Legislature(2025 - 2026)ADAMS 519
02/11/2026 09:00 AM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB263 || HB265 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 263 | TELECONFERENCED | |
| += | HB 265 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 11, 2026
9:05 a.m.
9:05:05 AM
CALL TO ORDER
Co-Chair Josephson called the House Finance Committee
meeting to order at 9:05 a.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 Nellie Unangiq Jimmie
Representative Elexie Moore
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Alexander Schroeder, Staff, Representative Andy Josephson.
SUMMARY
HB 263 APPROP: OPERATING BUDGET;AMEND;SUPP
HB 263 was HEARD and HELD in committee for
further consideration.
HB 265 APPROP: MENTAL HEALTH BUDGET
HB 265 was HEARD and HELD in committee for
further consideration.
Co-Chair Josephson reviewed the meeting agenda.
HOUSE BILL NO. 263
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
HOUSE BILL NO. 265
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
9:06:02 AM
Co-Chair Josephson reviewed the items in members' packets
including the new committee substitute (CS) for HB 263,
redline comparison document between the governor's budget
and CS, summary of changes, CS for HB 265, redline
comparison document for HB 265, agency summary totals (all
funds), and agency summary totals (UGF only) (copy on
file).
Co-Chair Josephson asked for a motion on the first CS.
Co-Chair Schrage MOVED to ADOPT the proposed committee
substitute for HB 263, Work Draft 34-GH2498\G (Marx,
2/6/26).
Co-Chair Josephson OBJECTED for discussion.
Co-Chair Josephson asked his staff to explain the changes
in the CS.
9:07:18 AM
ALEXANDER SCHROEDER, STAFF, REPRESENTATIVE ANDY JOSEPHSON,
reviewed the changes in the CS. He read from prepared
remarks:
Before the committee is a proposed committee
substitute for HB 263: the Operating bill, work draft
34-GH2498\G, also called House Committee Substitute 1
or HCS1. Also included in members' packets is a
redline comparison between the Governor's December 11,
2025, operating bill and HCS1. For purposes of this
walk through today, I will refer to the page and line
numbers in the redline comparison, not the work draft.
I want to begin by identifying three broad changes to
the bill.
The first broad change is to address technical and
conforming changes. If the committee permits, I ask to
refrain from getting into detail about what those
technical and conforming changes are. In summary: the
administration has different drafting requirements
than the legislature, so we translate the operating
bill to meet Legislative Legal's requirements.
The second broad change is that all supplemental items
have been removed. There are currently two
supplemental bills, HB 283 and HB 289, under the
committee's consideration. The Co-Chair's position is
that, at this time, those bills and their items should
be considered separately from the operating bill. So,
fair warning, I do not plan to walk through the
supplemental items removed from the bill.
The third broad change is reverting to an "adjusted
base" budget in accordance with the Legislative
Finance Division's definition (with one exception, to
be explained in a moment). The "adjusted base"
definition is "The prior year's budget less one-time
appropriations plus current statewide policy decisions
(such as salary adjustments and formula changes)
needed to maintain services at a status quo level."
Formula items funded at a partial amount (meaning
deviations from statutory formulas in the previous
fiscal year's budget) are carried forward in this
committee substitute. Those items will be explained
when I get to the language section.
It's worth noting that the Legislative Finance
Division does not apply the adjusted base concept to
certain aspects of the bill and uses the Governor's
submission for those items. Examples include:
• Wordage, such as conditional language in the
number's sections.
• FY26 language sections with no fiscal impact
added or removed by the Governor in his proposed
budget, such as the section implementing Bonuses
for State Employees authorized by Letters of
Agreement.
• Miscalculations by the Governor in formula-driven
appropriations.
If an item falls outside the definition of "adjusted
base," it is unchanged from the Governor's version in
this committee substitute.
That concludes the broad changes between the
Governor's proposed budget and the work draft before
you. Ultimately, this work draft is meant to be a
starting point while we work through the Finance
subcommittee process and the House Finance amendment
process.
9:10:39 AM
Co-Chair Josephson noted that the mental health budget
would be taken up after the operating budget. He clarified
that the mental health budget CS was version I.
Representative Stapp remarked there were many numerical
changes that were not listed on the summary of changes. For
example, he pointed to page 6 of the CS and remarked that
the Alaska Gasline Development Corporation (AGDC) budget
was substantially less. He asked if it was the adjusted
base change.
Mr. Schroeder replied affirmatively. He elaborated that any
of the numbers section changes were shown in the
transaction comparison and were not included in the summary
of changes because the difference reflected the reverse of
the transaction compare between adjusted base and gov
amend.
Mr. Schroeder reviewed the changes in the CS with the
redline comparison document:
In the number section, please turn to Page 4, Lines 19
through 33. We have flagged it in the committee
members' redline document. Here, you will see the
Department of Agriculture was removed. On Page 32,
Line 25 to Page 33, Line 4 you'll be able to see it
was restored as the Division of Agriculture under the
Department of Natural Resources. Technically, this is
consistent with LFD's definition of adjusted base. It
is also consistent with the Superior Court ruling that
"the Governor transmit a proposed executive order to
the Legislature only during regular session." This
meaning that Executive Order 137 was unlawful and the
creation of a Department of Agriculture void.
The second structure difference in the numbers section
is found on Page 77, Lines 1 through 19, where you
will see the Alaska Marine Highway System reflected as
Section 4 in numbers, which is consistent with how the
legislature passed the FY26 budget.
The remaining changes in the numbers section are only
reflected as differences in appropriation totals. All
transactions the Governor proposed, the ones before
the Finance subcommittees, were removed. You can view
these transactions in full in the transaction
comparisons between the adjusted base and the
Governor's proposed budget on the Legislative Finance
Division website.
That concludes the changes in the numbers section.
Moving on to the language section, I mentioned earlier
one exception to the adjusted base made in this
committee substitute. Please turn to Page 81. It is
the second flag in the members' redline document.
Looking at Section 11, subsection (c), (specifically
Page 81, Line 27 to Page 82, Line 1). Here, the
committee substitute modifies the earnings reserve
account deposit. Instead of splitting the transfer
from the earnings reserve account between the general
fund and the dividend fund, the Co-Chair believes that
depositing all the funds to the general fund first is
a better starting position for the work of this
committee. This structure mirrors the same structure
in last year's Enrolled operating bill, and every
operating bill since FY19 when the Percent of Market
value draw began.
Yes, it does not yet appropriate a portion of the
general fund for the payment of a permanent fund
dividend. That appropriation will be revisited in the
budget amendment process in this committee and on the
House Floor.
9:15:15 AM
Mr. Schroeder reviewed adjusted base changes beginning on
page 82 of the redline document:
The remaining language section items before us are all
adjusted base changes. Please turn to page 82, Lines 5
through 8. Here you see that it removes the inflation
proofing appropriation to the Alaska Permanent Fund.
The next change is on Page 88, Lines 6 through 14.
Here you see it removes State's Employment Assistance
and Training Program, or STEP, estimated
appropriations from the language section. A
corresponding increase maintains funding in the
numbers section for the Department of Labor and
Workforce Development. LFD notes that this language
was new this fiscal year. It is conceptually similar
to the Alaska Technical and Vocational Education
Program, or TVEP, language in Section 9, which was
moved from numbers to language in FY24 and FY26.
The next change is on Page 89, Line 15 through Line
18. Here you see it removes Department of Revenue
section on externally managed investment profit
sharing fees. The department reports that they have
new profit-sharing agreements with public entities
investment managers. Only if those external managers
outperform market benchmarks would these fees be paid.
The next change is on Page 89 Line 19 through Page 90,
Line 1. Here you see it removes language moving the
Alaska Marine Highway System from a calendar year to a
multiyear appropriation spanning two fiscal years. The
change was requested in FY26 and denied by the
legislature. It was requested again in the Governor's
FY26 supplemental. Effectively, it would allow the
department to move any surplus in the current fiscal
year forward, and future year funding to fill current
year budget holes.
9:17:37 AM
Mr. Schroeder continued to the next change on page 94:
The next change is on Page 94, Line 4 through 7. Here
you see it removes appropriation of arbitrage rebate
related to investment earnings in the Alaska
International Airport System reserve fund. Investment
earnings in this fund have exceeded allowable
arbitrage yield, so this item would allow the earnings
to maintain the bonds' tax-advantaged status.
The next subsection is on Page 94, on Lines 8 through
12. Here you see it removes the backstop to the
previous section if the estimate is sufficient to
cover arbitrage rebate.
Page 94, Line 26 to Page 95, Line 1. Here you see it
Reduces School Bond Debt reimbursement to 75 percent
of statutory requirement (same as FY26). The next
change is on Page 96, Lines 5 through 6. Here you see
it reduces the appropriation to Disaster Relief fund
to $13,044,800 UGF (matching FY26 enacted policy, in
keeping with LFD's definition for adjusted base
language items)
Please note: Lines 7 and 8 on this page removes the
$40 million supplemental appropriation to the disaster
relief fund because all supplemental items were
removed from this committee substitute.
Staying on the same page, the next change is Page 96,
Line 30 to Page 97, Line 1. Here you see it reduces
the Regional Educational Attendance Area and Small
Municipal School Fund deposit to 75 percent of
statutory requirement (again matching FY26 policy).
For context, last year, the legislature funded school
aid for costs of school construction at 75 percent.
The Governor vetoed the REAA deposit down to 75
percent to match the school bond debt reimbursement.
9:20:01 AM
Mr. Schroeder continued to review adjusted base language
section changes with prepared remarks:
The next change is on Page 98, Lines 17 through 21.
Maintains FY26 policy for the Community Assistance
fund deposit by adding $5,978,000 in UGF. This would
result in a $20 million disbursement in FY27 (same as
FY26). The next FY27 adjusted base change is on Page
101, Lines 6 through 13. Adds $37,945,000 in UGF to
meet the Alaska Retirement and Management Board's
actuarial recommendations for State Retirement
contributions. For context, the Governor did not fund
the ARM Board's FY27 contribution rate, instead
choosing a different rate which pays less upfront but
more in future years. And the last change is on Page
104, Line 30 to Page 105 Line 13. Removes the
constitutional budget reserve draw to cover
appropriations made in the FY27 budget.
That concludes the adjusted base language section
changes.
Overall, the net reduction from the Governor's bill to
HCS1 in non-duplicated fund sources for FY27 operating
and statewide items is the following:
$2,358,386,400 in Unrestricted General Fund
$11,170,600 in Designated General Fund
$7,772,100 in Other State Funds
$31,328,200 in Federal Receipts
If you include the appropriations in the Governor's
proposed capital budget, the surplus of unrestricted
general fund in the operating budget is $819.5
million.
That concludes the differences between the Governor's
December 11, 2025, operating bill, and HB 263, version
G.
9:22:11 AM
Representative Bynum referred to page 82, lines 5 through 8
pertaining to the removal of inflation proofing from the
budget and page 89, line 19 through page 90, line 1 that
moved the multiyear appropriation for the Alaska Marine
Highway System (AMHS) to the numbers section of the bill.
He asked for an explanation of the rationale.
Mr. Schroeder responded that the two items had been removed
because in the Legislative Finance Division's (LFD)
adjusted base definition the items would revert back to the
prior year's version. For example, AMHS was in the numbers
section the previous year and the legislature had denied
changing it to the language section. The current CS put
AMHS back into the numbers section. Additionally, there was
no inflation proofing in the prior year's budget;
therefore, it had been removed from the CS. He deferred to
LFD if a more detailed explanation was needed.
Co-Chair Josephson clarified that the CS was designed as a
starting point with some consistent basis. He stated that
it was not what the budget would look like when the
legislature adjourned in May due to a variety of reasons
including the wishes of members of both bodies.
Representative Stapp stressed that the budget had gone from
a budget deficit to a budget surplus because the Permanent
Fund Dividend (PFD) had been deleted from the budget. He
recognized the language for the PFD was included, but the
bill contained no fund source. Additionally, he stated that
the bill dramatically undercharged known expenses for
disaster relief, specifically pertaining to Typhoon Halong.
He agreed it was a starting point, but he underscored that
the surplus resulted from not including a PFD.
Co-Chair Schrage stated that the CS reflected a procedural
adjustment back to the FY 26 budget's starting point the
past year. He believed it was too early to talk about
whether there was a surplus or deficit. He viewed the CS as
an early starting point that procedurally stripped out
changes that occurred in the budget passed the previous
year. He believed disaster funding was a priority of the
legislature's, in order to address costs in Western Alaska.
He stressed that the expenses were being incurred and would
have to be paid. He thought the funding to meet the need
would be included in the supplemental budget in the near
future. He directed his comments to the public and
explained that the CS reflected a procedural step to unwind
some of the changes that occurred through the budgetary
process and through some of the vetoes over the interim. He
stated that through the subcommittee and amendment process,
it would start to become clearer whether there would be a
surplus or deficit and what the appropriation may be for
the PFD, disaster funding, retirement, etcetera. He
remarked that there were many policy choices the committee
and body would have to work through. He appreciated Co-
Chair Josephson for getting the budget to a good starting
point. He added that the starting point followed years of
precedent.
9:27:25 AM
Co-Chair Josephson highlighted that in about an hour he
hoped the House would adopt the governor's financing plan
for disaster relief on the floor. He noted that the other
body had passed the item unanimously. Additionally, the
supplemental budget reflected the same urgency. He
reiterated that the CS was a starting point.
Representative Tomaszewski asked for verification that the
Constitutional Budget Reserve (CBR) section had been
removed.
Mr. Schroeder confirmed the CBR section had been removed.
Representative Tomaszewski thought it sounded like d vu
from the previous year. He believed it had been removed
from the budget the previous year only to have to try to
put it back in. He wondered what the purpose was.
Co-Chair Josephson replied that it was removed because the
CS currently reflected a surplus and the language did not
have a purpose in a surplus budget.
9:28:48 AM
AT EASE
9:29:10 AM
RECONVENED
Co-Chair Josephson added that the adjusted base did not
have a CBR vote and the goal was to stay true to the
adjusted base.
Co-Chair Foster did not believe the purpose of the CS was
to indicate there was a surplus. He noted that everyone
knew the PFD was not included in the CS. He characterized
the PFD as the biggest elephant in the room that would
require an ongoing conversation. He remarked that there had
been some one-time items included in the budget the
previous year. He provided a hypothetical example of a $1
billion increment for a road to Nome that was meant to be a
one-time item. He stated that the committee would not want
to automatically repeat the item in the FY 27 budget. He
explained that the one-time items had been removed to get
to the adjusted base. He reiterated that the PFD was the
elephant in the room that the committee would need to work
through. Additionally, the spring forecast was forthcoming,
which would provide a projection of oil revenue for the
state. With regard to disaster relief, he did not believe
anyone was saying it should not be funded. He expected the
legislature would be doing something along the way. He
remarked that it impacted his district and his neighbor's
district [Representative Jimmie] and he believed everyone
was sensitive of the need to provide support.
9:31:31 AM
Representative Moore thought there were serious policy
implications in the CS. She did not think it was normal.
She thought the removal of the CBR gave leverage to the PFD
conversation later on. She did not think it was something
the committee should be entertaining.
Co-Chair Josephson replied that the recent history showed
that the removal of the PFD at the current stage was fairly
typical.
Co-Chair Schrage reminded committee members the CS was
returning to adjusted base in order to make policy
decisions at the table. He stated that it reflected a
procedural step to unwind choices that had been made since
the last budget passed in order to make new policy
decisions. He emphasized that the move was not from a place
of leverage. He remarked that if it was a policy choice he
would likely not be supportive of reducing funding for some
of the items being reduced in the CS. For example, he did
not know that he would choose to [reduce] school bond debt
reimbursement. He stated that following the process of
prior legislatures to get back to a place of adjusted base
allowed the committee to make cleaner decisions. He
remarked that the policy decisions were still before the
committee. He understood it may appear that some of the
policy decisions were being made in the CS, but he
reiterated that it was a procedural step to unwind what had
been done since the last budget passed in order to have a
clean place to move forward from. He looked forward to
making the policy choices after thorough discussion with
the committee.
Co-Chair Josephson WITHDREW the OBJECTION.
Representative Stapp OBJECTED. He stated that the CS
included fundamental structure changes that did not reflect
merely returning to the adjusted base. He pointed to the
deposit of the entire withdraw from the Permanent Fund to
the General Fund. He stated it was not the norm. He stated
that the policy decision could have been to leave the
dividend split for the percent of market value (POMV) draw.
He stressed that the CS reflected an intentional choice to
put all of the funds typically appropriated for the PFD
into the General Fund for future appropriation. He
highlighted that there was no change in the [K-12]
foundation formula and if the CS was based on the prior
year's adjusted base, the foundation formula would have
been adjusted as well.
Co-Chair Josephson asked Mr. Schroeder for verification
that the other body put the entirety of the draw into the
General Fund in its draft budget in April.
Mr. Schroeder confirmed that the Senate version of the
budget appropriated the Earnings Reserve Account (ERA)
deposit to the General Fund, which was the version adopted
in the final budget signed by the governor.
Co-Chair Josephson stated his understanding it was
consistent with an adjusted base budget.
Mr. Schroeder replied affirmatively.
9:36:00 AM
Co-Chair Foster pointed out that in three out of the four
years between 2020 and 2024 the PFD had been stripped out
of the budget at the start of the process with the
knowledge that the legislature could not come to a
consensus on what the number would be at the start of
session and that ongoing discussions were necessary.
9:36:36 AM
AT EASE
9:37:26 AM
RECONVENED
Representative Stapp MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Galvin, Hannan, Jimmie, Foster, Schrage,
Josephson
OPPOSED: Tomaszewski, Allard, Moore, Stapp, Bynum
The MOTION PASSED (6/5).
There being NO further OBJECTION, Work Draft 34-GH2498\G
was ADOPTED.
HB 263 was HEARD and HELD in committee for further
consideration.
9:38:25 AM
Co-Chair Josephson requested a motion on HB 265.
Co-Chair Schrage MOVED to ADOPT the proposed committee
substitute for HB 265, Work Draft 34-GH2502\I (Marx,
2/6/26).
Co-Chair Josephson OBJECTED for discussion.
Co-Chair Josephson asked his staff to explain the changes
in the CS for HB 265.
ALEXANDER SCHROEDER, STAFF, REPRESENTATIVE ANDY JOSEPHSON,
reviewed the changes in the CS with prepared remarks:
Before the committee is the proposed committee
substitute for HB 265: the mental health bill, work
draft 34-GH2502\I. A redline comparing the Governor's
December 11, 2025, mental health bill and HB 265,
version I is included in members' packets. However, I
will not be referencing it for this walk-through.
The changes in this committee substitute parity the
operating bill committee substitute. This work draft
contains technical and conforming changes, and it also
reverts to an adjusted base budget in accordance with
Legislative Finance Division's definition.
Please note that the Governor's December 11 mental
health bill contained mental health capital items.
This committee substitute does not change the
Governor's request, preserving those items and their
funding per the December 11 mental health bill.
That concludes the differences between the Governor's
December 11, 2025, mental health bill, and HB 265,
version I.
9:40:13 AM
Co-Chair Josephson WITHDREW the OBJECTION.
There being NO further OBJECTION, Work Draft 34-GH2502\I
was ADOPTED.
HB 265 was HEARD and HELD in committee for further
consideration.
Co-Chair Josephson reviewed the schedule for the afternoon
meeting.
ADJOURNMENT
9:41:23 AM
The meeting was adjourned at 9:41 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 263 CS WorkDraft v. G 021126 .pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 263 |
| HB 263 v. G HCS1 Agency Summary - All Funds 021126.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 263 |
| HB 263 v. G Gov to HCS1 - Doc Compare 021126.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 263 |
| HB 263 v. G HCS1 Agency Summary - UGF Only 021126.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 263 |
| HB 263 v. G HCS1 Summary of Changes.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 263 |
| HB 265 v. I GovMH to HCS1MH - Doc Compare 021126.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 265 |
| HB 265 v. I CS WorkDraft 021126.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 265 |
| Legal Opinion Leg Legal Vetos CCS HB 53 062425.pdf |
HFIN 2/11/2026 9:00:00 AM |
HB 53 |