Legislature(2021 - 2022)SENATE FINANCE 532
02/08/2021 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB68 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 68 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 8, 2021
9:02 a.m.
9:02:52 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof
Senator David Wilson
MEMBERS ABSENT
Senator Bill Wielechowski
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor
SUMMARY
SB 68 APPROP: SUPP; REAPPROP; AMENDING; CBR
SB 68 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 68
"An Act making supplemental appropriations,
reappropriations, and other appropriations; amending
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."
9:02:52 AM
Co-Chair Stedman reviewed the meeting agenda.
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, provided a PowerPoint presentation
titled "State of Alaska, Office of Management and Budget,
FY2021 Senate Finance Supplemental Budget Overview,
February 8, 2021" (copy on file). He began on slide 2,
"FY2021 Supplemental Summary." The slide showed a summary
of appropriation requests outside of HB 205, the operating
budget passed during the 2020 legislative session. He
explained that supplementals were additional needs for
appropriation or authority to collect and expend funds that
were not anticipated when the budget was passed the
previous year. The summary included four categories,
beginning with the fast-track supplemental introduced in
December 2020. The fast-track supplemental included the
most urgent items as well as some items related to
appropriations that were not passed during the previous
session due to the early adjournment [resulting from the
COVID-19 pandemic].
Mr. Steininger reviewed the second section of the
supplemental summary on slide 2. He explained that the SB
49 and SB 50 supplementals were primarily technical items
relating to other appropriations in the governor's proposed
operating and capital budgets for FY 22. The third section
included SB 68 supplementals had been introduced the
previous week and included items that did not have
sufficient information to include in the fast-track in
December and/or items with lower urgency. The fourth
section pertained to FY 21 revised program legislative
(RPL): items that had not been considered in the
appropriation bill for FY 21 but were granted collection
and expenditure through the RPL process. He explained that
RPLs went before the Legislative Budget and Audit Committee
primarily for collection of federal revenues.
Mr. Steininger reported that the total supplementals across
all of the bills listed on slide 2 represented $1.25
billion in unrestricted general funds (UGF) and $1.45
billion in all funds.
9:06:47 AM
Co-Chair Stedman addressed members of the public watching
the meeting and explained that the committee would silo the
items into the proper fiscal year (FY 21 and FY 22) and
would aim to factor out the anomalies due to COVID-19 and
other issues that in order to put a finer point on the
structural deficit. He noted the supplemental numbers were
large, but they included numerous anomalies.
Mr. Steininger reviewed slide 3 titled "Elements of
Supplemental Bills" and restated some of the information he
had provided on the previous slide.
SB 48 Supplementals Fast Track
? This bill addresses high priority projects and
completion of the FY2021 capital budget
SB 49 and SB 50 Supplementals in FY2022 Governor
? This bill includes technical supplemental items,
primarily appropriations related to FY2022 budget
changes.
SB 68 Supplementals
? This bill is the normal supplemental request for
emergent needs
9:08:45 AM
Mr. Steininger directed attention to a spreadsheet included
in members' budget binders titled "FY2021 Supplemental Bill
Summary" (copy on file). He began with a request on line 3
to address to address a shortfall in School Finance and
Facilities. He explained that the school bond debt program
had been vetoed for FY 21. He detailed that the School
Finance and Facilities section within the Department of
Education and Early Development (DEED) relied on the
appropriation to fund facilities activities above
activities related to school bond debt reimbursement. The
request for $928,000 would go to support individuals doing
facility condition work and school maintenance projects.
Mr. Steininger relayed lines 4, 6, 7, 9 were all related to
a shortfall in Technical Vocational Education Program
(TVEP) funding. He explained that the amount available for
distribution in the program was $1.7 million less than
anticipated when the FY 21 budget had passed. The budget
contained reductions associated with the distribution of
the funding.
Senator von Imhof asked if the reduction was due to reduced
program participants.
Mr. Steininger replied that he could not speak to the exact
factor that reduced TVEP funding.
Co-Chair Bishop stated the reduction was due to the
unemployment rate incurred the previous summer. He
explained there had been fewer people working. He relayed
an approximate three-tenths of a percent from the working
wages of Alaskans went toward funding TVEP. He elaborated
that the reduced number of workers, reduced the funds
coming into the program. [Co-Chair Bishop made a clarifying
remark related to the TVEP calculation multiplier at the
end of the meeting.]
9:11:48 AM
Senator Olson asked if adjusting the amounts for the
percentage of distribution would change the amounts in the
supplemental request.
Co-Chair Bishop deferred the question to Mr. Steininger.
Mr. Steininger asked for verification that Senator Olson
was asking if changing how the percentage distribution of
TVEP funds was weighted between programs would change the
numbers.
Senator Olson replied affirmatively.
Mr. Steininger answered that there would still be a
reduction. He elaborated that the way the funds were
allocated between TVEP programs was set in statute. He
pointed to the spreadsheet and noted there was a much
larger reduction to the University of Alaska and a smaller
reduction to student and school achievement, which was
based on the distribution percentage.
9:13:07 AM
Mr. Steininger moved to an increase in the Permanent Fund
Dividend (PFD) Hold Harmless program on line 5. The fast-
track supplemental proposed a completion of the FY 21 PFD
payment; however, paying a second PFD payment would
increase the need for the PFD Hold Harmless program, which
ensured PFD recipients were not knocked off of public
assistance programs. The request was $13.5 million from the
PFD Fund.
Co-Chair Stedman asked for verification there was an
assumption that some legislative action would be taken.
Mr. Steininger replied that the item was associated with
another item appearing later in the spreadsheet reflecting
the deposit into the PFD Fund. He elaborated that the two
items would be taken together.
Senator von Imhof asked for verification the $13.5 million
was not needed if the legislature did not act on the
supplemental PFD.
Mr. Steininger responded in the affirmative.
Mr. Steininger moved to a $750,000 appropriation for a
COVID-19 related operational shortfall at the Alaska
Vocational Technical Center (AVTEC) on line 8. The funding
source was general funds because the program was
experiencing a shortfall in revenue resulting from
declining enrollment and the inability to provide in-person
classes at the start of the pandemic. He clarified that the
specific type of shortfall was not eligible for [federal]
Coronavirus Relief Funds (CRF).
Mr. Steininger noted the next section of the spreadsheet
pertained to capital items. He requested to skip the
section because the capital items had been discussed in a
Senate Finance Committee meeting the previous week.
Co-Chair Stedman agreed.
Mr. Steininger turned to page 3, line 34 and highlighted a
$6 million supplemental increment for the Alaska
Psychiatric Institute (API). He noted there was a similar
$6 million increment in the FY 22 budget addressing the
same need. There was a shortfall in revenues at API related
to the anticipated ability to collect money through
Medicaid and private billing, which had not come to
fruition. He explained that additional direct support was
needed to run the facility. He noted the administration's
recommended funding source was from Alaska Mental Health
Trust Authority (AMHTA) reserves.
Co-Chair Stedman asked why the item was included in the
supplemental and not the FY 22 mental health budget.
9:16:57 AM
Mr. Steininger replied that the item was matched by a $6
million request in the FY 22 budget as well. He clarified
that the shortfall occurred in FY 21 and was anticipated to
continue. He explained that the plans to find other revenue
sources to help API did not come to fruition.
Senator von Imhof stated that the committee had received a
letter from AMHTA. She recalled that AMHTA had been
surprised about the administration's proposal to use $6
million in AMHTA reserves. She asked if the entity had not
anticipated the proposed use of its funding.
Mr. Steininger replied that he had been in receipt of the
letter as well.
Senator von Imhof asked about the long-term effects of
taking more than the annual allotment in AMHTA funds.
Mr. Steininger answered that OMB had looked at the amount
of AMHTA reserves in addition to the principal held by the
trust. He reported the reserves were significantly in
excess of the trust reserve target of 400 percent. He noted
the trust was currently holding in excess of 600 percent.
The administration believed its recommendations were
sustainable based on the reserve balance, but perhaps not
in perpetuity. He explained that at a time when there were
not sufficient state reserves and there were other areas of
reserves, the administration believed it was a prudent
recommendation as a possible fund source to meet the
specified needs.
9:19:12 AM
Co-Chair Stedman queried the reserve targets for the state
that the committee should be considering as it worked to
fix the structural deficit.
Mr. Steininger replied that it was a difficult question to
answer in a time when state revenues had been significantly
below expenditures. He remarked that the state had been
deficit drawing for almost a decade. He stated knowing the
right amount of reserves depended on the future projection.
Co-Chair Stedman asked Mr. Steininger to get back to the
committee with an answer. He believed there should be
reserve targets. He highlighted concern at the table that
the state's reserves had been drawn down by billions of
dollars and the state was running out of the ability to
maneuver. He referenced testimony from the Alaska Permanent
Fund Corporation (APFC) that overdrawing the Permanent Fund
would have significant long-term negative impacts on the
fund structure, the future payment of the PFD, and on
future PFD recipients. He believed the reserve targets were
an integral part. He remarked there was clearly an opinion
that AMHTA was in a strong reserve position and perhaps
some would characterize it as over-reserved. He stated it
could also go along with Alaska Housing Finance Corporation
(AHFC). He referred to a proposal on the table to have AHFC
assist the state General Fund in paying general obligation
bonds.
Co-Chair Stedman noted that all arrows were pointing to a
liquidity squeeze. He highlighted the need to clarify the
magnitude of the squeeze in order to get out of the
situation before it worsened in the coming years. He wanted
OMB to interact with the legislature via the Legislative
Finance Division or other to try to set reserve balance
targets. He stated that zero and negative numbers did not
work. There had been discussions the previous year on
cashflow needs and the earlier drawing dates out of the
Earnings Reserve Account (ERA) to the General Fund. The
committee had talked about when the payments came across to
the state out of the ERA.
Co-Chair Stedman stressed that the legislature needed as
much information as possible on the savings targets. He
stated that OMB would set the targets and the legislature
would review them and try to work with OMB. He believed
flying blind when running out of cash was foolish. He
pointed to the importance of having the discussion in the
building in order for elected officials and staff to
understand the precarious position the state was quickly
getting into.
Senator Olson remarked that Co-Chair Stedman brought up
some important points to be considered. He wanted to know
the reason for the current situation and what could be done
to help. He remarked that in the recent past API had gone
to a private contractor. He asked if it had helped or
hindered the situation. He wondered how it had impacted the
$6 million supplemental request.
9:23:41 AM
Mr. Steininger answered that the $6 million supplemental
request was not necessarily related to the shift to private
contracted management for API. He stated that the shortfall
was related to the ability to make certain types of claims
through Medicaid. Currently, API was able to claim as a DSH
[Disproportionate Share Hospital], which was a different
rate than claiming as Medicaid.
Senator Olson clarified that he was in favor of the use of
private contractors.
Co-Chair Stedman expected that mental health
representatives would have their own positions to bring
forward to the committee table once the mental health
budget was discussed. He shared that he had asked Mr.
Steininger to work with mental health to try to work out
the differences of opinion in the budgets. Otherwise, it
would be sorted out in committee. He hoped the two entities
would come to an agreement.
Mr. Steininger moved to regular supplemental bill items
beginning on page 4, line 42 of the spreadsheet. Line 42
related to the cost of transitioning state payroll to
biweekly. He elaborated that the transition caused a 0.38
percent increase in state employee salaries, generating a
cost of approximately $4.8 million across state agencies.
He detailed that the savings and benefits of transitioning
to biweekly payroll fell within human resources and payroll
processing under the Department of Administration. In order
to ensure the cost was not borne by all of the agencies
resulting in reductions, the administration had instituted
a reduction in the rate that the Division of Personnel and
Labor Relations charged agencies. He noted that savings
related to biweekly payroll could not be implemented
immediately. The supplemental request was the difference
between a reduction in the rate by $2 million and the
savings implemented in the first year. He relayed that
increased savings would occur as activities associated with
a decreased workload were implemented and work was
centralized.
Co-Chair Stedman remarked that the topic had been covered
in detail the previous year.
9:27:39 AM
Mr. Steininger moved to line 43 related to a shortfall in
revenue in some of the professional licensing programs
resulting from a suspension in fee increases through the
disaster declaration. The request of $411,000 would ensure
professional licensing boards did not fall into a deficit.
Senator von Imhof asked if there was a possibility to use
some CARES Act funding because the item was COVID-19
related.
Mr. Steininger responded that the CARES Act had tight
limitations on revenue replacement; therefore, the federal
funds could not be used for the item.
Senator Wilson asked for a list of the impacted licensing
programs.
Mr. Steininger confirmed that OMB would provide the
information to the committee.
Co-Chair Bishop referenced Senator von Imhof's previous
question and asked for verification that OMB would look at
future incoming federal dollars as a possible fund source
for the item in the future.
Mr. Steininger replied that it could be a possibility if
there was additional federal relief that did not have the
revenue replacement restriction. He noted that the state
would have to wait to see what additional federal relief
came forward.
Co-Chair Stedman asked if the $411,700 would be paid back
to the state treasury when things turned around.
Alternatively, he asked if the funding was a grant to the
licensing programs.
Mr. Steininger responded that as proposed, the item was a
grant to ensure that boards would not go into a negative
account balance as a result of suspended fee increases. As
proposed, there was no intention of a payback.
Co-Chair Stedman referenced Senator Wilson's previous
question and expressed intention to review which boards
needed [financial] help. He stated the committee would make
the call on whether to provide the funding. He highlighted
that the Legislative Budget and Audit Committee looked at
the account balances annually. He asked OMB to follow up on
Senator Wilson's request for additional detail.
9:30:42 AM
Senator Olson shared that in his past experience on the
state medical board, budget shortfalls were typically due
to an increased number of complaints coming through. He was
not aware of any uptick in complaints requiring boards to
hire outside help. He asked if his analysis was incorrect.
Mr. Steininger replied that the projected shortfalls were
based off of baseline spending projections by the
Department of Commerce, Community and Economic Development
and not necessarily due to an increase in activity or
complaints.
Senator Olson stated his understanding that board members
began meeting via videoconference as opposed to traveling
to meet in person. He thought it meant there would be a
decrease in the budget request for boards.
Mr. Steininger agreed that many of the boards had likely
been reducing costs associated with travel and in-person
meetings. He explained that the increment [on line 43] did
not represent every board that had not been able to
increase fees with a projected need for a fee increase. The
increment only included boards that were operating on the
margin without much of a surplus where the lack of a fee
increase resulted in a negative account balance. He stated
that despite any other cost reduction efforts, the boards
had not been able to achieve a zero account balance with
current fee collections.
Mr. Steininger moved to line 44 showing a $70,000
supplemental need resulting from a delayed project. He
expounded that the Department of Environmental Conservation
(DEC) entered into a project to achieve energy savings in
one of its facilities; however, the project had been
delayed over the past year. Consequently, the savings the
department thought it could achieve over the fiscal year
did not come to fruition. He relayed that $70,000 would
cover the additional cost of the debt service for energy
efficiency savings that could not be covered in energy
reductions over the remainder of the fiscal year.
Co-Chair Stedman asked if DEC was unable to absorb the cost
within its budget.
Mr. Steininger replied affirmatively. He explained there
was a mechanism that enabled state agencies to take on debt
if the debt could be covered by the savings from energy
efficiencies in state facilities. He explained it
encouraged agencies to reduce their energy footprint in
buildings and generate savings. He elaborated that due to
the delay, the debt service cost was over the department's
budget for energy costs and other amounts available. He
relayed that the $70,000 was less than the total additional
cost. The department had analyzed other pots of money that
could be used to cover most of the cost before requesting a
supplemental.
9:34:17 AM
Mr. Steininger moved to lines 45 and 46 pertaining to
unanticipated legal expenditures for DEC totaling
~$350,000. He detailed that the costs were above the normal
amount DEC paid to the Department of Law for legal
services. Line 47 was $590,000 for the Division of
Elections within the Office of the Governor. The increment
was primarily to match additional federal receipts received
through the CARES Act for election security from the Help
America Vote Act. He believed the federal funding required
a 20 percent match for the $3 million provided to the
state. He noted the requested increment was slightly less
than the 20 percent and the department was able to find the
remainder of the funds to fulfill the match requirement.
Line 48 was just under $3 million and reflected an increase
in the number of children placed into adoptions or
permanent guardianships. He detailed that the Office of
Children's Services (OCS) paid a stipend to adoptive
parents up to a specified age of the child. The increment
was primarily access to federal receipts to pay for some of
the grants through the Title IV-E program. There was a
small increment needed to match the funds.
Co-Chair Stedman asked if the number of children in foster
care was increasing.
Mr. Steininger responded that the increment represented an
increased number of children being placed into adoptions or
permanent guardianships. He clarified it did not represent
an increase in the number of children in foster care. He
characterized the increment as a "good news" increase
because it reflected kids going into permanent homes. He
did not know the current statistics on the number of
children in out of home placements in foster care. He noted
that OCS tracked the number carefully.
Co-Chair Stedman asked Mr. Steininger to follow up with the
data including a several year lookback. He was interested
to see if the state was gaining ground on the issue. He
remarked there were an alarmingly high number of children
in custody or guardianship around Alaska.
9:37:20 AM
Senator von Imhof referenced an OCS bill passed a couple of
years earlier that addressed the issue of making an effort
to contact relatives. She wondered if there was any
correlation between the policy implemented by the bill and
the current situation. She suggested asking the question of
the Health and Social Services subcommittee.
Co-Chair Stedman replied that the committee could ask the
chair of the subcommittee to help with the question.
Senator Wilson relayed that his office had been working on
situation. He noted there had been some technical glitches
in the language of the [OCS] bill, HB 151. He was trying to
determine a compromise by working with the department to
overcome the technical glitch the bill had left out.
Mr. Steininger addressed a $1.2 million increment
pertaining to maintenance of effort for the state's
Medicaid program operated through the Adult Public
Assistance Program on line 49. He highlighted two years
earlier there had been a move to reduce the maintenance of
effort requirement; however, during the process it had been
discovered that the method for calculating maintenance of
effort was incorrect. He elaborated that the federal
partners had pointed out an adjustment was necessary. He
explained that the adjustment had resulted in a significant
increase in cost. He detailed that the FY 21 budget had
included an increase to Adult Public Assistance to
compensate for the federal calculation. Since the new
calculation had been implemented, the cost was greater than
when initially implemented the past year. The proposed
increment on line 49 would true up the cost in order to
meet the maintenance of effort requirement.
Co-Chair Stedman asked if it was a budgetary item the state
had no control over and merely had to pay the bill.
Mr. Steininger answered, "Effectively, yes."
Senator von Imhof asked what calculation had been used to
create the budget for FY 22 in order to avoid another
supplemental in the future.
Co-Chair Stedman responded that the issue had been on the
minds of the Division of Public Assistance staff when the
FY 22 budget had been constructed. He remarked that there
may or may not be a need for the administration to submit a
budget amendment related to the calculation change as more
information was received. He relayed that OMB would come
back to the committee to further explain the calculation in
more detail if needed.
Co-Chair Stedman asked Mr. Steininger to get back to
Senator von Imhof during the subcommittee process. He
highlighted that Senator von Imhof would chair the Health
and Social Services subcommittee. The committee wanted to
do everything possible to avoid supplementals. He stated if
there was a cost, he wanted to recognize it and determine
how to deal with it.
9:41:12 AM
Senator Wilson asked if line 49 reflected an increase to
the [Adult Public Assistance] budget. He pointed out that
OMB's changes showed a ~$6 million reduction to Division of
Public Assistance pertaining to telework and a reverse of
positions to address a backlog, and reduction in postage
related to online renewals.
Mr. Steininger replied that the items highlighted by
Senator Wilson represented future savings and line 49
reflected an FY 21 item; therefore, the savings and
expenditures did not net out. He noted that the Division of
Public Assistance was a large division and Adult Public
Assistance was a formula program within the division. The
reductions the administration put forward for FY 22 were
related to the eligibility and field services side of the
overall division. He believed it was necessary to look at
the different areas separately and track the distinct costs
separately.
Mr. Steininger addressed a $1.2 million federal increase
for the Department of Military and Veterans Affairs to
cover maintenance costs at Army Guard facilities (on line
50) through federal partnership. Line 51 was a $130,000
department-wide risk management position within the
Department of Revenue (DOR) commissioner's office. He
elaborated the position would look at areas within DOR that
may have security vulnerabilities. The position would work
in partnership with the Office of Information Technology,
in addition to working on physical security. The idea was
to prudently monitor any risks to the state's financial
assets.
Co-Chair Stedman referenced a past Mustang [oil field]
lending issue and asked if the position would review things
of that nature.
Mr. Steininger replied that the risk management was more
related to things like ransomware attacks locking access to
finances and financial systems that other states had faced.
He cited additional examples such as bad actors within the
department or people trying to defraud the Permanent Fund
Dividend system. He reported the department had seen
increased activity attempting to penetrate the department's
IT systems.
Co-Chair Bishop referenced the contractor Worldwide
Technologies mentioned in the description on line 51. He
asked if the entity was an in-state or out-of-state
employer.
9:44:51 AM
Mr. Steininger replied that he did not have the information
on hand.
Co-Chair Bishop queried the length of the contract.
Co-Chair Stedman asked Mr. Steininger to get back to the
committee with the answers.
Mr. Steininger highlighted an adjustment to Alaska
Permanent Fund Corporation (APFC) investment management
fees on line 52. The increment was based on the
corporation's updated projections of the total management
fee costs for the current year. The corporation anticipated
higher management costs given high returns over the past
couple of months. He noted that management fees were based
on performance.
Mr. Steininger skipped capital budget items that had been
covered during a prior capital budget presentation. He
moved to page 6, line 69 and highlighted a $4 million
multiyear appropriation for FY 21 to FY 25 for outside
counsel and expertise on matters related to statehood
defense.
Co-Chair Stedman asked which line Mr. Steininger was
speaking to.
Mr. Steininger clarified that he was on line 69, page 6 of
the spreadsheet.
Senator von Imhof asked if it made sense to get an idea of
existing [statehood defense] cases. She asked if the
committee would find the information interesting.
Co-Chair Stedman thought it would be beneficial to have a
review on the topic at the subcommittee and committee
levels. He understood there was a directional change within
the Department of Environmental Conservation that may
impact potential cases.
Senator von Imhof remarked that lawsuits had crept up over
the last several years. She thought the committee should
see a list of the lawsuits and receive a status update.
9:47:41 AM
Mr. Steininger answered he did not have the specific cases
on hand. He believed someone from the Department of Law
(DOL) was available online for questions.
Co-Chair Stedman requested to receive the detailed
information in writing from DOL.
Mr. Steininger agreed to provide the information.
Mr. Steininger turned to line 70 showing just over $1.2
billion ($1,900 per person) for the completion of the FY 21
PFD. He noted a typo on the spreadsheet and clarified the
increment was for FY 21.
Co-Chair Stedman asked if the fund source for line 70 was
the ERA.
Mr. Steininger confirmed the funding source was the ERA.
Co-Chair Stedman relayed there would be a detailed
discussion on the topic. He remarked there was concern from
APFC on the impact to the ERA. He referenced an earlier
comment by Mr. Steininger about the state's cash reserve
policy. He wanted to take a look at the issue.
Senator Hoffman asked about the administration's timeline
on the increment shown on line 70. He observed that the
item was not included in the fast-track supplemental
request.
Mr. Steininger clarified that lines 69 and 70 were both in
the fast track supplemental bill request. The timeline on
the additional PFD payment was viewed by the administration
as urgent. He believed the PFD Division would be able to
pay out a dividend within 45 to 60 days of passage and
enactment of the increment.
Co-Chair Bishop remarked that earlier in the meeting there
had been discussion about the administration's proposal to
use funds from AMHTA because the fund had a surplus
balance. He highlighted that the discussion had prompted
Co-Chair Stedman to ask the administration what the state's
cashflow balances should be. He remarked that APFC believed
a four times draw was needed in the ERA to prevent an
overdraw of the account. He wanted everyone to keep it in
mind during the conversations in order to avoid overdrawing
from the ERA.
9:51:05 AM
Mr. Steininger noted that lines 74 and 75 were capital
budget items. He moved to line 79 on page 7 of the
spreadsheet. Line 79 was technical and had been discovered
when OMB had been looking at the various ways lapsing funds
were used at the close of a fiscal year. He relayed there
was statute associated with the topic that allowed unspent
money associated with personal services costs in the state
to go into the state's catastrophic reserve fund. The fund
was the buffer used for self-insurance in the state. He
clarified that the action required an appropriation;
therefore, the line cleaned up the need for the
appropriation in the appropriation bill. The investigation
into lapsing funds was related to line 80. Line 80
pertained to efficiencies in how state agencies providing
services to other state agencies financed themselves (i.e.,
areas such as Office of Information Technology, Shared
Accounting Services, and Facilities Management).
Mr. Steininger elaborated that in the past there had been a
low level of predictability related to how the charges were
distributed; the issue caused difficulty in management of
direct-service programs and agencies. He clarified that OMB
had been working over the past year to find a solution that
would provide increased predictability and visibility into
costs to drive down the cost over time. He explained that a
smoothing mechanism was needed to account for any
unforeseen circumstances. The administration was proposing
the use of lapsed money from the previous year to provide
for smoothing of the rates going forward.
Mr. Steininger pointed to an increment for the Medicaid
program on line 81. The item enabled the state to carry
forward lapsed Medicaid funding up to $35 million into FY
22. He detailed that the item was associated with a
reduction in FY 22 in the operating budget. The lapsed
funding was a result of the enhanced Federal Medical
Assistance Percentage (FMAP) rate through the course of the
federal COVID-19 disaster. The enhanced rate was saving the
state $15 million to $17 million per quarter in the state's
share of Medicaid. He expounded that moving some of the
saved funds forward allowed for a reduction in the FY 22
Medicaid budget. He added that it took quite some time to
make changes in the Medicaid program. He explained that it
signaled a target cost for the program going into FY 23 and
gave the department time to negotiate with outside and
federal partners on Medicaid services to be provided.
9:55:07 AM
Co-Chair Stedman asked why it would not be better to lapse
the funding and do a straight appropriation into the
following year's budget in order to have a clear view of
expenditures. He remarked that the proposed maneuver would
understate the actual budget numbers for the following year
and would cause confusion on the actual costs.
Mr. Steininger explained the proposal was meant to signal
where the administration wanted the Medicaid program to be
going into FY 23. He elaborated that it was about giving
the Department of Health and Social Services (DHSS) a
number to work for in order for all parties to understand
the target. He stated that not providing an amount would
put off the decision on how much money was available until
the last minute and did not allow for advanced planning. He
recognized the critique made by Co-Chair Stedman about
accurately showing the Medicaid budget. He thought there
needed to be transparency in the budget. He stated the goal
of the proposal was to signal an FY 23 spend in the
Medicaid program to assist with DHSS's efforts to find
reductions over time.
Co-Chair Stedman communicated his desire for the committee
to err on the side of transparency. He reasoned that
failure to recognize what was going on would result in a
jam. He recognized the concern highlighted by Mr.
Steininger; however, he believed transparency superseded
the concern. He remarked that he did not know how many
years he had heard about budget reductions when actual
expenditures were increasing (across multiple governors and
legislators dealing with the operating budget). He
clarified he was not speaking about the past several years
when there had been major reductions in the operating
budget. He stated it was a systemic problem that he wanted
to get rid of.
Senator von Imhof referred to Mr. Steininger's mention of
$17 million for FY 22. Additionally, she referred to his
statement about preparing for FY 23. She asked where the
$17 million came from. She wondered if it was already
included in the operating budget.
Mr. Steininger replied that the $15 million to $17 million
per quarter reflected the per quarter savings from the 6.2
percent enhanced FMAP. He clarified the enhanced FMAP was
temporary and only extended through the term of the federal
disaster declaration. He explained the savings would likely
bleed into FY 22 but would not continue in perpetuity.
Senator von Imhof asked for verification that the savings
from the enhanced FMAP were resulting in savings of $15
million to $17 million per quarter in FY 21.
Mr. Steininger responded affirmatively.
Senator von Imhof asked if the savings were reflected in
any documents.
Mr. Steininger answered that the savings came from the $35
million [in lapsed Medicaid funds] the administration
proposed carrying forward into the following year. He
relayed that when the supplemental had been put together in
December, OMB did not know how long the enhanced FMAP would
be extended. When the budget had been developed, the
administration anticipated $35 million in savings in the
Medicaid program was a reasonable target for FY 23.
9:59:50 AM
Senator von Imhof asked where the $35 million in savings
was reflected in the spreadsheet.
Co-Chair Stedman echoed the need for budget clarity. He
expressed the need to be careful with the item. He was
expecting to see a $200 million swing in the budget in a
couple of days when the issue was unwound.
Mr. Steininger replied that the $35 million reduction was
not shown on line 81 because the language proposed by the
administration pertained to excess money in Medicaid
services up to $35 million. He clarified the administration
was not proposing to remove money from the Medicaid program
midyear. The administration was anticipating savings at the
end of the year. He elaborated that in order to show the
$35 million in savings on a report, it would mean
restricting money out of the Medicaid program, which the
administration was not proposing to do in FY 21. He noted
that savings had been achieved through the FMAP
enhancement; however, the administration did not want to
overshoot and end up without sufficient funds at the end of
the fiscal year. He explained that OMB did not show a
negative number when it was not actually removing money
from a program; the department still had access to the
funds until the end of the fiscal year, but the
administration did not expect the funds to be used.
10:01:39 AM
Senator Olson thought he had heard Mr. Steininger state
there was a plan to reduce Medicaid services. He asked
which services would be reduced.
Mr. Steininger replied that the administration did not have
a proposal on specific services to change, which was the
reason for the FY 23 target. He explained that the
timeframe gave DHSS enough time to negotiate through the
changes that could be made. He clarified that under the
current COVID disaster and enhanced FMAP, no changes could
currently be made to the Medicaid program. The
administration did not believe the restriction would
continue through the entirety of FY 22, but it remained to
be seen how long the federal disaster declaration would
continue.
Senator Olson asked for verification that the
administration planned on decreasing Medicaid services.
Mr. Steininger responded affirmatively. He stated that as
the department developed the plans working with partners,
it would be able to identify areas it had found where
savings and efficiencies could be made.
Co-Chair Bishop remarked that hospitals were watching the
budget item and wanted to understand it going forward.
10:03:47 AM
Mr. Steininger moved to amended language for the
distribution of cruise ship head tax dollars on line 82. He
detailed that the language from the previous year did not
update the calendar year for distribution; therefore, the
change updated the date to the correct year. Additionally,
due to the significant reduction in head tax receipts, the
number had been adjusted. The -$21.3 million on the
spreadsheet reflected the reduction in receipts over the
last calendar year.
Co-Chair Stedman thought the committee needed to look at
the commercial vessel passenger tax because there may be
some over expenditures. He commented on the apparent lack
of ships anticipated in the current year. He wanted to
ensure the available funding was not over appropriated for
the coming year.
Mr. Steininger agreed that when the FY 21 budget had been
appropriated, it had been assumed there would be some
cruise ship traffic toward the end of the season.
Co-Chair Stedman stated that the committee and OMB would
work together on the issue, which was impacting the entire
state.
10:06:49 AM
Mr. Steininger addressed line 83, which utilized $30
million of a $75 million appropriation to DHSS to
capitalize the Disaster Relief Fund. He clarified there had
been a $75 million appropriation to DHSS the previous year
to respond to the COVID pandemic. He detailed that when the
appropriation had been made, the amount of incoming federal
funds had been unknown. The department had been able to
avoid utilizing the pot of appropriated general funds and
had used federal relief funds. The administration was
proposing to deposit $30 million of the remaining funds
into the Disaster Relief Fund instead of allowing all of
the funding to lapse back into the General Fund. He
explained that the Disaster Relief Fund currently had a low
unobligated balance and there were coming calls on the fund
for work related to prior disasters.
Co-Chair Stedman asked where the extra funds would end up
if action was not taken.
Mr. Steininger replied that the increment was a
reappropriation of existing appropriated UGF.
Co-Chair Stedman clarified that a more transparent method
would be to allow the funds to return to the General Fund.
The funds could then be appropriated from the General Fund.
Mr. Steininger responded that because the $75 million
appropriation had been for relief from a specific disaster,
depositing the funds into the Disaster Relief Fund would be
more of a "rescoping" of the original purpose. He asserted
that rescoping and redeploying the funds for more
generalized disaster relief was not necessarily a wholly
new appropriation.
Senator von Imhof stated her understanding there was $75
million in unspent funding in the Disaster Relief Fund and
the increment would reappropriate $30 million into the fund
for use on any disaster (e.g., earthquake or wildfire). She
asked about the remaining $45 million.
Mr. Steininger answered that the administration had not
proposed to redeploy the remaining $45 million. He
elaborated that there were still several months remaining
in the fiscal year and there was not complete clarity on
whether DHSS would need to utilize the funding for a COVID-
related cost. The administration believed it was more
prudent to allow the money to be available for COVID relief
if needed. The funding would lapse to the General Fund if
it was not used.
10:09:40 AM
Mr. Steininger looked at line 84 showing a deposit of $12.8
million into the Capital Income Fund. He detailed that a
handful of capital projects had been completed under
budget; therefore, the administration proposed depositing
the remaining values into the Capital Income Fund for use
on deferred maintenance.
Co-Chair Stedman asked for verification that most of the
amounts were under $1 million with the exception of a
couple that were around $3 million.
Mr. Steininger agreed that most of the increments were
smaller dollar values with the exception of a couple with
more material values.
Senator von Imhof asked where the individual increments
[remaining from finished capital projects] currently
resided. She wondered whether the money that would be swept
into the Capital Income Fund was currently spread out
across various municipalities or within the Department of
Transportation and Public Facilities (DOT). She understood
the accounting was there but wondered whether the actual
cash had been verified.
Mr. Steininger answered, "Generally speaking, yes." He
explained that when OMB put together reappropriations of
capital projects, there was significant work with DOT to
verify the funding. There was a process and investigation
done by the department. He elaborated that often projects
finished several years earlier showed up on a
reappropriation because it took time to ensure the books
were closed. The state's Comprehensive Annual Financial
Report (CAFR) included the increments as obligations to
state funds, but the funds were no longer needed. The
governor's budget reflected the transaction as removing
authority from the [original] programs and depositing the
money into another fund.
Co-Chair Stedman informed the public that the legislature
had designated the Capital Income Fund as funding to go to
deferred maintenance.
10:12:42 AM
Mr. Steininger noted that lines 88 and 89 were capital
items that had been discussed at a previous meeting. Line
93 was a special appropriation for the Morse settlement
between the Disability Law Center of Alaska and DHSS. The
item totaled $7.4 million in general funds and an
anticipated federal match of $4.5 million. He elaborated
that the item pertained activities related to psychiatric
evaluations of individuals including individuals placed in
hospitals outside of the state's control. He explained the
federal match pertained to Disproportionate Share Hospital
payments.
Co-Chair Bishop asked for verification the lawsuit came
after the governor had vetoed some behavioral health
funding the previous year. He asked if that was the reason
for the increment.
Mr. Steininger replied that money related to the settlement
had been added to the budget the previous year; however,
the settlement had not been finalized at the time. He
explained that the funds had been vetoed because the
administration wanted to ensure the amount included in the
budget matched the amount designated in the final
settlement.
Mr. Steininger moved to line 94 reflecting five other
judgements, settlements, and claims against the state
totaling $366,000.
Co-Chair Stedman looked at the Recall Dunleavy v. State of
Alaska item under line 94. He asked for verification the
item involved a payment of $197,000.
Mr. Steininger replied in the affirmative.
Co-Chair Stedman asked if the increment was subject to
veto.
Mr. Steininger answered that any appropriation in the
budget was subject to veto; however, the administration had
proposed the payment of the item.
Co-Chair Stedman observed that all of the judgements,
settlements, and claims under line 94 were large amounts.
He assumed there were many small judgements, settlements,
and claims as well. He asked for detail.
10:15:35 AM
Mr. Steininger responded that the items included in line 94
were the only judgements, settlements, and claims that had
reached the point of payment at present. He relayed that
the administration would introduce a budget amendment if
another judgement or settlement arose prior to the end of
session.
Co-Chair Stedman asked if the members' detailed budget
binders included more detail on each of the settlements.
Mr. Steininger confirmed there was documentation associated
with each of the settlements to explain what had been
contested and what had been settled.
Co-Chair Stedman informed the public that settlements were
delivered to the legislature as the appropriating body on
an annual basis for payment authorization. He relayed that
occasionally the amounts were large. He recalled there had
been a settlement several years back that had gone on for
20 years and had been in the multiple millions of dollars.
He noted that line 94 pertained settlements the state had
lost totaling $366 million [thousand]. He asked about the
cases the state won.
Mr. Steininger clarified the amount was $366,000. He
addressed the question about settlements the state won. He
explained that depending on settlement terms, the funds
were deposited into the General Fund or appropriated to a
specific purpose if specified. He cited a Volkswagen diesel
lawsuit related to air quality where funds had come in. He
explained that specific appropriations had been put forward
related to how the funding was spent due to spending
restrictions. He noted that many settlements went into the
General Fund as revenue.
Senator Olson looked at the settlement pertaining to
Alaskans for Better Elections under line 94. He thought the
group was a private entity.
Mr. Steininger answered that Alaskans for Better Elections
was an entity against the state. He clarified that the
group was not a state entity.
Senator Olson asked if the state was paying costs
associated with Meyer, Holmes, Weddle & Barcott, P.C. for
the specific settlement.
Mr. Steininger responded that the $47,000 would go to
Alaskans for Better Elections.
10:19:00 AM
Mr. Steininger noted that the committee had previously
discussed capital items on lines 98 and 99. He pointed to
the bottom row on page 8 of the spreadsheet showing a total
of $1.25 billion UGF and $1.4 billion in all funds.
Co-Chair Stedman asked whether $1.2 billion was the largest
supplemental budget in the state's history.
Mr. Steininger answered that he would have to look at
historical information to determine the answer. He noted
the significant item included in the supplemental was the
completion of the PFD payment from the previous year.
Co-Chair Stedman remarked on the large size of the
supplemental budget. He asked OMB to follow up on some of
the committee's questions and to work with DOL to ensure
everyone was on the same page with the same information.
Co-Chair Stedman thanked Mr. Steininger for his
presentation. He looked forward to working with him on
OMB's target of cash availability the state should have on
hand. He recognized there was a proposal by the
administration to allow short-term borrowing to help fund
budgetary shortfalls. He surmised there was a concern that
the past practice of being able to cash flow internally was
being questioned. The committee would work with OMB on the
issues going forward.
SB 68 was HEARD and HELD in committee for further
consideration.
Co-Chair Stedman discussed the following schedule for the
remainder of the week. He stated that there would be many
meetings on the CARES Act funding. He shared that the
subcommittee process would begin in the current week. He
explained that when DHSS subcommittee work was complete,
there would be a conversation in a future Senate Finance
Committee meeting.
Co-Chair Bishop corrected a comment that he made earlier
and clarified that the TVEP calculation multiplier was 0.16
percent.
ADJOURNMENT
10:25:40 AM
The meeting was adjourned at 10:25 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 020821 FY2021 Supplemental Bill Summary Spreadsheet.pdf |
SFIN 2/8/2021 9:00:00 AM |
SB 68 |
| SB 68 020821 SFIN Supplemental.pdf |
SFIN 2/8/2021 9:00:00 AM |
SB 68 |
| 020821 SFC - OMB Response Supplemental Budget Overview.pdf |
SFIN 2/8/2021 9:00:00 AM |
SB 68 |