Legislature(2025 - 2026)ADAMS 519
01/29/2026 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB64 | |
| Overview: Overview: Governor's Fy27 Budget by the Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 64 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
January 29, 2026
1:32 p.m.
1:32:45 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:32 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
Brodie Anderson, Staff, Representative Neal Foster; David
Dunsmore, Staff, Senator Bill Wielechowski; Representative
Sarah Vance; Representative Justin Ruffridge.
SUMMARY
CSSB 64(FIN) am
ELECTIONS
CSSB 64(FIN) am was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda.
CS FOR SENATE BILL NO. 64(FIN) am
"An Act relating to elections; relating to voters;
relating to voting; relating to voter registration;
relating to election administration; relating to the
Alaska Public Offices Commission; relating to campaign
contributions; relating to the crimes of unlawful
interference with voting in the first degree, unlawful
interference with an election, and election official
misconduct; relating to synthetic media in
electioneering communications; relating to campaign
signs; relating to voter registration on permanent
fund dividend applications; relating to the
Redistricting Board; relating to the duties of the
commissioner of revenue; and providing for an
effective date."
1:34:14 PM
Co-Chair Schrage MOVED to ADOPT the CS for SB 64, Work
Draft 34-LS0153\U, Dunmire, 1/28/26 (copy on file).
1:34:44 PM
Co-Chair Foster OBJECTED for discussion.
Representative Allard OBJECTED.
Co-Chair Foster asked his staff to outline the changes in
the committee substitute (CS).
1:35:33 PM
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
reviewed the changes in the CS. He explained that the CS
removed more sections from the bill than it added. He
stated that every member had been provided with a redline
version of the CS (copy on file) comparing the version
currently before the committee, version 34-LS0153\L.A., to
the proposed version 34-LS0153\U. He explained that the
removed sections appeared in blue in the document and were
struck through. He stated that he would reference both
removed sections and sections that were modified from prior
versions. He clarified that any section that was not
discussed reflected language that had appeared consistently
in prior iterations of the bill.
Mr. Anderson stated that the title had been amended to
reflect the changes in the new version and the remainder of
the CS had been renumbered to account for removed sections.
He explained that former Section 1 had addressed changes to
residency requirements and had been removed. He continued
to new Section 4, which revised the applicable timeline to
28 months. He noted that prior versions had referenced
either two general elections or two years. He stated that
the section also removed hunting and fishing licenses, out-
of-state tuition, and physical residence from the list of
disqualifiers used for voter list maintenance and voter
roll cleanup.
Representative Bynum asked how Mr. Anderson was walking
through the documents. He stated that he was attempting to
follow along using multiple materials, including the
redline document, the proposed version U, the sectional
analysis, and the prior version L.A. He asked what the
easiest way would be to follow along.
Co-Chair Foster suggested that Mr. Anderson slow down
slightly.
Mr. Anderson responded that referencing the redline version
would be the easiest way for committee members to follow
along. He stated that he would slow his pace and allow time
for members to locate sections. He explained that removed
sections appeared as entire pages marked in blue and struck
through, and that renumbered sections were indicated with
strikethroughs and replacement section numbers.
1:39:40 PM
Mr. Anderson continued discussing new Section 4. He
reiterated that the section revised the timeline to 28
months and removed hunting and fishing licenses, out-of-
state tuition, and physical residence as disqualifiers for
voter list maintenance. He noted that references to hunting
and out-of-state hunting and fishing licenses as a
disqualifier were removed throughout the entire CS.
Mr. Anderson moved to new Section 6, which revised the time
requirement to 34 months. The requirement had been the
fourth calendar year in the previous version. He continued
to new Section 8, which added additional review
requirements when the Division of Elections (DOE) updated
the master voter registry. He stated that the review would
now include information from the Systematic Alien
Verification for Entitlements (SAVE) program, whether an
individual had served on a jury in another state, or
whether the individual had received certain benefits from
another state. He stated that the section also removed out-
of-state hunting and fishing licenses from consideration.
He explained that the section authorized DOE to determine
when it could reasonably establish that an individual had
been out of state.
Mr. Anderson addressed the removal of former Section 10. He
explained that the section had contained an earlier version
of procedures for canceling voter registrations. The new
Section 10 retained the prior addition of rural community
liaisons. He then addressed the removal of former Section
13. He explained that the removal eliminated earlier
additions related to poll workers and observers involved in
ballot counting at facilities. He stated that former
Section 14 was also removed. The section had required the
Alaska Public Offices Commission (APOC) to maintain an
office in every Senate district.
Mr. Anderson moved to new Section 11, which was commonly
referred to as the true source clarification section. He
stated that a later section in the bill set the effective
date to January 1, 2027. He relayed that former Section 18
had been removed, which had addressed the posting of
notices regarding language assistance. He continued that
new Section 14 was amended to remove utility bills, bank
statements, and government checks from the list of
acceptable forms of identification.
Mr. Anderson stated that former Section 20 had been removed
and new Section 15 was amended, which together removed
references to ranked-choice voting and preserved existing
regulations for observers by removing additional
requirements added in prior versions of the bill. He
continued that new Section 17 required all absentee ballots
to include a postage-paid return envelope. The section also
removed the repeal of the witness signature requirement,
thereby retaining the witness signature requirement.
1:44:11 PM
Mr. Anderson stated that former Sections 23 and 24 had been
removed. He explained that the removals eliminated prior
changes related to candidate and campaign observers and
removed provisions concerning risk-limiting audits. He
stated that former Sections 26 through 30 had all been
removed. He explained that the sections had addressed
security measures for special needs ballots. He explained
that amended Section 18 removed utility bills, bank
statements, and government checks from the list of
acceptable forms of identification.
Representative Hannan asked which page Mr. Anderson was
referring to. She was unable to locate Section 18 and noted
that she was on page 18, which corresponded to former
Section 31. She thought it would be helpful for page
numbers to be provided, particularly where multiple
sections had been removed.
Mr. Anderson responded that the drafting was unusual. He
explained that on page 15, line 22, "Sec." was added,
followed by struck-through text that continued through page
17. He explained that on page 17, line 26, "18" was added
and marked the beginning of Section 18 [the additions
together forming Sec.18]. He explained that the bill
continued removing previously referenced items until page
18, line 16, after which the remainder of Section 18
appeared.
Representative Hannan asked for confirmation that Section
18 effectively began on page 18, line 16, but its heading
was spread across multiple pages.
Mr. Anderson responded in the affirmative.
Mr. Anderson directed members to page 19 of the redline
version. He explained that the removal of former Section
33, beginning on page 19, line 13, eliminated the provision
that had allowed voters to remain on the absentee-by-mail
list indefinitely as long as they cast a ballot once every
four years. He stated that pages 20 through 22 contained
two new sections, Sections 22 and 23, which preserved the
process commonly referred to as ballot curing. He noted
that the redlined portions showing removals corresponded to
former sections 36 and 37. He explained that the removals
eliminated the tracking barcode requirement tied to witness
signatures and removed regulatory requirements related to
ballot challenge review.
Mr. Anderson directed attention to page 24, beginning at
line 16, which reflected the removal of former Section 41.
He explained that removing Section 41 eliminated the
requirement to adopt regulations governing drop box
security standards and preserved the existing regulatory
framework.
1:49:27 PM
Mr. Anderson moved to the bottom of page 26, line 31, and
relayed that the removal of Sections 45 through 50
collectively eliminated several requirements. He explained
that the removals eliminated the requirement that the
lieutenant governor develop a cybersecurity program,
removed the prohibition on undisclosed use of synthetic
media, removed the codification of the settlement in the
American Civil Liberties Union (ACLU) of Alaska v. State of
Alaska, and removed previous APOC reporting requirements.
Mr. Anderson continued that new Section 29 appeared
beginning on page 31, line 27. He explained that new
Section 29, in conjunction with the removal of former
sections 51, 52, and 55, eliminated all Permanent Fund
Dividend (PFD) application requirements related to voting
except for the provision contained in Section 29. He stated
that the section required the Department of Revenue (DOR)
to share voter information gathered from PFD applications.
He explained that prior versions had included numerous
regulatory requirements and additional provisions related
to PFD applications and voting, which had been removed,
leaving only the information-sharing requirement.
Mr. Anderson stated that new Section 31 began on page 32,
line 26, and was amended to remove additional conforming
repeals related to poll watcher provisions that had been
included in prior iterations of the bill. He clarified that
the poll watcher regulatory provisions had been removed. He
continued that new Section 34 began on page 33, line 2, and
made Sections 23 and 24 of the new version of the bill
conditional upon both sections taking effect.
Mr. Anderson stated that new Section 35 began on page 33,
line 27, and established an effective date of January 1,
2027, for Section 11. He added that new Section 36
established an effective date of July 1, 2026, for the
remainder of the bill. Additional technical and conforming
language was included throughout the bill to reflect
changes made in prior iterations.
Co-Chair Foster asked on which page the postage-paid
provision appeared.
Mr. Anderson responded that the postage-paid provision
appeared in new Section 17, which was located on page 14,
and continued onto page 15.
Co-Chair Foster summarized that, at a high level, the bill
included ballot curing, retained the witness signature
requirement, required postage-paid absentee ballot
envelopes, and maintained the rural liaison provision. He
asked whether his summary accurately reflected the major
components of the bill.
Mr. Anderson replied that Co-Chair Foster's summary
accurately reflected the major changes. He agreed that it
was a high level synopsis. He added that the bill removed
several provisions that had been debated in earlier
versions, including observer powers and poll worker
provisions.
Co-Chair Josephson asked Mr. Dunsmore how he would describe
the bill at a high level.
1:55:05 PM
DAVID DUNSMORE, STAFF, SENATOR BILL WIELECHOWSKI, stated
that the version before the committee had been pared down
from the version that passed the Senate. He explained that
the bill focused on election integrity measures, including
ballot curing, ballot tracking, expediting voter roll
maintenance, and adding additional residency indicators. He
added that the bill also included provisions addressing
situations in which an individual had voted in another
state, which could serve as a trigger for initiating the
voter roll cleanup process. The bill also contained
provisions intended to expedite the certification and
release of election results.
Representative Allard expressed appreciation for the bill
coming forward. She believed members of the public would
want her to "destroy" the bill line-by-line because it
violated people's constitutional rights and discriminated
against individuals who did not reside in rural
communities. She asserted that a vote in favor of the bill
indicated support for ranked-choice voting. The bill did
not fix elections and she disagreed with the provisions
related to ballot curing and voter roll cleanup because
they did not go far enough. She relayed that she was
willing to compromise on some matters but elections was not
one of them. She stated that she wanted the bill to move
forward so that amendments could be offered and the public
could understand its contents on a line-by-line basis.
Representative Allard asked whether she could withdraw her
objection.
Co-Chair Foster responded that she could withdraw her
objection but noted that his own objection remained.
Representative Allard WITHDREW the OBJECTION.
Co-Chair Foster relayed that the committee would proceed
with questions. Once members felt they had a general
understanding of the bill, the committee would vote on
whether to adopt the CS. He clarified that adoption of the
CS would place the version before the committee for further
process, including public testimony.
1:58:22 PM
Representative Bynum commented that there were several
provisions in the CS about which he wished to seek further
clarification. He asked whether there would be a later
opportunity to review the bill section by section after
adoption of the CS.
Co-Chair Foster confirmed that there would be a later
opportunity to examine the bill in greater detail.
Representative Stapp commented that his redline version of
the bill appeared primarily in blue rather than red and
noted that he had not seen it formatted in such a way
before.
Representative Tomaszewski asked for more information about
the postage-paid provision. He had heard that the postage
provision had been removed.
Mr. Anderson responded that the postage-paid provision
remained in the bill. He stated that the paid postage
requirement was listed on page 15, lines 2 through 21. He
reiterated that the provision remained in the current
version of the bill.
Co-Chair Foster WITHDREW the OBJECTION.
There being NO further OBJECTION, Work Draft 34-LS0153\U
was ADOPTED.
CSSB 64(FIN) am was HEARD and HELD in committee for further
consideration.
2:01:15 PM
AT EASE
2:08:49 PM
RECONVENED
Co-Chair Josephson began chairing the meeting.
^OVERVIEW: OVERVIEW: GOVERNOR'S FY27 BUDGET BY THE
LEGISLATIVE FINANCE DIVISION
2:09:19 PM
Mr. Painter resumed the PowerPoint presentation from the
House Finance Committee (HFC) meeting on January 27, 2026,
titled "Overview of the Governor's FY 27 Budget" dated
January 27, 2026 (copy on file.) He continued the
presentation on slide 17 and explained that changes in the
FY 27 adjusted base included salary and benefits
adjustments. He explained that the Legislative Finance
Division (LFD) included the items in the adjusted base
because the legislature could not pick and choose salary
adjustments, and because the decision was an up or down
choice by the legislature. He stated that the legislature
had the authority to accept or reject the items. He relayed
that it had been decades since the legislature had chosen
to reject an item, but it remained an available policy
choice.
Mr. Painter reported that the current estimate included
about $55 million of unrestricted general funds (UGF) in
salary adjustments. He noted that five unions remained in
negotiations. The most substantial item was the health
insurance rate for AlaskaCare and certain union trusts. He
relayed that the state as an employer paid the full
actuarial cost for the Public Employees' Retirement System
(PERS), unlike other employers that had a cap. He noted
that when that rate increased, the state paid more for
state employees.
Mr. Painter added that cost of living adjustments (COLA)
had been negotiated as well. He explained that many were
based on an inflationary figure of 2.5 percent and one was
based on a 3 percent figure. He stated that several current
contracts tied the FY 27 COLA to inflation thresholds and
many contracts reached the threshold that resulted in the
2.5 percent adjustment, which matched the inflation
assumption. He reported that the total impact of salary and
benefits adjustments was $111 million. He noted that the
five unions that remained outstanding were not particularly
large unions compared to the prior year. The unions
included correctional officers, public safety, state
troopers, and wildlife troopers, which sometimes received
increases that were higher than inflation due to
recruitment concerns.
Co-Chair Josephson relayed that he had met with staff from
the university earlier that day. The staff had shared with
him that the regents were calling for $15 million in salary
adjustments, but the governor had included about $6
million. He asked whether the numbers were accurate.
Mr. Painter responded that the numbers were correct. He
explained that the governor did not include funding for
non-covered employees and the legislature also did not
include that funding the prior year. The non-covered
employees would not receive funding for two consecutive
years if the approach continued. He noted that there was
about $7 million in total funds, but that there was nothing
designated for the non-covered employees.
Co-Chair Josephson asked whether the governor recommended
that the university system authorize what it wanted and
find resources to bring parity to the non-covered
employees.
Mr. Painter responded in the affirmative. He stated that
the legislature had chosen not to fund the increases the
prior year and not to provide increases to the non-covered
employees.
Representative Hannan asked for more information about the
disparity between the regents' request of $15 million and
the budget's $6 million. She thought the difference related
to the non-union staff. She asked if it could be concluded
that there were more non-union employees at the university
than employees in all union units.
Mr. Painter replied that he was not confident in the
numbers off the top of his head but he would follow up with
the information. He explained that it was possible he had
included the health insurance for the university in the
same bucket and that the real total could be higher. He
would verify the information and follow up because he did
not want to speculate on the record.
Representative Hannan commented that she had heard similar
comments from the university as Co-Chair Josephson. She was
trying to understand why the difference was so large if all
staff were funded. She wondered whether the difference
included union administration.
2:14:24 PM
Representative Tomaszewski asked if the union employees had
received an increase the prior year. He understood that the
university had provided something for the non-union group.
He asked whether his understanding was correct.
Mr. Painter responded that he was trying to recall the
answer from the mid-year status report. He thought that the
university had found funds, but he would verify and follow
up with the committee.
Representative Bynum relayed that he often received
questions about how the legislature dealt with the budget
and what funds were approved and what funds the legislature
had control over. He noted that union contracts were
negotiated and approved through the executive branch and
the university and the associated dollar amounts were then
incorporated into the budget. Contrastingly, non-
represented employees depended on the legislature to
appropriate additional funds requested by the executive or
the university in order to receive wage adjustments. He
asked Mr. Painter to clarify the process for approving and
funding union contracts and to explain the legislature's
obligation to fund the contracts.
Mr. Painter replied that the legislature had delegated the
authority to negotiate collective bargaining agreements for
covered employees to the Department of Administration (DOA)
and, in the case of university unions, to the university.
He explained that once the agreements were negotiated, the
agreements were brought before the legislature. He noted
that the court had ruled that partially funding a
negotiated contract was equivalent to defunding it. He
explained that the budget contained language that asserted
that the legislature approved a contract by including
funding for the contract. He stated that if the legislature
did not wish to approve a contract, it would need to
exclude the funding and remove the contract from the
language.
Mr. Painter explained that for non-covered employees in the
executive, legislative, and judicial branches, compensation
was governed by a statutory salary schedule. He stated that
the current schedule matched the supervisory unit for a
three-year period corresponding to the length of that
unit's contract. He explained that because the pay scale
was set in statute, if funding were not provided, agencies
would still be obligated to comply with the statutory
salary schedule and would need to find the funds
internally.
Mr. Painter relayed that the situation differed for the
university and for state corporations because the
compensation structures were not set in statute. He
explained that the board of regents or other governing
boards could determine salaries, but without appropriated
resources, the boards might decline to implement increases.
For example, the Alaska Housing Finance Corporation (AHFC)
board chose to make the salary increases and the state
provided the appropriation to do so. He clarified that the
process was not automatic and it was slightly disconnected.
Representative Bynum asked for confirmation that when a
collective bargaining agreement had been reached but
funding was not provided, the result was effectively that
the agreement had not been reached. He asked what that
outcome meant for the collective bargaining process.
Mr. Painter replied that the matter would essentially
return to the "negotiating table."
Co-Chair Josephson asked if the legislature could identify
and fund parity increases for uncovered university
employees without a collective bargaining agreement or
contract. He understood that there was nothing as a matter
of legislative prerogative that would prevent the
legislature from funding the increases and it would not
need a contract to do so.
Mr. Painter confirmed that the legislature could review the
university's budget request or "red book" and review the
requested amounts.
2:19:00 PM
Representative Galvin remarked that she had also heard
reporting about how the university managed after it did not
receive funding for non-covered employee increases the
prior year. She had inquired into the way in which the
University of Alaska Anchorage (UAA) addressed the
shortfall and ensured that non-covered employees were
retained. She learned that the university utilized funds
that were originally intended for a project to upgrade
classrooms that could not appropriately seat all of the
students. She relayed that the university had set the
project aside in order to pay for non-covered employees.
Additionally, the university left approximately 50
positions vacant, which meant fewer class offerings and
concerns related to campus security. She emphasized that
shifting funds to cover compensation adjustments had
broader operational consequences.
Mr. Painter continued to slide 18, which presented the
fiscal summary of the governor's FY 27 budget and included
past information about FY 26 for comparison. The post-
transfer deficit in FY 26, before any supplementals, was
approximately $51 million. He recounted that the governor's
supplementals released on December 11, 2025, totaled just
under $240 million. He added that an additional $55 million
in fire suppression disasters had been declared but was not
yet included in the bill. The result was a post-transfer
deficit of $345.9 million in FY 26. The figure included the
$129.6 million repayment to the Higher Education Investment
Fund (HEIF), which was counted as part of the deficit
because it would be drawn from the Constitutional Budget
Reserve (CBR). He explained that the figure did not include
additional items expected in the governor's forthcoming
supplemental bill, including Medicaid and potentially other
smaller items. He indicated that the FY 26 deficit number
would likely increase once the full supplemental package
was introduced.
Mr. Painter continued that agency operations were virtually
flat in FY 27 compared to FY 26. He indicated that
statewide items and the capital budget were also largely
unchanged. He identified the primary source of growth
between the two years as the governor's proposal to
appropriate a full statutory PFD. He observed that the
estimate reflected in the presentation was slightly dated
and that the Alaska Permanent Fund Corporation (APFC) had
since projected a somewhat higher number based on revenue
running ahead of forecast through December of 2025. He
clarified that the presentation used the figure from in the
governor's bill.
Mr. Painter stated that the FY 27 budget reflected a
deficit of just over $1.5 billion, similar to the
governor's proposal in the prior year. He explained that
the governor proposed to cover both the FY 26 and FY 27
deficits with draws from the CBR. He noted that the balance
at the beginning of FY 26 was estimated at approximately
$3.3 billion, and when projected new settlements and
investment revenue were added, roughly $3.4 billion would
be available for FY 26. He emphasized that the combined
draws for FY 26 and FY 27 would consume about half of the
value of the CBR.
Co-Chair Josephson understood that the governor's position
was that there was a disaster declaration and therefore the
governor could spend more than what was appropriated. He
noted that the legislature's position was that it still
needed to appropriate the funds. However, the result was
similar in that the same amount would be appropriated for
the same purpose. He hoped that the issue would not become
a significant debate about separation of powers and become
relevant for generations to come. He asked if there was a
reason to debate over semantics.
Mr. Painter responded that he did not think that the
terminology was particularly significant from a fiscal
standpoint. He highlighted the importance of the total and
ensuring the total was properly accounted for. He noted
that the governor had included the $55 million in the
fiscal summary but not in the bill, which suggested an
effort to present the most accurate fiscal picture
possible. He remarked that whether the amount was treated
as a ratification or as a supplemental appropriation was
less important than ensuring that the fund was properly
capitalized. He observed that historically, ratifications
for fire suppression had occurred, though more recently the
practice had been to include the amounts as appropriations.
He added that his principal concern with the fire
suppression process related more to the timing of the
disaster declaration than to the fiscal mechanism used. He
noted that a disaster declaration was made in November of
2025 when there were no fires burning, which he did not
think adhered to the requirements in statute.
2:25:04 PM
Mr. Painter explained that the next few slides were visual
representations of the governor's budget. He moved to slide
19 which contained a "swoop graph" that compared agency
budget sizes in the FY 26 management plan on the left with
those proposed in the FY 27 governor's budget on the right.
He noted that most agency budgets appeared similar from
year to year. For purposes of the graph, statewide items
and the capital budget were treated as agencies to maintain
clarity and scale within the graph, with the capital budget
of $157 million displayed near the middle of the page.
Mr. Painter explained that LFD included the Department of
Agriculture in the comparison because it was part of the
governor's budget. The FY 26 amount reflected what had been
included in the Division of Agriculture in FY 26. He
indicated that the approach was intended to maintain parity
across the years.
Mr. Painter advanced to slide 20, which presented another
visual representation of the budget and showed the total FY
27 UGF revenue and draws across various categories. The
largest revenue source in FY 27 was the percent of market
value (POMV) draw of nearly $4 billion. He indicated that
the next largest source in the governor's proposal was the
draw from the CBR, followed by petroleum revenue and non-
petroleum revenue. He noted that the chart helped
illustrate the relative size of each revenue source and
emphasized that petroleum revenue remained approximately
twice the size of non-petroleum UGF revenue, even at lower
oil prices. On the expenditure side, agency operations was
the largest portion of the UGF budget at $4.77 billion,
followed by the governor's PFD proposal, statewide items,
and the capital budget.
Mr. Painter moved to slide 21 and addressed agency
operations. He explained that the governor's FY 27 agency
operations budget was approximately $11 million above the
adjusted base. He identified the largest decrease was
within Medicaid. The FY 26 budget had included a temporary
$10 million increment for behavioral health rates in FY 26
and FY 27, but the governor removed the increment one year
early in FY 27. There was an addition of $6.5 million in
UGF in the Department of Transportation and Public
Facilities (DOT) to replace one-time fund sources used in
FY 26. He noted that there was an additional $1.4 million
that appeared to have been omitted due to a technical error
and that was expected to be addressed in a future revision.
He relayed that $5.2 million in UGF was utilized to replace
unavailable restorative justice funds. He explained that
restorative justice funds consisted of dividend amounts
that ineligible recipients would not receive due to felony
convictions. The funds were used across several areas of
state government and UGF was required to replace the
difference when the amount declined due to a lower
dividend.
Mr. Painter noted that there was additional funding related
to the information technology (IT) classification study
initiated several years prior. He explained that the Office
of Management and Budget (OMB) included amounts across
state agencies for classified employees, but not for exempt
employees. He indicated that similar adjustments for IT
employees in the legislature, judiciary, governor's office,
and state corporations were not yet included but would
likely be considered for parity in the future. He noted
that the item would appear before most subcommittees.
2:29:18 PM
Co-Chair Josephson understood that agency operations were
up, but cuts appeared for other items, and the net was a $1
million difference compared to the previous year.
Mr. Painter responded that Co-Chair Josephson was correct.
Co-Chair Josephson asked if Mr. Painter had ever seen a
budget with such an absence of a gap.
Mr. Painter responded that it was the closest to a flat
budget he had observed with the $1 million difference.
Mr. Painter proceeded to slide 22 and addressed statewide
items. He explained that the governor's proposal was below
the adjusted base for statewide items and reminded the
committee that the adjusted base reflected formula updates.
He identified the largest variance as related to PERS and
Teachers' Retirement System (TRS) contributions. He
explained that the governor did not fully fund the
contribution level recommended by the Alaska Retirement
Management Board (ARMB) for non-state employers. He
clarified that the governor fully funded the recommended
rate for the state as an employer but selected a different
funding approach than what was recommended by the board for
the state's on-behalf payments to other employers. He
explained that ARMB had evaluated around six options for
funding the retirement system, ultimately recommending an
approach that front-loaded payments. He explained that the
governor selected a different option that provided lower
payments in the near term but would require higher payments
in the future because the obligations would still need to
be satisfied. He noted that the board's recommendation to
front-load payments would reduce total long-term costs.
Representative Tomaszewski asked what the total amount was
that the board had recommended.
Mr. Painter responded that he did not recall the total but
that the difference between the board's recommendation and
the governor's proposal was approximately $37.7 million. He
noted that the total was likely in the range of $250
million but he would follow up with the details.
Mr. Painter continued to address school bond debt
reimbursement. He explained that the governor's FY 27
budget fully funded both school bond debt reimbursement and
the Regional Educational Attendance Area (REAA) fund. In
the prior year, the legislature funded school bond debt
reimbursement and REAA at approximately 75 percent. He
noted that the amount in the governor's budget was
estimated and that there were some municipalities that
planned to go out for debt. If the municipalities chose to
go out for the debt, the FY 27 amount would likely be
unchanged because there was a slight delay between the vote
on the debt and when payments would be due. He clarified
that there was some potential that new debt could change
the amount, but it was unlikely.
Co-Chair Josephson commented that although one could argue
that times were tougher now than they were 12 months ago,
the governor vetoed down to 75 percent last year while he
wanted 100 percent in the coming year.
Mr. Painter responded that the governor only vetoed the
REAA fund down, but the legislature funded school debt at
75 percent and fully funded the REAA fund. The statute was
ambiguous about the timing because the REAA fund was
supposed to be tied to the trailing year of school debt. He
understood that the legislature fully funded REAA in the
prior year with the intention to partially fund it in the
current year. Conversely, the governor vetoed REAA last
year to match the match in the same year. He explained that
the more typical process was to match the match in the same
year. He suggested that it was an academic debate.
Mr. Painter continued to discuss the Community Assistance
Fund (CAF). He explained that the legislature previously
funded an amount sufficient for a $20 million payment. In
the governor's FY 27 proposal, $14 million would be
transferred from the Power Cost Equalization (PCE) fund
with no UGF included. He stated that the amount would
result in approximately $18 million in community assistance
payments, which would be below the base payment level and
therefore prorated, with no additional per capita payments.
Co-Chair Josephson observed that community assistance
payments had been approximately $90 million in earlier
years and were now projected at $18 million.
Mr. Painter confirmed that Co-Chair Josephson was correct.
2:33:37 PM
Co-Chair Foster asked whether the $14 million from the PCE
fund was standard. He understood that PCE funds were
usually distributed to people in rural Alaska and typically
totaled around $50 million per year. He asked for
confirmation that the $14 million payment was for community
assistance.
Mr. Painter responded that statute contained a waterfall
provision allowing certain PCE earnings to be used for
community assistance based on available earnings. He
indicated that LFD and OMB disagreed slightly on how the
statutory waterfall was paid out. He suggested that there
should have been a statutory adjustment to the waterfall
calculation when the PCE fund was moved under APFC because
the corporation dealt with investment management fees
differently. He stated that LFD thought that management
fees of around $12.6 million should be deducted rather than
the $14 million proposed by the governor's budget. However,
it was subject to appropriation and statutorily allowable,
and the difference was not substantial.
Co-Chair Foster commented that he was aware of the
waterfall, but thought that PCE was outside of the
waterfall. He had not been aware that the amount was still
up for debate.
Representative Bynum thanked Mr. Painter for bringing up
the concept of the statutory waterfall and the mechanisms
used to cascade unspent funds into other purposes. He
remarked that he looked forward to discussing offline the
statutory structures that allowed the transfers. He
expressed concern that the legislature might have created
mechanisms that could take away the legislature's control
of appropriations and make the process automatic. He
suggested that it would be easy to overlook what was
happening within the process.
Mr. Painter responded that in the prior year, the
legislature did not follow the statutory waterfall. He
explained that the legislature instead funded less than the
full statutory amount from PCE in order to free up funds
for other purposes.
2:36:39 PM
Mr. Painter continued to slide 22 and addressed the final
two statewide items: fire suppression and the Disaster
Relief Fund (DRF). He explained that neither item was
governed by a strict statutory formula. He stated that the
governor's proposed fire suppression amount matched the
post-veto, pre-supplemental FY 26 level, while the proposed
DRF amount was closer to the legislature's pre-veto FY 26
level. He relayed that OMB Director Lacey Sanders indicated
that the DRF amount was based on a ten-year average, though
LFD had not yet verified the calculation. He emphasized
that there was no statutory formula.
Co-Chair Josephson asked why the numbers were not yet
known.
Mr. Painter responded that fire suppression funding was
inherently uncertain because future fire activity could not
be predicted. He noted that LFD generally advocated for
funding close to the average fire cost amounts to try to
reduce supplementals. He relayed that it was not possible
to know in advance whether a fire season would be above
average or below average. Last year, the legislature was
concerned that due to low snowpack, the fire season would
be above average, which was indeed the case. He added that
disaster relief funding likewise depended on events that
had not yet occurred. He thought that using past data to
understand future unknown disasters was a reasonable
approach.
Representative Hannan asked if the legislature would be
funding the average or 50 percent of the average.
Mr. Painter replied that OMB stated that the DRF figure
represented the ten-year average. He noted that LFD had not
yet verified OMB's calculation. He added that the fire
suppression amount was approximately $27 million below the
recent average and was not a fixed percentage.
Mr. Painter moved to slide 23 and explained that the
governor's capital budget was largely matching funds did
not involve a significant amount of UGF for state
priorities. He explained that approximately 81 percent of
the capital budget consisted of general fund match for
federal dollars, primarily in federal highways, aviation,
and the Department of Environmental Conservation's (DEC)
Village Safe Water (VSW) program. He noted that $22.9
million of AHFC's dividends were directed back to its own
housing projects, which was slightly below the board's
recommendation of $28.7 million. He stated that AHFC had an
above average year of dividends and the remaining dividend
funds would flow to the general fund as UGF revenue.
Mr. Painter explained that the mental health capital budget
included $1.9 million in UGF, which differed from the $6.5
million recommended by the Alaska Mental Health Trust
Authority (AMHTA). He identified two additional UGF
projects in the Department of Fish and Game (DFG) related
to salmon initiatives. He noted there was no funding in the
governor's proposal for school construction or major
maintenance, and that $26 million from the Alaska Capital
Income Fund (ACIF) was designated for deferred maintenance
on state facilities. In FY 24, there was $14.6 billion of
state facilities between the state and the university and
at least 2 percent of that was ongoing maintenance and
operations and totaled $292 million. He added that school
construction and major maintenance would be partially
handled through the School Bond Debt Reimbursement Program
(SBDRP). He explained that if school districts went out to
bond, some projects would be handled through the REAA fund,
but there were no additional funds for the projects.
2:41:08 PM
Co-Chair Josephson remarked that when he thought of bonding
for school construction major maintenance, he thought of
"new stuff." He asked for confirmation that the governor
would not be funding any of the existing projects and only
funding the required amount for new projects.
Mr. Painter responded in the affirmative.
Representative Bynum observed that each year he had been in
the legislature, the capital investment outside of match
had remained minimal. He thought that the pattern was
concerning. He asked if the slide reflected all available
match that the state was trying to obtain.
Mr. Painter responded in the affirmative.
Representative Bynum restated that he meant match for which
the state was eligible rather than match the state was
attempting to obtain. He noted that some agencies and
institutions had recommendations for additional non-match
capital investments that were not funded. He asked if there
were recommendations broken down by department on what each
department would like to see funded. He asked if it was a
"rule of thumb" that more capital investment was necessary,
but not being made a priority in the budget.
Mr. Painter responded that LFD was only aware of agency
requests when they came from independent boards or entities
that had publicly available recommendations. He noted that
the judiciary had submitted capital project requests that
were not included in the governor's budget and that the
University of Alaska (UA) Board of Regents had submitted
several capital requests that were likewise not included.
He stated that the items were identified in the
subcommittee materials. He added that when requests
originated within executive branch agencies, LFD did not
always know what had been submitted to OMB unless the
agency was independent and publicly disclosed its request.
Representative Bynum emphasized that the committee and the
House should take a better look at capital investment
statewide. He believed Alaska had underinvested in capital
needs and that the underinvestment negatively affected his
community and all communities across the state. He looked
forward to debate on the issue.
Co-Chair Josephson observed that the governor recommended
appropriating 10 percent of 2 percent of deferred
maintenance, which he thought was dire. He referenced a
memo that had an addenda to it from the Former Alaska
Governor Wally Hickel era which indicated that when a
governor received the judiciary's proposed budget, the
governor was expected to transmit it unchanged into the
governor's budget as a preliminary matter. He asked whether
the practice had occurred in the current budget cycle.
Mr. Painter responded that the practice had not been
followed for the past two years. He explained that
historically, the practice had upheld for the operating
budget but not the capital budget. He stated that in the
current and prior year, when LFD received the governor's
budget, the division contacted the judiciary to determine
which requested items were not included. He reported that
the excluded items were listed in the judiciary
subcommittee materials and in the capital overview. He
clarified that the items did not come through OMB.
Co-Chair Josephson asked about the second bullet on the
slide regarding the AHFC dividends. He noted that the board
recommended a higher dividend amount than what was proposed
in the governor's budget. He asked what could be inferred
from the proposal to spend less that the amount requested
by the board. He remarked that that there appeared to be an
underlying message that he was not understanding.
2:45:41 PM
Mr. Painter responded that AHFC dividends counted as UGF
and could be used for any purpose. He explained that the
legislature often appropriated the dividends back to AHFC
within the capital budget so the corporation could better
manage its cash flow rather than transferring the funds to
the general fund. He noted that doing so provided cost
efficiencies because once transferred to the general fund,
the corporation could not leverage the funds for bonding.
He added that the largest reduction within the AHFC
dividend allocation was to the homeless assistance program.
He stated that several AHFC-related items were identified
in the capital overview for DOR and the governor chose not
to fund the items in order to reduce overall spending.
Mr. Painter advanced to slide 24, which highlighted items
that were known obligations without a set timeline of when
the funding would be needed. The first item was Medicaid.
He explained that on December 15, 2025, the Department of
Health (DOH) provided a Medicaid projection indicating that
an additional $47.4 million in UGF would be required in FY
27. He stated that the amount was not included in the
governor's budget due to timing. He noted that in prior
years, a preliminary number had been included and later
adjusted, whereas the current approach omitted the
placeholder and relied on the updated projection. He
thought that the timing mechanism was less important than
ensuring the correct amount was ultimately appropriated. He
clarified that the $47.4 million did not include potential
increases associated with rate rebalancing studies.
Mr. Painter explained that DOH had been working with a
contractor to evaluate Medicaid rate methodologies more
comprehensively. He noted that historically, rate
adjustments required broad changes across service
categories rather than targeted changes to specific rates.
For example, the autism services rates had been identified
as insufficient for providing necessary services. He
explained that under the prior methodology, raising rates
for autism services would have required raising all
behavioral health rates, even if other services did not
warrant adjustment. He stated that the contractor conducted
a more granular review and developed recommendations for
rebuilding rates from the ground up. He noted that four
studies came from the review with recommendations. He
emphasized that the recommendations did not require
immediate or full implementation but represented policy
choices for legislative consideration. He noted that none
of the recommendations were currently included in the
governor's budget. He advised that the potential general
fund impact could total tens of millions of dollars in FY
27.
Co-Chair Josephson remarked that his understanding from
discussions with DOH was that the results of the studies
might not be ready in time for FY 27. He asked if Mr.
Painter had different information.
Mr. Painter responded that the studies were available.
Co-Chair Josephson understood that the studies from
Guidehouse advisors were available, but no final
regulations or rulemaking had been done.
Mr. Painter responded in the affirmative. He indicated that
depending on timing, some portion of implementation could
affect FY 27, potentially beginning in the latter part of
the calendar year, but the impact was not yet clear and the
department had not yet incorporated the costs into the
budget.
Mr. Painter continued to address ongoing employee
bargaining. He reiterated that five unions remained in
negotiations and noted that while additional costs were
anticipated, the remaining units were smaller than those
that had negotiated in the prior year, and any placeholder
amount would likely be significantly lower than the
previous year's estimate. He next discussed changes to the
Supplemental Nutrition Assistance Program (SNAP)
administrative cost match. He explained that under federal
legislation H.R.1, the state's required match for SNAP
administrative costs would increase from 25 percent to 50
percent beginning in federal FY 27. He stated that DOH
estimated the additional state cost at approximately $10.7
million annually. He noted that due to the timing of the
federal fiscal year, the state impact in FY 27 might
represent only three quarters of the amount. He confirmed
that the increase was not included in the governor's budget
and could appear later in the legislative process.
Mr. Painter continued that additional provisions in the
federal legislation could increase the workload for the
Division of Public Assistance (DPA). He explained that no
new positions had been added in the governor's budget to
address the increased workload. In the current fiscal year,
the department had relied on cross-appropriation transfer
authority to move funds into DPA, but the practice was not
seen as an ongoing solution. He advised that additional
adjustments might be necessary to ensure that staffing
levels were adequate, though no such changes were currently
included in the budget.
Mr. Painter relayed that he wanted to ensure the committee
was aware of the Temporary Assistance for Needy Families
(TANF) program. He explained that in prior years, the
legislature had included multi-year language authorizing
additional maintenance of effort funding if needed. He
stated that the most recent authorization had been $3
million and had now been fully expended. He noted that the
governor's budget did not replace the funds and it remained
unclear whether a replacement request would be forthcoming.
He indicated that funding would likely be necessary to
ensure that TANF met its maintenance of effort requirement.
Over the previous six years, the governor's amended budget
had averaged approximately $100 million more than the
initial December release of the budget. He noted that the
Medicaid adjustment alone would account for roughly half of
that amount in the current year. He advised the committee
to anticipate that additional items would be forthcoming.
2:52:14 PM
Representative Stapp asked if it would be possible to
estimate how the SNAP administrative cost increase might
change if the eligibility provisions that were expanded a
few years prior were reversed. He asked for more
information about the minimum eligibility requirements
mandated under federal law.
Mr. Painter asked if Representative Stapp wanted him to
follow up with the committee with the information or if
Representative Stapp simply wanted to highlight the issue.
Representative Stapp responded that he wanted Mr. Painter
to follow up with the committee.
Mr. Painter replied that he would follow up.
Co-Chair Josephson asked for confirmation that there was a
request for 15 additional SNAP eligibility technicians. He
understood that there was a "cavalry" coming.
Mr. Painter responded that more funding was being
transferred from other areas of the department for SNAP
technicians. Much of the funding was to replace the
defunding of the virtual call center by the legislature in
the previous year. He explained that there was no new
staff, but staff hired to replace call center staff.
Co-Chair Josephson noted that if the expected supplementals
were paid for, the budget would be out of balance with the
normal cash flow and the draw in FY 27, which would be on
top of the deficit.
Mr. Painter confirmed that the $1.5 billion FY 27 deficit
reflected in the governor's proposal did not include the
additional items.
Co-Chair Josephson remarked that he wanted to set aside the
overall deficit for the time being. He clarified that he
was talking about an adjusted base budget. He asked for
confirmation that the items on slide 24 were on top of the
base.
Mr. Painter responded in the affirmative.
2:55:09 PM
Mr. Painter advanced to slide 25 and explained that the
next section addressed "known unknowns," or potential
fiscal risks not yet quantified. He first addressed the
federal disparity test under the K-12 funding formula. He
stated that the governor's budget assumed the state would
pass the disparity test for both FY 26 and FY 27. He
relayed that the state had failed the FY 26 test but had
filed an appeal. He noted that it was unclear when the
appeal would be resolved and whether the state would win
its case. He explained that the state had not yet submitted
the disparity test for FY 27. If the state failed the test,
the additional amount would be approximately $79 million in
FY 26 and $71 million in FY 27. If the state failed the
disparity test, the budget would increase by those amounts
automatically, but no legislative action would be required.
If there was a cap on the amount, the legislature could
fund projected items and it could result in a shortfall. He
urged members to keep the issue in mind while balancing the
budgets for the next two years.
Mr. Painter continued to address the Alaska Marine Highway
System (AMHS). He explained that for the last three years,
the AMHS budget had relied on the Federal Transit
Administration's Rural Ferry Program (RFP). Typically, the
grant application went out in the spring and the award was
known by the fall. He relayed that the grant application
for the award relied upon for the calendar year 2026 budget
that had not yet been released and normally would have been
issued the previous spring. He explained that neither DOT
nor LFD knew the reason for the delay. He noted that the
award took several months to process, and the legislature
might not know during the current session how much of the
grant would be awarded. The state had $5 million of UGF as
a backstop for calendar year 2026, but it was still relying
on nearly $78 million of federal funding for AMHS. He
cautioned that the funding was not guaranteed if the grant
application did not come out. He noted that the federal
administration had withheld grant applications at times
which could result in a larger budget hole.
Mr. Painter explained that the governor had proposed
shifting to a multi-year approach for the AMHS budget.
Instead of continuing with calendar years, the proposal
used multi-year fiscal year budgeting. He noted that the FY
27 through FY 28 budgets relied on $83.3 million from the
RFP fund without a backstop. He cautioned that it could
create budget holes in FY 26 and FY 27 and the money could
run out if the grant was not awarded. He acknowledged that
the timing was complex.
Mr. Painter noted one positive development. He explained
that the Tustumena replacement, for which the final funds
had been appropriated the previous year, relied on already
awarded capital funds. He confirmed that the project was
out to bid and that the money was in hand, so it was not at
risk. He clarified that only the remaining two years of
funds were uncertain. He added that even if the funds were
awarded, the funds were expiring. He noted that U.S.
Congress was expected to take up a transportation bill in
the fall of 2026 and suggested that more information about
whether the grant would continue would be made available.
He advised that members should consider the possibility of
a hole in the budget next year even if grants were awarded
for FY 26 and FY 27.
Mr. Painter relayed that there was a SNAP match for the
program itself, as Representative Stapp had alluded to. He
explained that the match was based on the state's error
rate and would likely begin in FY 28, although a waiver
process could delay it. He stated that the projected amount
ranged between $15 million and $46 million. He clarified
that the impact would not occur until the following year,
but reducing the error rate through adequate staffing was
advisable. He reiterated it was not necessary to
appropriate funds yet, but he wanted to ensure that the
committee was aware of the situation.
2:59:57 PM
Co-Chair Josephson asked for clarification that there were
no funds set aside for FY 28.
Mr. Painter responded that the PFD POMV draw had increased
by approximately $200 million in the current year, which
was unusually significant. He cautioned that such an
increase would not recur in FY 28. He advised that if
balancing the budget was difficult in the current year, FY
28 likely would present greater challenges due to
additional fiscal headwinds and the absence of a comparable
POMV increase.
Representative Galvin remarked that the state needed to
reduce the SNAP error rate to a 6 percent error rate for FY
28. She noted that the current error rate was 24 percent,
which was an improvement from the previous 51 percent rate.
She acknowledged that prior policy choices had been made to
ensure Alaskans were fed. She expressed concern that no
additional new employees were being added to support SNAP
administration and indicated that investing now could
lessen the impact of potential penalties in the future.
Representative Stapp asked if multi-year receipt authority
language could be used to stretch AMHS funding in FY 26. He
asked for more information about the "drop dead" date for
FY 26, noting the difference between the federal October
fiscal year and the state's July 1 fiscal year. He asked
what would occur if the money were not on hand by July 1
and how it would affect ferry system operations.
Mr. Painter responded that AMHS currently had approximately
58 percent of its budget in hand. He explained that
decisions about stretching the budget would be management
and policy decisions to be made by DOT. He stated that if
the department took no action and the grant were not
awarded, it would run out of money after expending its
existing dollars. He indicated that the department could
reduce operations, rely on the expectation of the grant, or
seek additional appropriations, but it could ultimately
face an end to ferry sailings. He reiterated that the
decisions rested with DOT and that the department could
provide further insight into its planning.
Representative Stapp understood that there was a
significant delay in the application and award process. He
asked if the legislature should consider taking action
before conference committees occurred.
Mr. Painter responded that unless the grant application
were released within the next few weeks, it would be
unlikely that the legislature would know the outcome before
the budget reached conference committee. He explained that
the policy options included inserting a placeholder item
that could later be removed, or declining to include
funding and addressing any shortfall later. He noted that
under the governor's proposal, which shifted to a fiscal
year multi-year structure beginning July 1, there was not
necessarily an immediate hole in the current year. However,
if the grant were not awarded, the hole in the following
year would be larger because more of the available funds
would be used in the current year rather than spread across
two calendar years. He acknowledged that the situation
involved complex decisions and did not lend itself to a
simple answer.
Representative Stapp remarked that he did not fully
understand how the proposed budget stretched FY 26 dollars
so far. He observed that although multi-year language could
be used, the department would still exhaust funds without
receipt of the federal grant.
3:05:20 PM
Mr. Painter explained that the advantage of shifting to a
fiscal year multi-year structure was that instead of
beginning a new year on January 1, the year would begin on
July 1, thereby aligning with the state fiscal year and
providing additional time before funds were depleted.
Mr. Painter continued that there was a year in which the
legislature had an 18-month AMHS budget. He explained that
the governor's proposal attempted to use the earlier shift
as an advantage by again adjusting the structure and
effectively pushing the timing back. However, instead of
the FY 27 to FY 28 proposal funding two calendar years, it
would effectively fund only FY 27, thereby creating a
larger issue in the subsequent year.
Representative Hannan offered a reminder that AMHS had been
moved to a calendar year budget structure. She clarified
that while the discussion referenced FY 26, AMHS operated
on calendar year 2026 authority and therefore had
authorization to spend through December. She emphasized
that the federal grant was not in place and had not yet
been advertised. She reported that DOT officials had
planned to be in Washington, D.C., during the first week of
March of 2026 and hoped for clarity about the grant. She
noted that historically, the grant advertisement period had
lasted three to four months, which meant that it was
unlikely that the legislature would know the outcome before
it adjourned. She expressed concern that adopting a multi-
year approach could stretch funding further and potentially
dig a larger hole. She expressed deep concern about the
ability to continue sailings to communities if the grant
did not materialize.
Co-Chair Josephson asked if litigation might be an option
for Alaska if the federal funds were withheld for an
unknown reason, as had occurred in other states.
Mr. Painter responded that he could not answer a legal
question.
Representative Hannan understood that in other states, the
litigation involved grants that had already been awarded
but not disbursed. In Alaska's situation, the grant had not
yet been advertised and she thought that it would be
difficult to challenge.
Mr. Painter advanced to slide 26 and discussed the longer-
term fiscal outlook. He explained that the graph dated back
to FY 14, which marked the beginning of the current fiscal
era when oil prices declined in FY 15. He noted that
revenue had decreased significantly at that time, though
the state had already been running a deficit in FY 14
despite oil prices exceeding $100 per barrel. He relayed
that when the state adopted the POMV draw in FY 19, the
annual deceit decreased from around $3 billion to smaller
amounts for several years, followed by generally balanced
budgets from FY 21 through FY 26 on average. He pointed out
that there had been surpluses in FY 22 and FY 24 and
deficits in other years, but the state had overall managed
from year to year. He described the approach as a "muddle
through" fiscal plan in which available revenue determined
the size of the capital budget and PFD each year.
Mr. Painter stated that agency operations, adjusted for
inflation, stood 16.6 percent below the FY 15 peak. He
observed that deferred maintenance had not been funded at a
sustainable level since FY 14 and that the statutory PFD
had not been fully funded in a decade. He emphasized that
the year-to-year approach created uncertainty, with some
years producing larger dividends and capital budgets and
others producing smaller ones. He relayed that the state
had relied on the approach for approximately five years.
3:10:35 PM
Mr. Painter continued to slide 27 and relayed that that one
benefit to the approach had been that the state had started
to transition from drawing down savings accounts to
gradually rebuilding balances. He reported that in FY 14,
the CBR and Statutory Budget Reserve (SBR) together totaled
nearly $16 billion. By FY 20, the balances had fallen below
$2 billion due to significant draws. He noted that the
balances had since risen above $3 billion. He explained
that the improvement occurred largely because investment
earnings had outpaced draws and because the state had
experienced a few years with significant deposits tied to
surpluses. He highlighted that the balances were now moving
in a positive direction. However, the progress reflected
year-to-year management rather than a comprehensive fiscal
plan.
Mr. Painter advanced to slide 28 and discussed the Earnings
Reserve Account (ERA) in relation to the POMV. He noted
that because the POMV draw represented the state's largest
revenue source, an ongoing question was whether the ERA
would consistently contain sufficient funds to support the
annual draw. He identified a structural issue in the
projections: statutory net income was projected at 6.2
percent, compared to assumed inflation of 2.5 percent and a
POMV draw of 5 percent. He pointed out that the combined
draw and inflation pressure of 7.5 percent exceeded the
projected earnings rate, which produced a long-term
convergence concern.
Mr. Painter explained that the chart on the slide compared
the year-end realized ERA balance on June 30 to the
following year's POMV obligation on July 1 from FY 22
through FY 36. He cautioned that the ERA balance needed to
remain above the following year's POMV draw to avoid
liquidity pressure. He reported that the ERA currently
appeared healthy at approximately $12 billion in FY 26,
partly because the state had not inflation-proofed in FY 26
and partly because FY 25 investment performance exceeded
projections.
Mr. Painter relayed that probabilistic modeling showed a 33
percent chance of an insufficient ERA balance to fully fund
the POMV draw over the next decade assuming full inflation-
proofing. He noted that if inflation-proofing were
suspended when the ERA dropped below the next year's draw,
the risk declined to 24 percent. He added that the figures
represented an improvement from the prior year's estimates
of 46 percent and 33 percent, respectively, largely due to
strong FY 25 earnings and the absence of inflation-
proofing.
Mr. Painter advanced to slide 29 and reviewed the long-term
revenue outlook. He reported that DOR's fall forecast
projected that oil prices would grow slightly slower than
inflation over the next decade. He noted that oil
production was expected to increase from just over 500,000
barrels per day in FY 27 to approximately 659,900 barrels
per day by FY 35. However, total oil revenue was not
projected to grow at the same pace because legacy field
production was declining while new production generated
less tax revenue. He clarified that royalties were
projected to rise, but production tax revenue was expected
to decline over the forecast period.
Mr. Painter stated that the Permanent Fund was projected to
earn 7.3 percent annually according to APFC's assumptions,
which were slightly higher than those in the department's
Revenue Sources Book. He added that LFD had adjusted
Natural Petroleum Reserve-Alaska (NPRA) royalties to remove
amounts it considered federal revenue based on the
interpretations made by Legislative Legal Services (LLS).
He emphasized that the key takeaway was that total revenue
was projected to grow roughly at the rate of inflation. He
asserted that without structural changes, a budget that did
not balance in the current year was unlikely to be balanced
in future years.
Mr. Painter continued to slide 30 and concluded that the
long-term outlook remained challenging. He observed that
the state had continued to manage each year by not fully
funding the statutory PFD and by underfunding a sustainable
capital program. He reported that the governor's ten-year
plan did not include major policy changes and largely
maintained the existing deficit. He added that the
governor's fiscal plan generated about $900 million in new
revenue at peak and reduced the statutory PFD to a 50-50
framework worth roughly $400 million annually. He noted
that together, the changes totaled about $1.3 billion per
year but still left a remaining deficit. He explained that
the remaining gap was roughly $200 million to $400 million.
Mr. Painter relayed that under the governor's fiscal plan,
some taxes began to phase out in the out years, which
increased the deficit over time. He noted that the governor
also proposed a spending limit that capped government
growth at 1 percent, which was an assumption that had been
incorporated into the remaining $200 million to $400
million gap. He clarified that LFD had not yet seen full
modeling from the administration and that the estimate was
based only on the statutory components introduced to date.
Co-Chair Josephson asked for confirmation regarding
information on slide 24. He remarked that he had understood
the state might be able to forgo the SNAP administrative
cost increases for one year. He asked whether the delay
option applied only to the program match rather than the
administrative costs.
Mr. Painter replied that his understanding was that the
match for the program could be forgone, but not the
administrative costs. He offered to double check.
3:16:43 PM
Co-Chair Josephson reviewed the agenda for the following
day's meeting.
ADJOURNMENT
3:17:01 PM
The meeting was adjourned at 3:17 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 64 CS WorkDraft HFIN v. U 012826.pdf |
HFIN 1/29/2026 1:30:00 PM |
SB 64 |
| SB 64 Comparison of 34-LS0153_L.A and 34-LS0153_U.pdf |
HFIN 1/29/2026 1:30:00 PM |
SB 64 |
| SB 64 Sectional Analysis Version U 1.28.26.pdf |
HFIN 1/29/2026 1:30:00 PM |
SB 64 |
| LFD Budget Overview 012926 Fw_ Log 14155 LFD Request_ Broad-based Categorical SNAP Eligibility and Federal Changes.pdf |
HFIN 1/29/2026 1:30:00 PM |
HB 263 HB 263 HB 264 HB 264 HB 265 |
| LFD Budget Overview Response to HFIN 1-29-26 Meeting.pdf |
HFIN 1/29/2026 1:30:00 PM |
HB 263 HB 264 HB 265 |