Legislature(2023 - 2024)SENATE FINANCE 532
02/21/2023 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB40 || SB41 || SB42 || SB54 | |
| Fiscal Position with Governor's Budget Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 40 | TELECONFERENCED | |
| += | SB 41 | TELECONFERENCED | |
| += | SB 42 | TELECONFERENCED | |
| += | SB 54 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 21, 2023
9:02 a.m.
9:02:07 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.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
Alexei Painter, Director, Legislative Finance Division.
SUMMARY
SB 40 APPROP: OPERATING BUDGET/LOANS/FUND; SUPP
SB 40 was HEARD and HELD in committee for further
consideration.
SB 41 APPROP: CAPITAL/SUPPLEMENTAL
SB 41 was HEARD and HELD in committee for further
consideration.
SB 42 APPROP: MENTAL HEALTH BUDGET
SB 42 was HEARD and HELD in committee for further
consideration.
SB 54 APPROP: SUPPLEMENTAL; REAPPROP; AMENDING
SB 54 was HEARD and HELD in committee for further
consideration.
FISCAL POSITION WITH GOVERNOR'S BUDGET AMENDMENTS
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."
SENATE BILL NO. 41
"An Act making appropriations, including capital
appropriations and other appropriations; making
supplemental appropriations; making appropriations to
capitalize funds; and providing for an effective
date."
SENATE BILL NO. 42
"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."
SENATE BILL NO. 54
"An Act making supplemental appropriations,
reappropriations, and other appropriations; amending
appropriations; capitalizing funds; and providing for
an effective date."
9:02:18 AM
^FISCAL POSITION WITH GOVERNOR'S BUDGET AMENDMENTS
9:02:19 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation, "Fiscal Position with
Governor's Budget Amendments" (copy on file). He pointed to
slide 2, "Outline":
• Responses from 2-7-23 Meeting
• Updated Fiscal Summary GovAmend
• FY23 and FY24 Oil Price Sensitivity and Outlook
9:04:10 AM
Mr. Painter looked at slide 3, "Responses to Questions from
February 7 Meeting":
Senator Kiehl asked about the percentage of
Minnesota's budget reserve compared to its budget, and
Senator Bishop asked about Minnesota's current budget
status.
• In 2022, the Minnesota Management and Budget
recommended a reserve level of 4.8 percent of the
biennium's budget, or $2.7 billion (or about 9.6
percent of the budget on an annual basis). That is in
addition to a separate cash flow account that has a
target balance of $350 million.
• By comparison, OMB's $2 billion recommendation is
equal to 27.1 percent of the Governor's FY24 UGF
budget, and LFD's estimate of $3 billion to apply the
Minnesota calculation to Alaska is 40.1 percent of the
Governor's FY24 UGF budget.
• In December 2022, Minnesota Management and Budget
estimated that the state would have a surplus of $17.6
billion available in the FY24-25 biennium (including
additional amounts left from the FY22-23 biennium).
Mr. Painter addressed slide 4, "Responses to Questions from
February 7 Meeting (cont.)":
Senator Kiehl asked about the amount of new school
debt assumed in Legislative Finance's model.
• LFD assumes that the state share of new debt would
be $7.8 million annually.
• This figure was derived by taking a 10-year average
of the state share of new debt before the moratorium
began in 2015, prorated for the lower reimbursement
rates when the moratorium ends.
• The actual amount of new school debt will depend on
current interest rates and actual utilization of the
program, so this is a very rough estimate.
Mr. Painter highlighted slide 5, "Responses to Questions
from February 7 Meeting (cont.)":
Legislative Finance Division 5 Senator Stedman asked
for the graph of the capital budget compared to oil
prices to be restated as the capital budget compared
to Alaska's GDP.
Co-Chair Stedman recalled that there was some stagnancy
over several years, and Alaska was being surpassed by
northwest states. He felt that there should be a question
of whether the current policies were the most effective in
increasing the GDP.
Mr. Painter discussed slide 6, "Responses to Questions from
February 7 Meeting (cont.)":
Senator Stedman requested a sensitivity table showing
the likelihood of various Constitutional Budget
Reserve (CBR) balances in a single fiscal year.
The table shows the likelihood that the CBR balance at
the end of FY28 exceeds a given value based on the
Senate Finance Committee modeling assumptions across
the three PFD scenarios. Note that these are
illustrative projections which may understate
potential volatility.
9:10:17 AM
Mr. Painter addressed slide 7, "Short Fiscal Summary
Governor's Amended Budget." He remarked that the Office of
Management and Budget (OMB) had shown a version of their
fiscal summary the day prior. He remarked that the
Legislative Finance Division (LFD) summary differed from
OMBs in some respects.
9:15:34 AM
Co-Chair Stedman asked for an explanation of the reserve
balance.
Mr. Painter replied that the statutory budget reserve (SBR)
was available with majority vote by the legislature, and
that balance going into FY 23 was approximately $20
million. He noted that the constitutional budget reserve
(CBR) was not available without a further vote from the
legislature, with a balance of approximately $2.3 billion.
He stated that, in FY 23, there was a projection for an
increase in the CBR. He stated that the deficit draw for FY
24 would drop it back to $2.1 billion. He stated that the
Earnings Reserve Account (ERA) balance assumed that the
statutory net income would match the forecast. He noted
that, currently, the true balance may be a couple of
billion dollars lower in FY 23. He stated that the ERA was
not a true budget reserve.
Co-Chair Stedman asked about how those funds could be
accessed.
Mr. Painter noted that the ERA could be appropriated, but
there may be an issue of selling assets.
Co-Chair Hoffman recalled that the CBR balance did not have
a sufficient vote to access that account. He stressed that
for FY 24, the number to get to a vote would be very
difficult. He did not envision the legislature accessing
the CBR. He looked at line 19, and noted that the $7.8
million as a transfer from the Renewable Energy Fund. He
asked about that number.
Mr. Painter replied that $7.5 million in FY 24 was a
transfer from the general fund (GF) to the Renewable Energy
Fund. He remarked that the capital budget had an
appropriation from the Renewable Energy Fund to the Alaska
Energy Authority (ERA) for the projects. The money was put
into the fund by the GF transfer.
9:20:24 AM
Senator Bishop stressed that there were many needs that
were not yet addressed in the budget.
Co-Chair Stedman asked about funds for the university
deferred maintenance.
Mr. Painter replied that it was not included in the current
budget.
Co-Chair Stedman wondered whether there were funds to
replenish community assistance.
Mr. Painter replied in the negative.
Co-Chair Stedman stressed that the committee would decide
what to do with those items. He asked about Mustang Road.
He recalled about ten years of challenges with that
project.
Mr. Painter replied that the change was new in the amended
budget, but did not know the purpose of that decision to
transfer assets. He agreed to provide further information.
Co-Chair Stedman felt that the information would be
helpful, and possibly have a meeting on that issue. He
wondered whether the presentation would address the fast-
track supplemental requests.
Mr. Painter replied that the fast-track items were included
in the governors supplemental budget request, so they were
included in the totals.
9:25:14 AM
Senator Kiehl asked about the relationship between the K-12
forward funding and any decision the legislature would make
to increase K-12 school funding for FY 24.
Mr. Painter replied that, without forward funding, the
appropriation in the governors budget would cover FY 24 as
its currently written. He explained that there would need
to be additional funds if the legislature were to increase
the Base Student Allocation (BSA).
Co-Chair Stedman stressed that addressing the university
needs would put more pressure on the budget.
Co-Chair Hoffman asked about the $1.6 billion and how that
translates into the Permanent Fund Dividend (PFD).
Mr. Painter replied that the prior years dividend had two
separate payments, and were taxed differently according to
the federal government. The total payment was $3284, with
approximately $2600 as the actual PFD payment.
Co-Chair Stedman asked for a restatement of the proposed
dividend.
Mr. Painter replied that it would be approximately $3800
per person in FY 24.
Co-Chair Hoffman felt it was important for comparison
purposes.
Senator Wilson wondered whether the PFD should be called an
energy rebate so it would not be taxed.
Mr. Painter replied that he did not want to speculate about
how the IRS would treat it.
Mr. Painter looked at slide 8, "Oil Price Volatility Since
2020." He stated that the purpose of the slide was to show
how things change.
9:30:52 AM
Mr. Painter highlighted slide 9, "Fiscal Sensitivity
FY23." He stressed that oil prices have a very strong
affect on revenue.
Mr. Painter discussed slide 10, "FY23 Budget Situation":
• As of Friday, February 17, oil prices to date
averaged $91.72. They would need to average about
$82.70 to match the $88.45 forecast. The price on
Friday was $79.85.
• Based on the forecast, the post-transfer deficit
would be $0.3 million with the Governor's
supplementals. The FY23 budget currently has deficit-
filling language from the Statutory Budget Reserve,
which has a balance of about $20 million.
• Deficits beyond the SBR balance currently have no
source - the FY23 budget does not have CBR access
(which would require a ¾ vote of the legislature to
add).
• Even if oil prices and production do match the
forecast, there is a margin of error in revenue
forecasting. $20 million is not sufficient room to
ensure that the FY23 budget is fully funded.
• If the legislature adopts the Governor's
supplemental budget, it should designate a source for
deficits beyond the SBR balance.
Co-Chair Hoffman remarked on the substantial difference
between the budget and the actual spending.
Mr. Painter recalled that the difference was between $70
and $80 million.
9:37:33 AM
Co-Chair Stedman recalled that the committee chose to
increase the SBR in the year prior, so it would not be in
the CBR. He asked what would occur if there was a shortage
without access to the CBR.
Mr. Painter replied that an unbalanced budget could enact
the impoundment clause, which would allow the governor to
restrict appropriations. He noted that there were some that
would be easier to restrict than others. He stated that the
Port of Anchorage would be easier to restrict.
9:40:51 AM
Co-Chair Stedman wondered whether there was an estimate of
cash flow needed at the end of session.
Mr. Painter replied that the legislature historically
designated a reserve balance to cover any shortfall.
Co-Chair Stedman surmised that the FY 24 fiscal year would
fix the FY 23 fiscal year.
Mr. Painter agreed, and explained that things could be
changed with a retroactive effective date.
Senator Merrick asked for a history of the CBR vote.
Mr. Painter replied that CBR liabilities had occurred
beginning in the 1990s. He stated that in 2004 the
legislature did not have the vote, before 2010. He stated
that since then FY 21 and FY 22 had failed CBR votes.
Mr. Painter displayed slide 11, "Fiscal Sensitivity
FY24." He stated that the slide showed the Department of
Revenue (DOR) forecast, and the breakeven price of $87 per
barrel.
9:45:33 AM
Co-Chair Stedman recalled that firms used a $60 price
range, as a point of profitability.
Mr. Painter pointed to slide 12, "FY24 Budget Situation":
• Governor's FY24 budget has a pre-transfer deficit of
$434.3 million.
• This includes a statutory PFD estimated to be
$2,470.9 million. However, this estimate includes $4.6
billion of projected statutory net income in FY23.
Through December, statutory net income was about $1.0
billion. If that trend continues and the total is $2.0
billion, the projected PFD would decrease to $2,196.7
million.
That would reduce the projected FY23 deficit to
$160.1 million.
That would also decrease the projected payment
from $3,800 to about $3,400 per recipient
• With no K-12 forward-funding available in FY24 after
the Governor's supplementals, the FY24 deficit is made
up in the Governor's budget from a combination of ARPA
Revenue Replacement ($10.6 million), the remaining SBR
balance ($19.6 million), and the CBR.
Co-Chair Stedman discussed the agenda for the next meeting.
SB 40 was HEARD and HELD in committee for further
consideration.
SB 41 was HEARD and HELD in committee for further
consideration.
SB 42 was HEARD and HELD in committee for further
consideration.
SB 54 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
9:53:45 AM
The meeting was adjourned at 9:53 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 022123 SFIN Fiscal Update 2-21-23.pdf |
SFIN 2/21/2023 9:00:00 AM |