Legislature(2021 - 2022)SENATE FINANCE 532
02/03/2022 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB162 || SB163 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 162 | TELECONFERENCED | |
| += | SB 163 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 3, 2022
9:00 a.m.
9:00:47 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:00 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
Senator Natasha von Imhof
ALSO PRESENT
Pete Ecklund, Staff, Senator Bert Stedman; Alexei Painter,
Director, Legislative Finance Division; Hunter Bell, Fiscal
Analyst, Legislative Finance Division.
SUMMARY
SB 162 APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 162 was HEARD and HELD in committee for
further consideration.
SB 163 APPROP: MENTAL HEALTH BUDGET
SB 163 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 162
"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. 163
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making capital
appropriations and supplemental appropriations; and
providing for an effective date."
9:02:19 AM
Co-Chair Bishop moved to adopt the committee substitute for
SB 162, Work Draft 32-GS2686\I (Marx, 2/1/22).
Co-Chair Stedman OBJECTED for discussion.
9:02:43 AM
PETE ECKLUND, STAFF, SENATOR BERT STEDMAN, explained that
there had been various federal COVID-19 relief programs
over the two years. He stated that the governors proposed
budget had used the different fund sources for various
different operating items and revenue replacement. He
shared that the committee substitute removed the federal
funds and replaced them with UGF, in order to get a better
understanding of the states annual recurring revenue and
expenses, and the surplus-revenue situation would be
without the federal funds. He remarked that the committee
had some handouts that summarized the committee substitutes
within a series of spreadsheets.
Co-Chair Stedman removed his objection. There being NO
OBJECTION, it was so ordered.
9:07:19 AM
Co-Chair Stedman queried the difference between the numbers
section and the other sections.
Mr. Ecklund replied that the numbers section contained the
agency budgets with different dollar amounts with different
fund sources. He stated that the language sections
contained the appropriations that required more
explanation.
Senator Hoffman wondered whether there would be a
discussion of the remaining handouts.
Mr. Ecklund replied that Mr. Painter would address those
items.
Co-Chair Stedman shared that the process was similar to the
previous years. Time was spent evaluating and unpeeling
the budget.
9:09:56 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed looked at Handout B (copy on file), which had
some additional items that were along the same line as
items changed within the committee substitute. He shared
that there was a possibility that Alaska would fail the
disparity test for K-12, but was currently under appeal,
which would increase the UGF budget by $72 million in FY 22
and $74.6 million in FY 23. There would not need to be
changes to the budgetary language if that were to occur,
because the budget amount had been adjusted to the
necessary formula. He noted that the item in the Department
of Public Safety (DPS) budget was a request to add 17 new
state trooper and Alaska state wildlife trooper positions.
He stated that those requests did not come with associated
funding. He remarked that DPS has shared that if those
positions were actually funded, there would be a cost of
$5.1 million. He stated that the committee substitute only
addressed the operating budget, so there was an additional
$72 million from the capital budget and $20 percent in the
governors fast track supplemental budget. He stated that
the total equaled $244 million split across FY 22 and SY
23.
Senator Hoffman asked for more detail of the reason for the
disparity test. He also expressed concerns about whether to
consider the $72.3 million into the budget to have no doubt
regarding the disparity test.
Co-Chair Stedman also asked about potential contingencies
in the event that the appeal of legal action could go one
way or the other.
Mr. Painter explained that the federal government provided
impact aid to school districts based on federal activity,
which could be military members or tribal land held in
trust by the federal government. He stated that, rather
than pay taxes, the federal government provided impact aid
to districts. He stated that there was also impact aid,
which was not deductible, for certain characteristics of a
community. He stated that a portion of that federal impact
aid could be deducted against state aid. He stated that
Alaska must have an equalized K-12 formula in order to
deduct the impact aid.
Senator Hoffman wondered where the millions of dollars
would be spent if there was a failure of the disparity
test.
Mr. Painter replied that it would be spent as additional
state aid to districts that received deductible impact aid.
Co-Chair Stedman queried the impact on the more rural parts
of southeast Alaska.
Mr. Painter replied that some of those areas received
impact aid, and noted that the vast majority of impact aid
receiving districts were in western Alaska.
9:19:22 AM
Co-Chair Stedman requested a detail of every district that
received impact aid.
Senator Wilson queried the Department of Education and
Early Development (DEED) plan to hear on their appeal.
Mr. Painter replied that DEED should know with more
certainty by the end of the month.
Mr. Painter noted that there was not an inclusion in the
spreadsheet of the capital budget number, so there may need
to be an adjustment of $72 million.
Co-Chair Stedman asked for more explanation on that issue.
Mr. Painter replied that without the revenue-replacement
funds, there would be a $500 million deficit.
Co-Chair Stedman asked for a number of the structural
deficit portion.
Mr. Painter replied that there needed to be a consideration
of how to categorize the items in Handout B when deciding
whether there was a structural deficit.
Co-Chair Stedman surmised that the actual deficit was
around $750 million
Mr. Painter replied in the affirmative, but explained that
$244 million of that was split between FY 22 and FY 23.
Co-Chair Stedman felt that ballpark numbers related to
concepts was important for understanding the general idea.
He surmised that the number was around $650 million as the
deficit.
Mr. Painter replied in the affirmative, depending on the
disparity test.
Co-Chair Stedman wondered whether Handout D (copy on file)
was represented in slide format in the presentation.
Mr. Painter replied that it was not outlined in slide form,
but stated that it was available on BASIS.
9:29:25 AM
Co-Chair Stedman queried the impact of the Alaska Marine
Highway System (AMHS) on the Department of Transportation
and Public Facilities (DOT) budget.
Mr. Painter replied that AMHS had zero UGF in the
governors proposal. He stated that the governor had
proposed a service level increase, so the budget was
relatively stable.
Co-Chair Stedman wanted to use similar numerics with the
House, so there was not confusion.
Mr. Painter discussed the presentation, Comparison of
Governor's 10-Year Plan to LFD Baseline (copy on file). He
looked at slide 3, Review of Modeling Baseline:
? Legislative Finance's fiscal model is designed to
show policy makers the longer-term impact of fiscal
policy decisions.
? The baseline assumptions are essentially that
current budget levels are maintained, adjusted for
inflation. Policy changes are then applied against
that baseline.
? Our default is to assume that statutory formulas
will be followed.
Mr. Painter addressed slide 4, Review of Modeling Baseline
(cont.):
Revenue Assumptions
? LFD's baseline revenue assumptions are the
Department of Revenue's Fall Revenue Forecast.
This assumes $71 oil in FY23, following futures
market thereafter.
DNR oil production forecast projects that
Alaska North Slope production will increase from
500.2 thousand barrels per day in FY23 to 586.2
thousand barrels per day in FY31.
? For the Permanent Fund, we use Callan's return
assumption of 5.86 percent total return in FY22 and
6.20 percent thereafter.
9:36:16 AM
Mr. Painter pointed to slide 5, Review of Modeling
Baseline (cont.):
Spending Assumptions
? For agency operations, these scenarios assume the
Governor's FY23 budget grows with inflation (2.0
percent).
? For statewide items, the baseline assumes that all
items are funded to their statutory levels beyond
FY23.
This includes School Debt Reimbursement, the
REAA Fund, Community Assistance, oil and gas tax
credits.
? For the capital budget, we assume the Governor's
FY23 capital budget grows with inflation (2.0 percent)
? For supplementals we assume $50.0 million per year.
This is based on the average amount of supplemental
appropriations minus lapsing funds each year.
Co-Chair Stedman queried the definition of effective POMV
draw.
Mr. Painter replied that it was an examination of the POMV
level required to draw from the ERA.
Co-Chair Stedman queried the source of the baseline.
Mr. Painter replied that it was based on the statutory
dividend, which was approximately $4200 in the current
year.
Senator Hoffman noted that in FY 23 there was a CBR draw,
but the governor did not have a proposed CBR draw.
Mr. Painter stated that the slide showed the LFD baseline,
and not the governors budget. He stated that the
governors budget did not have a statutory dividend or a
CBR draw.
9:40:37 AM
Mr. Painter looked at slide 7, Governor's 10-Year Plan:
Policy changes in Governor's 10-Year Plan:
? PFD is 50 percent of POMV, including an FY22
supplemental;
? Agency operations are held flat in FY24, then grow
at 1.5 percent for all items except Medicaid, which
grows at 1.0 percent;
? Beginning in FY24, School Debt Reimbursement is
funded at 50 percent, and the REAA Fund Cap is reduced
to a flat $17.5 million;
? PERS and TRS health care contributions are not
funded;
? The capital budget is held flat with no inflationary
growth, but a General Obligation Bond issued in FY23
increases debt service by $22.8 million in FY24 and
beyond;
? Supplementals and lapse are assumed to cancel out;
and
? Governor uses $375.4 million of ARPA revenue
replacement in FY23.
Senator Wilson wondered whether the supplementals and
lapses would cancel each other out.
Mr. Painter replied that it was not common for those
requests to cancel out, but not impossible. He stated that
it was a goal to reduce the regular supplementals, like
investments in fire suppression.
Co-Chair Stedman queried the difference between lapsing
funds and supplemental requests.
Mr. Painter replied that lapsing funds were fund that were
unspent money that had been appropriated to an agency, so
those funds were then returned to the general fund. He
stated that the impact of the pandemic had caused an
increase in lapsed funds. He stated that supplemental
requests were made after the initial budget to increase or
decrease the budgeted levels in the current year.
9:45:36 AM
Senator Olson wondered whether the American Rescue Plan Act
(ARPA) funds could result in penalties if spent
incorrectly.
Mr. Painter replied that it is possible for penalties to
occur. He felt that revenue replacement was most likely
allowable up to the maximum usage.
Co-Chair Bishop remarked that the 1.5 percent growth across
agencies for the next ten years was concerning.
9:50:41 AM
Mr. Painter looked at slide 8, Mr. Painter pointed to slide
8, Comparison of LFD Model to
Governor's Model:
? Other than policy choices, there is only one
substantive difference in assumptions:
LFD adopted an assumption from the Fiscal Plan
Working Group that School Bond Debt Reimbursement
will begin to add new debt after the current
moratorium expires. This slightly increases the
baseline for both School Debt and the REAA Fund.
? Other differences are due to rounding and
presentation differences (for example, OMB includes
fund transfers with statewide items, LFD separates
them).
? We also have slightly different CBR starting
balances LFD will not update last year's estimates
until audited numbers are available, OMB has slightly
higher estimates based on pre-audit actuals.
Senator Wilson wondered whether the reference was last year
or the previous years working group.
Mr. Painter replied that it was the 2021 working group.
Co-Chair Stedman felt that the committee had more
experience than the working group, except for Senator
Hoffman.
Mr. Painter stated that in FY 23 the only difference was
$50 million in supplementals. He noted that in FY 24 there
was a larger difference because the operating budget would
be held flat.
9:56:14 AM
Co-Chair Stedman asked for more information about the low
inflation expectation in the projection.
Mr. Painter stated that the higher inflation could result
in the unions desiring higher increases.
10:01:01 AM
Co-Chair Stedman remarked that if inflation ran at 4
percent, there would be significant changes in the
projection.
Mr. Painter replied that it cause retention issues, but
stressed that it was a policy call.
Mr. Painter looked at slide 11, Comparison of Governor's
10-Year Plan to LFD Baseline: Statewide Items.
Mr. Painter addressed slide 12, LFD Modeling Baseline with
50/50 Plan.
Co-Chair Stedman wondered whether the model took the CBR to
zero.
Mr. Painter replied that there was a floor of $500 million
in the CBR for cash flow in the presentation.
Co-Chair Stedman stressed that the CBR was not taken to
zero in the presentation.
Mr. Painter agreed.
10:05:38 AM
Mr. Painter pointed to slide 13, Governor's 10-Year Plan
in LFD Model. He also addressed slide 14, Additional
Items to Consider: Should the Baseline Be Higher?
? Several ongoing items in the Governor's budget are
funded
with short-term federal funds:
DOC's DNA Tracking program: $1.1 million CSLFRF
(need to be replaced in FY24)
AMHS: ~$82.0 million in place of UGF from
federal infrastructure bill (need to be replaced
in FY27)
DOTPF: $22.4 million of FHWA and FAA funds
(need to be replaced in FY24/25)
? The ARM Board decision not to fund retiree health
care is backed out in LFD's baseline only for the
statewide item. It would also have about a $15.9
million UGF impact on
agency budgets.
? Evergreen Economics projects that the State's
Medicaid share will grow by 4.2 percent without policy
changes.
Co-Chair Stedman shared that there had been work with OMB
to ensure that the math was the same within all modeling.
Mr. Painter stated that the baseline of the governors
budget gave a clean starting point.
10:10:37 AM
Mr. Painter looked at slide 15, Additional Items to
Consider: Should the Baseline Be Higher? (Cont.)
Senator Wilson surmised that the Department of Corrections
(DOC) item was because of a backlog and should be absorbed
into existing work.
Mr. Painter replied that the responsibility would be
ongoing.
Senator Wilson thought that the funding was required for
addressing the backlog, and not for future work.
Co-Chair Stedman looked at FY 26 and noted that, taking
away AMHS, there was a negative of $317.8 million. He asked
for more information on that issue.
Mr. Painter stated that the governors ten-year plan began
to balance in FY 26.
10:16:54 AM
HUNTER BELL, FISCAL ANALYST, LEGISLATIVE FINANCE DIVISION,
looked at slide 16, Probabilistic Modeling:
? LFD developed a probabilistic model to enhance our
modeling capability. Unlike the Callan model, it is a
complete fiscal model with the budget and revenue as
well as the Permanent Fund.
Results for Permanent Fund scenarios are
similar to what Callan's model produces.
? Runs 2,000 trials with varying assumptions for
Permanent Fund earnings, oil prices, and oil
production.
? Assumes LFD baseline budget, with only PFD amount
changing by scenario.
? APFC 6.2 percent average return with 13.2 percent
annualized standard deviation.
? Average oil price equals DOR's fall forecast.
Applies standard deviation equal to 34 percent of a
given year's average price.
? LFD can run additional scenarios as requested by
legislators and staff
10:20:02 AM
Co-Chair Stedman noted that there was interest from
committee members to move money from the ERA, which took a
simple majority vote to spend.
Mr. Bell looked at slide 17, Stress Test: Statutory PFD.
Co-Chair Bishop wondered whether the slide represented a
full year for the price of oil, and whether it factored
into the prior years funding.
Mr. Bell replied in the affirmative.
Co-Chair Stedman requested numbers related to the mean
deficit.
Mr. Bell agreed to provide that information
10:25:31 AM
Mr. Bell looked at slide 18, Stress Test: 50 percent POMV
to PFD.
Co-Chair Stedman queried the price of oil on the low end.
Mr. Bell replied that the maximum value oil represented was
$120 per barrel, because of data limitations. He stated
that, once oil got to $100 a barrel, the revenue was double
what it would be at $50 per barrel, which was why it was
non-linear. He noted production also had a significant
impact.
Co-Chair Stedman stressed that there needed to be a broad
scope of the various oil prices.
10:30:03 AM
Mr. Bell looked at slide 19, Stress Test: $1,100/person
PFD.
Co-Chair Stedman stressed that there was support for an
absolute floor of a $1100 PFD.
10:34:16 AM
Mr. Bell looked at slide 20, Probability of ERA Shortfall
by PFD Scenario.
Co-Chair Stedman felt that the committee would not tie up
the ERA to the point that there would not be a PFD.
Senator Wielechowski noted that the deficit with a full
statutory PFD was roughly equal to the amount of deductible
oil tax credits that the state was giving yearly.
Co-Chair Stedman stated that there would be an analysis of
how the oil basin revenue flowed through the tax structure.
SB 162 was HEARD and HELD in committee for further
consideration.
SB 163 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:45:17 AM
The meeting was adjourned at 10:45 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 020322 LFD SFIN Presentation 2-3-22.pdf |
SFIN 2/3/2022 9:00:00 AM |
|
| SB 162 FY15-23 Baseline w 3 Gov Terms 2-22-2022.pdf |
SFIN 2/3/2022 9:00:00 AM |
SB 162 |
| SB 162 Short Fiscal Summary Senate Baseline.pdf |
SFIN 2/3/2022 9:00:00 AM |
SB 162 |
| SB 162 Additional Items Not in CS 0.5.pdf |
SFIN 2/3/2022 9:00:00 AM |
SB 162 |
| SB 162 Senate UGF Baseline Summary.pdf |
SFIN 2/3/2022 9:00:00 AM |
SB 162 |
| SB 162 2-1-22 SB 162 work draft Version I (CS 0.5).pdf |
SFIN 2/3/2022 9:00:00 AM |
SB 162 |