Legislature(2023 - 2024)SENATE FINANCE 532
01/24/2023 01:00 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB40 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 40 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
January 24, 2023
1:00 p.m.
1:00:17 PM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 1:00 p.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator Kelly Merrick
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor; Representative Dan Ortiz.
SUMMARY
SB 40 APPROP: OPERATING BUDGET/LOANS/FUND; SUPP
SB 40 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 40
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; making
supplemental appropriations; making appropriations
under art. IX, sec. 17(c), Constitution of the State
of Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
1:02:39 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, He discussed the presentation,
"State of Alaska; Office of Management and Budget; FY2024
Governor's Budget; SB40,SB41,andSB42; Senate Finance;
January 24, 2023" (copy on file). He highlighted slide 2,
"Budget Lookback." He stated that the slide showed the
history of the enacted budgets since Governor Dunleavy was
first elected in 2019. He noted the significant savings in
statewide items, which were fixed costs, that dropped by
nearly 50 percent. He noted some specific areas of
investment. He looked at the revenue side, and noted the
2.9 percent increase in traditional revenue.
1:05:13 PM
Senator Wilson looked at the deficit line, and felt that it
was higher than the Revenue Source Book.
Mr. Steininger replied that a slide in the presentation
would address that question. He stated that there were some
other adjustments that were not included in the Revenue
Sources Book. He remarked that there would be information
that was about sources of funds, and not just revenue.
Co-Chair Olson remarked that the governor had proposed a
fifty-fifty split for the Permanent Fund Dividend (PFD) in
the past, but the current proposal was for a larger PFD. He
wondered whether the governor was still advocating for a
fifty-fifty split.
Mr. Steininger stated that there was not a fifty-fifty
split proposal, and the current budget was following the
existing statute.
Co-Chair Olson noted that the governor's proposed dividend
that was higher than the year prior.
Mr. Steininger replied that the current budget had a PFD
draw from the savings accounts. He stated that the proposed
carbon bill package was expected to fill the funding gap
for the PFD.
Co-Chair Stedman remarked that the carbon revenue bill
package had not yet been submitted to the legislature.
Mr. Steininger agreed, and stated that the bill should be
submitted shortly.
Co-Chair Olson felt that using the CBR was off limits,
because of the difficulty in getting a three-quarter vote
from the legislature.
Mr. Steininger remarked that there were challenges in
getting the votes for use of the CBR. He stated that he was
willing to work to get the appropriations funded for state
government.
1:09:24 PM
Mr. Steininger pointed to slide 3, "FY23 and FY24 Uses of
Funds." He stated that the phrase uses of funds better
matches the statutory wording, and better reflects some of
the revenue adjustments.
Co-Chair Olson wondered whether the funding difference
would be utilized in education funding.
Mr. Steininger wondered whether Co-Chair Olson was
referring to the $4.8 million change.
Co-Chair Olson clarified his question, and queried the
source of the decline from the current budget proposal to
the following years proposal.
Mr. Steininger replied that the capital budget in FY 23 was
significantly higher than previous years, therefore the
proposal for FY 24 was primarily state match with a small
amount of discretionary capital.
1:15:19 PM
Co-Chair Stedman recalled that in the previous year there
was some concern by members regarding not funding health
care. He asked for the proposed health care expenditures.
Mr. Steininger replied that the proposal was the amount
offered by the Alaska Retirement Management Board (ARMB).
He stated that the ARMB chose not to fund the health
contribution to the retirement trust in the previous year
because the health portion of the trust was funded in
excess of the need.
Senator Bishop wondered how much would be lost in the
healthcare portion.
Mr. Steininger agreed to provide that information.
Co-Chair Stedman shared that there would be a presentation
from the ARMB to examine the solvency, and the management
of the cash flow. He queried the efforts related to
community assistance.
Mr. Steininger replied that the community assistance
deposits and fund distributes funds to communities at one-
third of the value of the fund on the first day of the
fiscal year.
1:20:10 PM
Co-Chair Stedman remarked that there should be a discussion
on how to distribute the community assistance fund.
Mr. Steininger discussed slide 4, "FY23 and FY24 Sources of
Funds." He stated that the slide showed a combination of
current year revenue and uses of saving or other sources of
money available for appropriation.
Senator Kiehl wondered why the proposed $225,000 draw from
the CBR did not show up as an appropriation.
Mr. Steininger replied that it was a technical nuance
within the reports. He explained that a direct
appropriation from a savings account was categorized as a
direct appropriation from savings.
Senator Kiehl felt that the explanation made sense, but did
not match with the title of the slide.
1:25:00 PM
Co-Chair Stedman wondered whether the supplemental shown
was up to date.
Mr. Steininger felt that the number was optimistic.
Co-Chair Stedman asked that the information be provided to
the committee related to the fire safety supplemental
budget request.
Mr. Steininger agreed to provide that information.
1:26:08 PM
Mr. Steininger addressed slide 5, "Fiscal Summary Savings
Balances":
•Minimum savings balance of $500m required to maintain
cash flows.
•Savings balances assume status quo revenue.
•Based on unaudited financial data.
Co-Chair Stedman felt that there needed to be a current
cushion of $1.5 billion. He wanted to have a further
analysis of the proper cushion.
1:30:00 PM
Mr. Steininger replied that it was not specifically for the
presentation.
Co-Chair Stedman stressed that he was pointing to normal
oil price volatility, and remarked that there was not much
cushion.
1:34:25 PM
Mr. Steininger pointed to slide 6, "Budget Challenges -
Revenue Volatility":
FY2023 revenue estimates when the Legislature passed
the budget were $2.2b higher than the day the Governor
released his initial budget proposal.
From the day the Governor signed the FY2023 budget to
today revenue estimates have declined $1.8b
Co-Chair Stedman recalled that the year prior saw some high
oil prices during the budget process, but the committee was
not comfortable focusing on those high oil prices.
Therefore, the committee forward funded education with the
excess revenue.
1:39:54 PM
Mr. Steininger looked at slide 7, "Budget Challenges -
Vacancy":
•Most departments are experiencing significantly
greater vacancy than pre-pandemic levels.
•Recruitments are taking longer and are less likely to
result in a hire.
•Recruitment incentives being used to address most
critical public needs.
1:44:12 PM
Senator Wilson queried the specific issues and analyses
regarding the recruitment and retention.
Mr. Steininger replied that there would a couple of
inclusions in the budget that address root cause issues
brought forward by commissioners.
Senator Wilson wanted something more tangible than a
response, "hey we are working on this." He queried the
issue in retention.
Co-Chair Hoffman felt that there needed to be a greater
examination of the $70 million, because those funds could
have been used to address the supplemental budget.
1:50:24 PM
Senator Bishop wanted to examine the employment vacancy
factors within the budget.
Mr. Steininger displayed slide 8, "Budget Challenges
Medicaid Match Rate":
•Under the COVID public health emergency the state
received an enhanced federal medical assistance
percentage match (eFMAP) of 6.2 percent resulting in
$17.3m in state savings per quarter.
•Dec 29, 2022federal government authorized phase out
of the eFMAPover state FY23 and FY24
percent April 1, 2023 Increases state share
$3.3m for Q4 FY23
•2.5 percent July 1, 2023 Increases state share
$10.3m for Q1 FY24
•1.5 percent October 1, 2023 Increases state
share $13m for Q2 FY24
percent January 1, 2024 Increases state share
$34m for Q3 and Q4 FY24
•Allows for eligibility redetermination
Senator Kiehl noted that public assistance was not looking
to hire any eligibility workers. He asked how much the
state would give back in penalties for missing the federal
deadlines for processing.
Mr. Steininger agreed to provide that information.
Senator Wilson felt that there would be a supplemental
request for the penalty after auditing. He wondered whether
the administration was not prepared to lose that funding.
Mr. Steininger remarked that the deadlines had been
extended multiple times over the time period.
1:56:17 PM
Senator Wilson wondered whether eliminating the
redetermination process would result in cost savings.
Mr. Steininger replied that there was current work on the
best way to make that estimation.
Co-Chair Stedman stated that the issue would be addressed
in the subcommittee process.
Mr. Steininger looked at slide 9, "FY2024 Agency Operating
UGF." He stated that the slide showed the relative size of
the state agencies.
Co-Chair Stedman wondered whether the PFD distribution was
a general fund expenditure.
Mr. Steininger replied that it was a general fund
expenditure, but was not an agency expenditure.
Co-Chair Stedman queried the appropriation number if the
PFD was on the graph.
Mr. Steininger replied that it would be approximately $2.4
billion.
Co-Chair Stedman requested that the Legislative Finance
Division (LFD) include the PFD appropriation in order to
see the scale of the full budget proposal.
1:59:45 PM
Mr. Steininger pointed to slide 10, "FY24 Budget High
Points":
•UGF Operating down almost 4 percent since FY19
•Full Statutory PFD
•Estimated $3,860 per person
-12 Education
•Fully funded to the $5,960 base student
allocation
•Net UGF reduction of $1.7m
•SLA 2022 HB114 Reads Act year two funding $6.4m
•Municipal and School Bond Debt/REAA fully funded
•PCE and Scholarships Fully Funded
Co-Chair Stedman felt that the issue of community
assistance needed to be sorted, however they were making
progress.
Co-Chair Hoffman thanked the administration for municipal
and school bond debt funding of the Regional Educational
Attendance Area (REAA).
Mr. Steininger addressed slide 11, "FY24 Budget High
Points":
•$5m for rural public professional housing
•$5m to DCCED to market Alaska
•Oil and Gas Tax Credits to be fully paid off -$42.7m
•Retires about $300m in debt
•WWAMI -$2m capital investment and funding for 10
additional slots for medical students
•Alaska Marine Highway System fully funded
•Federal funding still uncertain
•$4m for new cabins and park sanitation
•$56.2m ($31.3m UGF) Net salary adjustments
Senator Bishop hoped that there could be some alliance with
the administration to ensure that there were also nurses
working with the doctors.
2:05:19 PM
Senator Wilson requested a summary of the cost savings
related to previous legislation, SB 55.
Mr. Steininger agreed to provide that information.
Co-Chair Stedman remarked on the current steel and issue
related to the ferry system.
Mr. Steininger discussed slide 12, "FY24 Budget High
Points":
•Statehood Defense Investments
•$10m in funding for litigation, expert
witnesses, and outside counsel
•$1.3m in additional funding for DFG wildlife
research
•$1.5m in air quality monitoring for DEC
•$9.5m to address Congenital Syphilis and Tuberculosis
and provide health coverage to post-partum mothers
Food Security Investments
•$4.6m to DFG and DNR for fisheries and livestock
•$3m investment in power infrastructure for the
Delta farm region and co-op
•$3m for produce processing at Point Mackenzie
2:10:02 PM
Co-Chair Olson queried the summary of some of the
litigation.
Mr. Steininger agreed to provide that information.
Co-Chair Stedman felt that the department of law should
present to the committee regarding the litigation.
Senator Kiehl wondered whether there was a plan to get past
the history of correctional industries with no maintenance
and eventually degradation when the legislature potentially
fails to appropriate funds. He wondered whether there was a
plan to avoid the degradation of facilities.
Mr. Steininger replied that he would discuss general
deferred maintenance at a future meeting. He stated that
there were efforts with DOC to make sure that there was
better maintenance of their facilities.
Senator Kiehl requested a discussion of possible carry-
forward language in the future.
Mr. Steininger highlighted slide 13, "FY24 Budget High
Points":
•Public Safety Investments
•Fully fund filled trooper positions
•30 new support positions
•Allow the troopers to focus on public safety
work
•$1.2m in assorted capital investment
•Criminal justice IT systems
•Trooper posts and training academy maintenance
and upgrades
•Forensic equipment refresh
•Vessel and vehicle replacements
•$2.5m investment in the Alaska State Defense Force
•$10m investment in University drone program
•$2m for the Business Enterprise Program
2:16:01 PM
Co-Chair Hoffman stressed that the first line of defense
for people in rural Alaska were the Village Public Safety
Officers (VPSOs). He wondered how the budget would affect
the VPSO program.
Mr. Steininger replied that the in prior budgets the number
of VPSOs was expanded, and one of the focuses of the
current commissioner of DPS was to provide a more focus on
the VPSO program to ensure its continued success.
Mr. Steininger addressed slide 14, "10 Year Outlook - UGF":
With targeted new revenue 10-year outlook:
•Maintains a healthy CBR balance
•Provides a full statutory dividend
•Provides for conservative growth in service
levels
Without targeted new revenue 10-year outlook:
•Eliminates reserves by FY2027
•Jeopardizes the PFD
•Requires significant reduction in public
services
2:20:51 PM
Co-Chair Stedman stressed that without new revenue there
was not enough cash to go to the end of the term without
using the Permanent Fund. He noted that the projection was
linear, however the price of oil was not linear. He assumed
that the Revenue Source Book long-term projection price was
used in determining the forecast. He remarked that without
new revenue, and understanding the volatility of oil
prices, the state would be broke after five years. He
understood that targets were necessary, and was encouraged
by the acknowledgement that the current situation was not
appropriate for the states fiscal health.
Co-Chair Hoffman noted the ten-year projection showed $9
billion projected for collection. He looked at line 4,
which was the capital budget merely matching federal
programs. He felt that the scenario would result in the
capital structure of the state crumbling. He did not
believe that the Alaskan people wanted the infrastructure
to fail.
2:25:31 PM
Senator Merrick expressed concern about the significant
potential supplemental budget, as well as the significant
draw from the CBR.
Co-Chair Stedman discussed the agenda for the following
day.
SB 40 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
2:27:21 PM
The meeting was adjourned at 2:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012423 OMB Senate Finance Overview.pdf |
SFIN 1/24/2023 1:00:00 PM |