required port
electrification and the project would reduce air pollution
by allowing cruise ships to plug into shore power rather
than operate on fuel or diesel.
Co-Chair Foster asked why funding for Western Alaska
genetic testing studies was not included in the budget.
Ms. Sanders deferred the question to her colleague.
2:23:02 PM
BONNIE JENSEN, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,
DEPARTMENT OF FISH AND GAME, asked for clarification on
whether Co-Chair Foster was referring to the South
Peninsula study that was included in the prior year's
capital budget.
Co-Chair Foster clarified that he was referring to genetic
testing for Western Alaska salmon. There were ongoing
concerns related to declines and subsistence fishing
closures on the Kuskokwim and Yukon rivers. He explained
that genetic testing had been cited as necessary to
determine stock origin and noted that a request for
additional funding had been submitted by members of the
Bush Caucus. He had not seen funding for that purpose in
the current budget and acknowledged that a follow up might
be necessary.
Ms. Jensen responded that she would need to contact the
Division of Commercial Fisheries (DCF) to obtain a list of
genetics projects.
Ms. Sanders added that she would follow up. She relayed
that there had been $500,000 for a chum salmon study and
stated that the funding source might have changed.
Ms. Sanders moved to slide 12. The budget included an
annual Alaska Mental Health Trust Authority (AMHTA) item
under DOH for home modifications and upgrades to retain
housing in the amount of $1.2 million. Additionally, the
DMVA budget included several federally funded projects,
including $5 million for public protection and
infrastructure support, $26.8 million for the State
Homeland Security Grant Program (SHSGP), and $25 million
for deferred maintenance, replacement, and renewal that was
specific to armories across the state. She added that the
budget also included $1.8 million in federal receipts for
Air National Guard modernization and sustainment. The
availability of federal funding allowed the department to
address several of its outstanding needs.
Ms. Sanders continued to DNR items and explained that the
budget included a continuation of the Nationwide Forest
Inventory (NFI) for the Susitna and Tanana Valleys in the
amount of $1.9 million in timber receipts. The budget also
included a continuation of the Land and Water Conservation
Fund Grant (LWCF) program totaling $4.8 million, as well as
$12 million in federal receipts for cooperative forestry
and fire programs. She noted that many of the projects were
continuations from previous years.
Ms. Sanders moved to slide 13 and relayed that the DNR
budget included $22.9 million from the AHFC dividend
received to be used for housing programs. She explained
that these were standard housing programs that were
administered annually by AHFC, such as teacher housing and
senior housing.
Ms. Sanders then addressed the highlighted budget items for
DOT. She explained that the budget included $70.2 million
in state general funds to provide the match for the
Statewide Transportation Improvement Program (STIP). The
item was associated with the prior year veto of a
reappropriation and the funding would allow the department
to meet the federal matching requirement in FY 26. She
added that the budget also included a continuation of the
federal program match for highways and aviation totaling
$107.8 million in state general funds.
Ms. Sanders explained that the DOT budget proposed a change
related to statewide deferred maintenance, renovation, and
repair. She explained that responsibility had previously
fallen to the governor, but the administration worked
closely with DOT to administer the funds across state
agencies. She explained that the proposed change would move
the appropriation directly to DOT to reduce administrative
transfers and allow the department to administer the funds
directly. She added that the budget also included $27.5
million for Alaska Marine Highway System (AMHS) vessel
overhaul, annual certification, and shoreside facilities
rehabilitation.
2:28:25 PM
Representative Hannan asked for more information about the
$26 million cost for statewide deferred maintenance,
renovation, and repair funding. She asked if there was a
list of projects the funding was intended to cover.
Ms. Sanders responded that a statewide facilities council
conducted an annual process to rank projects across state
facilities. She explained that all state agencies submitted
project lists, which were prioritized and ranked, and the
funding was administered based on the prioritization. She
offered to provide the most recent list to the committee
and noted that the list was updated on a recurring basis to
ensure the highest needs were addressed.
Representative Hannan relayed that she was trying to
understand how many projects could be addressed with $26
million. She noted that in the prior year, the funding had
only covered a small number of top-ranked projects.
Ms. Sanders asked if Representative Hannan was referring to
school major maintenance, which was a separate issue.
Representative Hannan responded that she was not.
Ms. Sanders responded that she would follow up with the
project list and provide it to the committee.
Representative Tomaszewski asked for a breakdown of what
was being planned and prepared for maintenance on the
Dalton Highway. He noted that the question might be better
suited for DOT. He explained that he had raised questions
about the highway throughout his time in the legislature
and believed there should be a stronger focus on
maintenance. He stated that constituents did not want new
construction projects or major reconstruction, but instead
wanted the road bladed and kept flat so large trucks could
travel safely. He noted that the highway had numerous
potholes.
Ms. Sanders responded that she would follow up with the
information.
Representative Hannan asked where the Fairbanks Pioneer
Home (FPH) ranked on the deferred maintenance list. She
stated that Mr. Painter had previously warned that the
building was at risk of structural failure and that it was
not receiving sufficient maintenance. She expressed concern
that the facility could reach a point where it was
effectively derelict. She asked if the facility was now
ranked at the top of the list so the state could address
the issue before it became uninhabitable.
Ms. Sanders responded that replacement of FPH would not be
included on the deferred maintenance list. She offered to
follow up with more information.
Representative Hannan understood that FPH remained on the
maintenance list but it was ranked so low that it was not
receiving funding. She reiterated the concern that if the
building was neither being maintained nor replaced, its
condition would continue to deteriorate. She recalled that
the estimated cost associated with the facility had
previously been approximately $18 million.
Ms. Sanders responded that she would follow up with
additional details.
2:32:20 PM
Ms. Sanders moved to slide 14, which provided an annual
snapshot of budgeted positions compared to filled
positions. The graph on the right side showed comparisons
by agency. She advanced to slide 15, which displayed
vacancy rates by department as of December of 2025. She
reported that the statewide vacancy rate was approximately
15.3 percent.
Representative Galvin remarked that she had several
questions related to DEED. She appreciated DEED being
included on the bar graph on slide 5 because it helped the
public understand how much funding was associated with the
department. She asked for confirmation that the vacancy
rate of 18.5 percent reflected only DEED as a state agency
and not school districts. She also asked if the salary
adjustments shown on slide 3 were tied to labor agreements
and applied to employees across departments.
Ms. Sanders responded that the salary adjustments reflected
in the budget applied only to state employees and were
associated with labor agreements.
Representative Galvin asked whether the vacancy and salary
information reflected all educators statewide. She noted
that educator compensation was handled separately through
the foundation formula and that each school district was
responsible for paying any salary adjustments.
Ms. Sanders responded in the affirmative.
Representative Galvin asked if the foundation formula
itself included any adjustment for teacher salaries in the
current year.
Ms. Sanders responded that the state provided funding to
school districts through the foundation formula, but each
district determined how to allocate the funds for its own
operations. She explained that the formula did not include
changes related to contractual salary adjustments made by
individual school districts.
Representative Galvin asked for confirmation that the
formula was not changing in the current year and that there
was $0 included to account for salary agreements across the
53 districts.
Ms. Sanders responded in the affirmative.
Representative Galvin asked if districts received differing
amounts based on student counts. She understood that the
districts were otherwise working within the same statutory
framework. She remarked that other departments operated
differently than school districts and that districts were
required to find the funds within their existing
allocations to cover any salary adjustments.
Ms. Sanders responded that it was incumbent upon each
school district to determine its operational priorities.
She explained that the base student allocation (BSA) was
set in statute and could only be adjusted through
legislation.
2:37:23 PM
Representative Galvin thanked Co-Chair Josephson for
allowing the extended discussion. She asserted that it was
important for the public to understand why teacher salary
negotiations were difficult. The lack of inflationary or
other adjustments within the formula made it challenging
for districts to maintain services while absorbing
increased costs.
Ms. Sanders moved to slide 16, which addressed work that
was underway pursuant to Administrative Order (AO) 359,
related to budget efficiency, and AO 360, related to
regulatory reform. She stated that she would not read
through each bullet but would summarize the efforts. She
explained that OMB had developed a grants dashboard for AO
359. The dashboard was publicly available and provided both
historical and current information on state-administered
grants, including recipients and dollar amounts, in order
to improve transparency regarding state spending.
Ms. Sanders explained that the administration had been
working with several departments that administered
permitting and licensing programs to review existing
processes and technology. She noted that DNR and DCCED had
collaborated with the administration on the effort and two
reports had been produced. The first identified just over
50 opportunities to improve licensing and permitting
processes statewide. The second outlined roadmaps
describing how the state could move from current practices
to improved systems by leveraging resources to streamline
operations and modernize processes.
Ms. Sanders explained that all state agencies were working
through their regulatory reform packages and plans under AO
360. She stated that the plans were intended to be posted
online at the beginning of February of 2026. She explained
that the governor's office was working closely with DOL on
each department's regulatory package to ensure compliance
with the requirements to reduce regulations. She remarked
that the process had been eye-opening, noting that
regulations were often adopted in response to statutes and
laws and remained in place for many years without review.
She stated that the effort provided an opportunity to
examine existing regulations, reduce unnecessary burdens on
industry and individuals, streamline processes, modernize
requirements, and move toward a regular cycle of regulatory
review.
Representative Galvin remarked that the initiatives
reflected innovation and increased transparency. She asked
whether the grants dashboard would include funding related
to the Rural Health Transformation Program (RHTP).
Ms. Sanders responded that the dashboard was intended to be
comprehensive and include grants statewide. She added that
DOH was working to ensure transparency in how RHTP monies
were allocated or awarded and noted that the department
might also provide additional dashboards on its own
website.
2:42:19 PM
Co-Chair Foster expressed support for the regulatory reform
initiative. He observed that members of the public were
often frustrated by outdated or burdensome regulations. He
asked how individuals could submit suggestions for
eliminating or updating obsolete regulations.
Ms. Sanders responded that agencies were incorporating
public comment periods as part of the regulatory reform
process and that members of the public could submit
feedback directly to departments. She added that she would
consider additional mechanisms for receiving public input,
such as submissions being made through legislators or
directly to her office.
Co-Chair Josephson asked how departments would calculate
whether they had achieved a 15 percent reduction in
regulations. He asked if removing minor or obsolete
provisions would count toward the threshold, such as
archived cassette tapes.
Ms. Sanders responded that such changes would count toward
the regulatory reduction target. She explained that
updating outdated regulations constituted a meaningful
process change that affected Alaskans and therefore
qualified under the reform effort.
2:45:27 PM
Representative Bynum remarked that the discussion had been
helpful. He stated that he shared similar concerns and
sought confirmation that the intent of the regulatory
reform initiative was to make it easier to do business in
Alaska and improve efficiency, rather than merely
modernizing regulations without reducing burdens.
Ms. Sanders responded that the intent of the effort was to
identify and remove regulations that were burdensome,
inefficient, or unnecessarily complex. She emphasized that
the focus was on reducing barriers, streamlining processes,
and improving outcomes for Alaskans.
Representative Bynum asked whether the administration
anticipated communicating progress and successes to both
the legislature and the public as reforms were implemented.
Ms. Sanders responded in the affirmative.
Co-Chair Foster expressed support for the effort and
commented that even incremental progress represented
movement in the right direction.
Co-Chair Josephson asked whether there were additional
amended supplemental items that could be shared or if the
committee should wait.
Ms. Sanders responded that she could not currently share
more details because OMB was still working through the
process and awaiting the governor's approval. She noted
that February 3, 2026, was the statutory deadline for
transmitting supplementals. She was willing to return to
the committee to walk through the supplementals once
released.
2:48:33 PM
Representative Bynum noted that there were concerns about
some items that were not included in the budget,
specifically the federal disparity test for education. He
asked what the administration anticipated if the state's
appeal was unsuccessful.
Ms. Sanders responded that a determination had not yet been
made regarding the case. She explained that once a decision
was issued, the matter would be brought before the
legislature for incorporation into the budget. She stated
that the issue was premature and therefore not included.
Representative Bynum expressed concern that a decision
could occur late in the budget process. He asked what the
plan would be if the appeal was not successful and a
decision occurred near the end of the budget cycle. He
stressed that it was a major issue that the legislature
could not ignore.
Ms. Sanders responded that the budget was still a proposal
and there was a lot of work that had yet to be done. She
anticipated that there would be a forthcoming committee
substitute. She remarked that the legislature was the
appropriating body and it was at their discretion whether
they wanted to include an appropriation in the budget.
Representative Bynum expressed a high level of concern
regarding the current budget and how spending priorities
affected Alaskans. He emphasized that decisions about where
funds were allocated were significant and noted that the
thin capital budget raised substantial concerns. He
asserted that the state's capital needs would not be
resolved by inaction and that the committee should consider
how to communicate the importance of the capital program
both to Alaskans and to the administration.
2:51:28 PM
Co-Chair Josephson reviewed the agenda for the following
day's meeting.
ADJOURNMENT
2:51:45 PM
The meeting was adjourned at 2:51 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01.23.26 OMB House Finance FY2027 Budget Overview.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |
| 02.03.26 HFIN OMB Gov Budget Follow-up to 01.23.26 Hearing.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |
| DRF summary (5 and 10 year average) January.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |
| ADFG Response SFIN Subcom AYK Chinook Salmon Funding 04.14.25.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |
| DRF summary (5 and 10 year average) October.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |
| FY2025 State Deferred Maintenance Prioritizations Final Allocations.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |
| FY2026 Statewide Deferred Maintenance Facilities Council Prioritizations.pdf |
HFIN 1/23/2026 1:30:00 PM |
HB 263 HB 264 |