Legislature(2021 - 2022)SENATE FINANCE 532
05/13/2022 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Fiscal Update: Alexei Painter, Director, Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 107 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
May 13, 2022
9:07 a.m.
9:07:23 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:07 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
Senator Donny Olson
Senator Natasha von Imhof
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division.
SUMMARY
SB 107 OIL and GAS PRODUCTION TAX; CREDITS
SB 107 was SCHEDULED but not HEARD.
FISCAL UPDATE: ALEXEI PAINTER, DIRECTOR, LEGISLATIVE
FINANCE DIVISION
^FISCAL UPDATE: ALEXEI PAINTER, DIRECTOR, LEGISLATIVE
FINANCE DIVISION
9:09:36 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation, "Fiscal Update with Senate
Budget" (copy on file). He pointed to slide 2, "Outline":
? Volatility and Spring Revenue Forecast
? Updated Fiscal Summary with Senate budget
? Summary of Changes from Senate Finance and
House Budgets to Senate Budget
? Big Picture: How the Senate Budget Handles the Oil
Price Spike
? Projecting FY24 and Beyond
? New Revenue Options
Mr. Painter discussed slide 3, "Oil Price Forecast Update."
He noted that the minor difference on the chart was
actually a larger difference when discussing the savings
balances.
Mr. Painter looked at slide 4, "Oil Prices, FY22 to Date."
He remarked that there was a bit of a runup beginning in
the new year. He stated that prices had been in the $70 to
$80 range, peaking at approximately $85. He stated that the
Department of Revenue (DOR) Spring Forecast was created at
a particularly volatile time due to the Russian invasion of
Ukraine, and continued to see volatility.
Mr. Painter addressed slide 5, "FY23 Oil Price Sensitivity
Chart." He stressed that rather than examining one price of
oil, the committee should focus on the entire sensitivity
chart. He noted that the entire chart is not linear.
Mr. Painter highlighted slide 7, "Fiscal Summary: Senate
Budget, Spring Forecast (UGF only)." He explained each line
on the slide. He noted that there was a total projection of
approximately $7 billion of UGF revenue in FY 22; and
approximately $8.3 billion of UGF revenue in FY 23. He
noted that the higher projection in FY 23 was due to the
expectation of higher oil prices in that year.
9:14:51 AM
Co-Chair Stedman queried the draw for the current year on
the 5 percent of market value (POMV) on the Permanent Fund.
Mr. Painter replied that in FY 22 the draw was $3.69
billion, and in FY 23 the draw increased to $3.360 billion.
He noted that the increase reflected the strong investment
performance in FY 21.
Senator Wielechowski wondered whether the state was on
track to meet the 2022 revenue forecast.
Mr. Painter replied that currently, the revenue was
approximately two dollars below the forecast, which was
approximately $150 million to $200 million below the
forecast.
Mr. Painter continued to detail the revenue in each portion
of the accounts.
9:20:08 AM
Co-Chair Stedman recalled that there was mention of some
capital amendments on the Senate floor, and queried detail
and financial impacts of those amendments.
Mr. Painter replied with slide 9, and explained that there
was $416 million added to the capital budget. He explained
that of that $416 million, $175.3 million was for the Port
of Nome; $175 million was for the Port of Alaska; $30
million for Mat-Su transportation infrastructure; and $24.3
million UGF combined for smaller projects.
9:20:59 AM
Co-Chair Stedman looked at slide 7, and wondered whether
the magnitude of the $470 million appeared bigger than the
capital budgets number in the most recent decade.
Mr. Painter replied in the affirmative, and remarked that
the over $400 million alone was the largest capital budget
since FY 15.
Mr. Painter continued to discuss slide 7. He explained the
Permanent Fund section of the slide.
Co-Chair Stedman wondered how much was added to the budget
from the Permanent Fund POMV.
Mr. Painter replied that the POMV draw for the current year
was $3.6 billion. He stated that, because the Energy Relief
would be drawn from the general fund, there was no overdraw
of the Permanent Fund in the budget. He stated that the
combined Permanent Fund Dividend (PFD) would exceed the
POMV draw for the year.
Co-Chair Stedman queried the projected surplus.
Mr. Painter noted that line 19 on slide 7 showed the pre-
transfer deficit for FY 23 at $1.1 billion. He explained
that in FY 22 there was a pre-transfer surplus of $553
million. He noted that there were many proposed fund
transfers in the current year, so he would pause on those
numbers. He stated that the recurring revenue had a $1.1
billion deficit in FY 23 .
Co-Chair Stedman queried the price of oil used for the
calculation of the deficit.
Mr. Painter replied that it assumed the spring forecast of
$101 per barrel. He noted that the Senate budget had a
provision that deposited any oil revenue received above
$100 per barrel into the Permanent Fund. Therefore, acting
as a kind of revenue cap.
9:25:16 AM
Co-Chair Stedman stressed that because of that cap, the
impact on the price of oil being above $100 per barrel had
no impact on the budget. He wondered whether other savings
sources needed to be found to balance the budget.
Mr. Painter replied in the affirmative, and explained that
the current Senate budget had the $1.1 billion deficit
billed out the Statutory Budget Reserve (SBR), utilizing
the surplus from FY 22.
Co-Chair Stedman wanted to examine the strategy to fill the
$1.1 billion hole.
Senator Hoffman stressed that the $1.1 billion deficit was
a direct result of actions that happened on the Senate
floor. He noted that the budget that came out of the Senate
Finance Committee had a balanced budget. He stressed that
statutorily and constitutionally the committee was
obligated to balance the budget.
Co-Chair Stedman wondered what happened to the $1.2 billion
in forward funding of education in the previous fiscal
years budget.
Mr. Painter replied that that provision was written so that
forward funding would only occur if there was sufficient
revenue to have a surplus for that item. He stated that the
item would remain in the bill, but was functionally zero
because of the deficit.
Co-Chair Stedman recalled that there was a formula to
forward fund education.
Mr. Painter agreed and explained that the budget for the
forward funding depended on the formula based on the price
of oil.
Co-Chair Stedman stressed that all Senators had a
constitutional obligation to balance the budget.
9:40:37 AM
Co-Chair Stedman wondered whether the proposal was more
than the production of money from the Permanent Fund.
Mr. Painter replied in the affirmative.
Mr. Painter looked at slide 7a, "Swoop Graph - UGF Only FY
23 Senate Compared to FY 22 Management Plan (Millions)." He
stated that the slide outlined the size of various
expenditures.
Co-Chair Stedman stressed that the issue was not about the
individual PFD, but rather the aggregate dollars needed to
produce the PFD.
Mr. Painter discussed slide 8, "Flow of Savings in Senate
Budget":
? In FY22, an estimated $1.5 billion is deposited into
the SBR ($660 million direct, $840 million from
projected surplus).
? In FY23, an estimated $1.05 billion is withdrawn
from the SBR ($350 million direct, $700 million from
projected deficit).
? Across the two years, this means about $450 million
is estimated to be deposited into the SBR.
? If oil prices exceed the Spring forecast, the
additional amounts flow into the Permanent Fund, not
the SBR.
? If prices are below the Spring forecast, the SBR
could fill the FY23 deficit down to about $93 oil.
Below that, an additional deficit-filling account
would be needed. The CBR, if accessed, would drop to
zero at about $75 oil.
Co-Chair Stedman stressed that there needed to be language
in the budget to address the possible issue of the SBR
drying up at certain specific prices of oil
Mr. Painter highlighted slide 9, "Changes from Senate
Finance Budget to Senate Budget":
? PFD increased from 50 percent of POMV draw ($1,680.3
million, about $2,350 per recipient) to an amount
equal to estimated statutory PFD ($2.764.8 million,
about $4,200 per recipient)
? Added $840.1 million for a $1,300 energy relief
payment
? Added $416.0 million to the capital budget:
175.3 million for Nome port
$175.0 million (in addition to $25.0 million in
SFIN budget) for Port of
Alaska
$30.0 million for Mat-Su Borough Transportation
Infrastructure
$24.3 million for smaller capital projects
? In total, $2,342.3 million UGF was added on the
Senate floor.
? This results in reduced savings: the Senate Finance
budget forward-funded K-12 ($1,215.1 million) and
deposited $1,579.9 million into the SBR. After the
amendments, there is no forward funding and a $452.7
million SBR deposit.
Mr. Painter said that the amendments on the floor resulted
in less available revenue and reduced savings.
Co-Chair Stedman lamented the magnitude of the potential
impact on the future finances of the state.
Mr. Painter looked at slide 10, "Major Differences between
House and Senate Operating Budgets":
? House budget replenishes Alaska Higher Education
Fund in FY22 and utilizes it to pay scholarships in
FY23.
? Senate budget includes significant structure changes
in Departments of Revenue and Fish and Game and the
Office of the Governor.
? House funds $29.8 million of University of Alaska
projects utilizing CLSFRF, Senate does not.
? Senate has an additional $5.5 million for UA fixed
costs above the House and utilizes a two-appropriation
structure, while the House has a one-appropriation
structure.
? House includes a structure change intended to
prevent Medicaid spending on abortion, Senate did not.
? House included $4.9 million for 404 Primacy in DEC
(plus $750.0 supplemental), Senate did not.
Mr. Painter noted that the original House budget had not
included a Capital budget. He noted that if the committee
wanted to replace funding to the Higher Education fund, and
continued to detail the differences between the budgets
from the two bodies.
9:51:46 AM
Mr. Painter pointed to slide 11, "How the Senate Budget
Spends the Revenue Spike Comparison to December 2021." He
spoke of the budget put forth by the governor in December.
The slide showed that the governor directly spent the
available ARPA CSLFRF funds, while the Senate used it as a
revenue replacement. The slide detailed the comparable
items and their amounts, accompanied by notes.
9:55:02 AM
Mr. Painter explained slide 11a, "Major Increases in FY23
Governor's Budget from FY22":
$45.0 million for Medicaid
? $33.6 million UGF increases to offset DGF lost in
CBR sweep
? $27.0 million UGF for union contracts, health
insurance, and other contractual items
? $17.4 million combined increases in Department of
Public Safety (adding troopers, VPSOs, and support
positions)
? $12.9 million combined increases in Department of
Corrections (booking and MH unit at Hiland Mountain,
adding non-CO support positions)
? $5.7 million for DEC to take primacy of federal
permitting programs
? $4.0 million for Department of Law for statehood
defense
? $3.8 million for fire suppression preparedness
Mr. Painter pointed to slide 11b, "Major Increases in
Senate Agency Operations from Governor Proposal":
? $60.0 million K-12 Outside BSA Formula
? $59.4 million for AMHS (Governor eliminated UGF)
? $27.0 million for fuel trigger to offset high oil
prices
? $16.1 million DOH to Increase Personal Care
Attendant Wages
? $14.1 million for University of Alaska
? $5.0 million for ASMI
? $4.3 million for Food Bank pilot program
? $4.3 million for 50 percent increase to K-12
residential schools
Mr. Painter looked at slide 11c, "Major Increases in Senate
Statewide Items from Governor Proposal":
? $89.3 million for PERS/TRS pension fund (amount that
would have gone to healthcare fund but for ARM Board
decision to leave it unfunded)
? $199.0 million to PF corpus in FY22 to satisfy audit
finding relating to FY17-18 royalties
? $220.8 million in FY22 to pay past unfunded School
Bond
Debt Reimbursement from FY17-21
10:01:48 AM
Mr. Painter continued to discuss slide 11c:
? $84.0 million in FY22 to repay past unfunded REAA
deposits from FY17-21
? $60.0 million in FY22 to pay oil tax credits at
statutory amount
? $38.9 million in FY22 to bring Community Assistance
distributions to $30 million in FY22 and FY23
10:02:14 AM
Mr. Painter addressed slide 12, "How the Senate Budget
Spends the Revenue Spike Comparison to September 2021."
He stated that the Spring Forecast at that time was
significantly lower than the current forecast.
Mr. Painter pointed to slide 13, "Projecting FY24 with a
50/50 PFD." He stated that there were scenarios and fiscal
modeling displayed in the slide and future slides.
Senator Wilson noted that there was a projection of FY 24
if there was an enactment of the Senate version of the
budget.
Mr. Painter replied in the affirmative.
Senator Wilson wondered whether there would be an $800
million surplus the following year, if there were a deficit
enacted in the current year.
Mr. Painter replied in the affirmative.
10:10:18 AM
Senator Wilson surmised that the proposition could work,
because of a one-time budget.
Mr. Painter agreed, but only if the forecast were met in
both years.
Senator Hoffman stressed that the constitution required the
legislature to balance the budget, so a deficit was
unconstitutional.
Co-Chair Stedman reiterated that oil prices were hard to
predict, and extremely volatile.
Co-Chair Bishop stressed that there were many unknowns, and
that there were some grants that would come available.
Mr. Painter looked at slide 14, "Fiscal Model: Senate
Budget with 50 percent of POMV to PFD FY24+." He noted that
the surplus in FY 24, and called for continuing oil prices
over the upcoming years.
10:14:33 AM
Mr. Painter addressed slide 15, "Senate Budget with 50/50
PFD FY24+ Revenue Stress Test." He detailed the structure
and detail of the slide.
Co-Chair Stedman queried the inflation calculation and the
inflation trends.
Mr. Painter stated that the slide used 2.25 inflation,
which was the official number. He noted that there was
significantly higher inflation recently.
Co-Chair Stedman wondered whether the budget proposals
would help to pay back the CBR.
Mr. Painter replied that allowing the sweep put the surplus
in the SBR, instead of repaying the CBR. He legislature
would make those decisions, but the constitutional
requirement could be stepped around by depositing the
surplus elsewhere.
Co-Chair Stedman stressed that there were constitutional
requirements.
10:19:44 AM
Senator Wielechowski wondered where in the constitution it
stated that the legislature was required to balance the
budget.
Mr. Painter replied that the did not have a constitution
with him, but there was no requirement that each years
budget was required to necessarily be balanced, but rather
there must always be revenue to pay the expenditures.
Mr. Painter pointed to slide 15a, "Projecting FY24 with a
75/25 PFD." He detailed the outline and specifics of the
slide.
Co-Chair Stedman felt that the title should include FY 23
and FY 24.
Mr. Painter agreed.
Co-Chair Stedman pointed out that the legislature had not
structured the surplus being placed in the SBR for FY 24,
because the CBR was the default.
Mr. Painter agreed.
Co-Chair Stedman stressed that there were many complexities
in the budget.
Mr. Painter looked at slide 16, "Fiscal Model: Senate
Budget with 25 percent of POMV to PFD FY24+."
Mr. Painter discussed slide 22, "Senate Budget with 20/75
PFD GY 24+ Revenue Stress Test."
10:25:43 AM
Co-Chair Stedman stressed that he had various handouts with
different analyses.
Mr. Painter displayed slide 6, "New Revenues." He stated
that the slide showed an update on the potential new
revenues to fill the possible deficits.
10:30:02 AM
Co-Chair Bishop wondered whether the sales and income tax
propositions posted any fiscal notes reflecting any
possible new personnel.
Mr. Painter replied that the presentation showed the
numbers net of the cost of implementation. He was not sure
of the fiscal model.
10:31:22 AM
AT EASE
10:35:43 AM
RECONVENED
Co-Chair Stedman felt that SB 107 should be postponed to a
later meeting.
SENATE BILL NO. 107
"An Act relating to the oil and gas production tax;
relating to credits against the oil and gas production
tax; relating to payments of the oil and gas
production tax; relating to lease expenditures and
adjustments to lease expenditures; making public
certain information related to the oil and gas
production tax; relating to the Department of Revenue;
and providing for an effective date."
SB 107 was SCHEDULED but not HEARD.
ADJOURNMENT
10:37:06 AM
The meeting was adjourned at 10:37 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 281 FY`6-FY23 with Governor Terms included (w 3 Senate Compares) 5-11-22.pdf |
SFIN 5/13/2022 9:00:00 AM |
HB 281 |
| HB 281 LFD Presentation- Senate Budget 5-13-22.pdf |
SFIN 5/13/2022 9:00:00 AM |
HB 281 |