Legislature(2021 - 2022)SENATE FINANCE 532
01/29/2021 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Office of Management and Budget - Governor's Fy22 Budget Proposal | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
January 29, 2021
9:01 a.m.
9:01:48 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson (via teleconference)
Senator Natasha von Imhof
Senator Bill Wielechowski
MEMBERS ABSENT
Senator David Wilson
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor.
SUMMARY
^OFFICE OF MANAGEMENT and BUDGET - GOVERNOR'S FY22 BUDGET
PROPOSAL
9:04:37 AM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
(OMB), OFFICE OF THE GOVERNOR, discussed the presentation,
"State of Alaska, Office of Management and Budget, FY2022
Senate Finance Overview" (copy on file). He looked at slide
2, "Historical Savings Balances." He spoke to the fiscal
situation that developed over the last decade.
Senator von Imhof surmised that 2019 was nearly equal to
the 2022 estimate. She noted that it was a relatively
balanced budget. She felt that it was a good start.
Co-Chair Stedman queried the formula used to calculated the
proposed Permanent Fund Dividend (PFD).
Mr. Steininger replied that the current statutory formula
was used to determine the PFD, with a draw of slightly over
$2 billion or a $3000 PFD per person.
Co-Chair Stedman wondered whether there was a reflection of
any ad hoc draws or overdraws of the 5 percent [percent of
market value (POMV)].
Mr. Steininger replied in the affirmative. He stated that
there was a proposed one-time additional draw from the ERA
in order to cover the dividend payment.
Co-Chair Stedman queried the amount of the additional draw.
Mr. Steininger replied that it was roughly $2 billion.
Co-Chair Stedman remarked that there were conflicting
statutes. He explained that one statute had the dividend
calculation, which had been in place for nearly 40 years.
He added that there was another statute, which capped the
draw on the ERA. He remarked that one of those two statutes
needed to be breached in order to meet the proposal.
Mr. Steininger replied that there were two conflicting
statutes. He stated that there were not other reserves to
allow to work through that conflict.
9:10:51 AM
Senator von Imhof wondered how the statutes were
differentiated as far as decided which ones to disregard
and which ones to follow.
Mr. Steininger replied that the question might be better
for the governor. He explained that the administration's
position on the Permanent Fund was to follow the statute
until the statute might change, which is why there was a
proposed statutory change and constitutional amendment.
Senator Wielechowski queried the following year's
projection.
Mr. Steininger replied that there would be a slide
depicting the first five years of the projection. He
remarked that the scope of the fiscal problem could not be
solved with a single proposal.
Co-Chair Stedman remarked that there would be a
consideration of the Permanent Fund consultants'
recommendations.
9:14:37 AM
Mr. Steininger addressed slide 3, "Elements of Fiscal
Package":
Operating Budget Reductions
Fast Track Supplemental Budget
Utilize Bonding for Capital
? $59 million UGF leverages $1.4 billion total
capital spending with use of $101 million AHFC
bond financing
? Approximately $350 million general obligation
bond package for shovel-ready critical
infrastructure investment to jumpstart economy
Constitutional Amendments
? Set framework for a path to fiscal stability
? Statutory PFD change to compliment
constitutional amendment
Co-Chair Stedman asked for an explanation of "fast track
supplemental."
Mr. Steininger replied that it was a supplemental budget
introduced earlier than the normal statutory deadline.
Co-Chair Stedman remarked that the supplemental budget
would be addressed in the committee at a future date, and
remarked that some of the items might need a sooner
effective date.
9:20:07 AM
Co-Chair Bishop wondered when the administration would
provide the cost of the bonds from AHFC.
Mr. Steininger replied that the proposal was approximately
$64,000 per million dollars issued.
Co-Chair Stedman remarked that there would be a review of
the state's debt position.
Senator von Imhof queried the pay back plan for the bonds.
Mr. Steininger deferred to the state's debt manager.
Co-Chair Stedman remarked that there would be discussions
about the cash flow to the state.
Senator Hoffman looked at the Permanent Fund Dividend
(PFD). He queried the amount of the proposed early payment
of the PFD.
Mr. Steininger replied that it was roughly $1900 per
person, which was approximately $1.2 billion that would be
draw from the ERA.
9:25:22 AM
Senator Hoffman wondered whether the administration was
considering including a formula in the constitutional
amendment proposal, and also asked about the parameters of
the constitutional amendment.
Mr. Steininger replied that the PFD constitutional
amendment would cover the POMV draw.
Senator Hoffman wondered whether the 2022 PFD would be the
amount calculated by the proposed statutory change.
Mr. Steininger replied that the current proposal followed
the current statute. He stated that a statutory change
effectiveness in the PFD would be dependent on the bill
passage and amendment.
Senator Hoffman wondered how much the PFD would be under
the current formula and formula change.
Mr. Steininger replied that the current formula would be
approximately $3000, and agreed to provide that information
about the formula change.
Senator Hoffman asked for the amount of the total draw for
the PFD and for the change.
Mr. Steininger agreed to provide that information.
Co-Chair Stedman wondered whether the administration viewed
the 5 percent POMV as the standard general fund
appropriation process.
Mr. Steininger agreed.
9:30:04 AM
Senator Wielechowski queried the UGF goal number for the
administration.
Mr. Steininger replied that, in the ten-year plan, there
was an approximate additional $150 million budget reduction
goal. He stressed that there were no specifics around that
goal, as there would be ongoing changes in state
operations.
Senator Wielechowski recalled a projection of $1 billion in
additional revenue, and wondered whether the governor
supported additional revenue and the source of that
revenue.
Co-Chair Stedman felt that some questions could be deferred
to later in the presentation.
Mr. Steininger highlighted slide 4, "Fiscal Summary." He
shared that the slide showed a high level picture of the
state's operating budget.
9:36:42 AM
Co-Chair Stedman felt that adding the adjustments of one-
time uses would change the fiscal summary.
Senator von Imhof remarked that the FY 21 fiscal cycle was
being "muddied" with CARES Act funds. She wanted to ensure
that the one-time money was properly matched with one-time
expenses.
Mr. Steininger agreed.
Senator von Imhof surmised that the governor's statutory
dividend proposal resulted in a $2 billion draw, which
resulted in a $2 billion deficit.
Mr. Steininger agreed.
9:40:00 AM
Senator von Imhof stressed that there was not necessarily a
"fiscal crisis" rather more of a "priority crisis."
Co-Chair Stedman noted that there might be an additional
surplus coming from the federal government, which would
affect the fiscal conversations.
Mr. Steininger looked at slide 5, "FY 2022 Projected
Draws." He explained the details of the slide. He noted the
impact of the prior year's deficit draw.
Co-Chair Stedman remarked that the draw issue on the
permanent fund continued to be "repackaged." He explained
that there would be meetings that detailed more of the
fiscal items.
Senator Hoffman stressed that the three-quarter vote to
access the CBR caused substantial problems, and wondered
whether the $40 million would warrant the consideration of
using the CBR in FY 22.
Co-Chair Stedman agreed that the legislature would be "held
for ransom" for the $39 million. He stressed that the goal
was to minimize expenditures in the operating budget.
9:46:43 AM
Mr. Steininger addressed slide 6, "Five-Year Fiscal
Outlook." He shared that the slide showed all the fiscal
impacts that he had discussed in the previous slides.
Co-Chair Stedman remarked that FY 23 showed substantially
less than a 5 percent draw. He wondered why all the revenue
was not included in the revenue line.
Mr. Steininger replied that it reflected the proposal to
split the POMV draw 50 percent to government and 50 percent
dividends.
Co-Chair Stedman requested a slide that showed the current
statutes, because the slide assumed changes that may or may
not occur.
9:50:45 AM
Senator Wielechowski noted that there would be a $1.2
billion deficit going forward. He queried the appropriate
time to deal with the deficit.
Mr. Steininger replied that discussions needed to occur
momentarily, however the proposals were to address the
issue of the PFD.
Senator Hoffman felt that resolving the dividend and
resolving the deficit were each paramount to the state.
Co-Chair Bishop queried the administration's inflation
factor in the out years.
Mr. Steininger replied that he believed it was 2.25
percent.
Co-Chair Stedman asked that the table reflect current
statutes.
9:55:39 AM
Mr. Steininger discussed slide 7, "State of Alaska
Operating Budget":
FY2022 Operating Budget Highlights:
?Organizational changes for service delivery
?Utilization of COVID relief
?Process changes from telework resulting in
savings
?Continued constraint on operational costs
Co-Chair Stedman wondered whether the slide referred to the
agencies.
Mr. Steininger replied in the affirmative.
Senator von Imhof confirmed that the slide referred to
expenditures.
Mr. Steininger agreed.
Senator von Imhof remarked that the PFD was not included
consistently in the "overall expenditures." She felt that
overall spending should reflect the capital expenditures
and PFD.
Co-Chair Stedman asked that the numbers be clarified and
detailed in UGF.
Co-Chair Bishop assumed that the university cuts were
included within the numbers.
Co-Chair Stedman asked that the information be delivered
later to the committee.
10:05:51 AM
Mr. Steininger pointed to slide 8, "Budget Cost Drivers":
?From FY2019 to FY2022
?State assistance to retirement has increased
$43.3 million
?Employee salary adjustments for cost of living
and health insurance have increased $50.0 million
?Public protection services including law
enforcement, prosecution, defense, courts, and
corrections have required investment of $52.8
million
?$146.1 million in UGF reductions to maintain a flat
budget
Co-Chair Bishop remarked that the ERA overdraw proposal
should be included as "lost revenue."
Co-Chair Stedman asked for comment on "opportunity cost
reflection."
Mr. Steininger remarked that the draw was included in the
five-year reduction in POMV income.
Co-Chair Stedman queried the financial loss in perpetuity
to the permanent fund as a result of the ad hoc draw.
Mr. Steininger looked at slide 9, "FY22 Department UGF
Budgets." He stated that the slide examined the components
of the traditional operating budget.
10:10:25 AM
Co-Chair Stedman requested a three-year target dollar
amount.
Senator von Imhof hoped that there would be new graphs with
the proposed PFD.
Co-Chair Stedman remarked that there would be other tools
to solve the structural deficit.
Senator Wielechowski felt that there were other ways to
solve the deficit than "taking the dividend." He stressed
that the Texas company operating in Prudhoe Bay was paying
zero corporate income tax, and a negative overall corporate
income tax.
10:15:33 AM
Co-Chair Stedman felt that the issue would be addressed at
a later time.
Mr. Steininger highlighted slide 10, "Administration":
FY2022 Significant Budget Changes:
?Office of Information Technology: State
Microsoft license change (-1,250.0 Other)
?Close 6 DMV offices (-582.5 DGF, -4 full time -2
part time PCNs)
?Transfer public building facility management and
lease administration to Department of
Transportation
?Consolidate procurement activity under the
Office of Procurement and Property Management
?Adjust central service budgets to reflect
approved billings (-16,904.0 Other)
10:20:14 AM
Co-Chair Stedman wondered why the issue was addressed in
previous years.
Mr. Steininger replied that they were considered duplicated
funds in the budget.
Senator Hoffman queried the Division of Motor Vehicles
(DMV) offices that would be closed according to the
governor's proposal.
Mr. Steininger replied that the six offices were Eagle
River, Tok, Delta Junction, Homer, Haines, and Kodiak.
Co-Chair Stedman discussed housekeeping.
ADJOURNMENT
10:24:51 AM
The meeting was adjourned at 10:24 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012921 SFIN OMB Budget Overview.pdf |
SFIN 1/29/2021 9:00:00 AM |
OMV Budget Overview |