Legislature(2023 - 2024)SENATE FINANCE 532
01/30/2023 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB40 || SB41 || SB42 | |
| Legislative Finance Overview of Proposed Fy 24 Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 40 | TELECONFERENCED | |
| += | SB 41 | TELECONFERENCED | |
| *+ | SB 42 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
January 30, 2023
9:01 a.m.
9:01:15 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator Kelly Merrick
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division; Rob
Carpenter, Analyst, Legislative Finance Division; Albert
Wall, Analyst, Legislative Finance Division; Connor Bell,
Analyst, Legislative Finance Division; Valerie Rose,
Analyst, Legislative Finance Division; Michael Partlow,
Analyst, Legislative Finance Division.
SUMMARY
SB 40 APPROP: OPERATING BUDGET/LOANS/FUND; SUPP
SB 40 was HEARD and HELD in committee for further
consideration.
SB 41 APPROP: CAPITAL/SUPPLEMENTAL
SB 41 was HEARD and HELD in committee for further
consideration.
SB 42 APPROP: MENTAL HEALTH BUDGET
SB 42 was HEARD and HELD in committee for further
consideration.
LEGISLATIVE FINANCE OVERVIEW of PROPOSED FY 24 BUDGET
SENATE BILL NO. 40
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; making
supplemental appropriations; making appropriations
under art. IX, sec. 17(c), Constitution of the State
of Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
SENATE BILL NO. 41
"An Act making appropriations, including capital
appropriations and other appropriations; making
supplemental appropriations; making appropriations to
capitalize funds; and providing for an effective
date."
SENATE BILL NO. 42
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
9:02:10 AM
^LEGISLATIVE FINANCE OVERVIEW of PROPOSED FY 24 BUDGET
9:02:12 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
(LFD) introduced himself.
9:02:43 AM
ROB CARPENTER, ANALYST, LEGISLATIVE FINANCE DIVISION,
introduced himself.
9:03:10 AM
ALBERT WALL, ANALYST, LEGISLATIVE FINANCE DIVISION,
introduced himself.
9:03:30 AM
CONNOR BELL, ANALYST, LEGISLATIVE FINANCE DIVISION,
introduced himself.
9:04:02 AM
VALERIE ROSE, ANALYST, LEGISLATIVE FINANCE DIVISION,
introduced herself.
9:04:24 AM
MICHAEL PARTLOW, ANALYST, LEGISLATIVE FINANCE DIVISION,
introduced himself.
9:04:39 AM
Mr. Painter stated that Ms. Foss was also an analyst for
LFD, but was not able to join the meeting.
9:05:03 AM
Mr. Painter discussed the presentation, "Overview of the
Governor's FY24 Budget" (copy on file). He looked at slide
2, "Outline":
• 2022 Session and FY23 budget Recap
• Fiscal Outlook
• FY24 Budget Baselines
• Governor's FY24 Proposal
• Long Term Outlook and Governor's 10 Year Plan
9:05:23 AM
Mr. Painter looked at slide 3, "FY23 Budget Recap." He
noted that in FY 23, it was the revenue sensitivity graph.
He pointed out the revenue the state would receive as the
price per barrel of oil changed on the axis. He noted that
the revenue curve was not linear, because there was a
progressivity element in the oil taxes. He remarked that
the FY 23 budget would balance before transfers at $94 per
barrel, which was the true fiscal breakeven point.
Co-Chair Stedman stated that there were upcoming
supplemental adjustments that were not included in the
chart. He queried the expectations of the proposed
estimates.
9:07:31 AM
AT EASE
9:07:54 AM
RECONVENED
9:08:00 AM
AT EASE
9:09:24 AM
RECONVENED
9:09:30 AM
Mr. Painter stated that the governors budget had a fiscal
summary from the Office of Management and Budget (OMB) that
included a placeholder of $85 million for supplementals in
FY 23. He stated that the estimate was using $50 million
for fire suppression, but would probably be closer to $60
million. He stated that the supplemental would then be
increased to $95 million, due to OMBs public discussions.
He felt that the true number may be higher than $95
million.
Co-Chair Stedman wondered whether $88 per barrel was
required to meet the budget until the end of June.
Mr. Painter replied that the $88 was required for the
entire fiscal year.
Co-Chair Stedman felt that there needed to be a close eye
on the price of oil estimate.
Mr. Painter pointed to slide 4, "FY23 Budget Recap
(Cont.)":
• In FY23, the budget balances at $94 per barrel
before fund transfers this is the true fiscal
balancing point
• The legislatures budget transferred the FY22
surplus (nearly $1 billion) to the SBR and used that
to fill any FY23 deficit. The Governor vetoed most of
that transfer, leaving about $20 million in the SBR to
fill a deficit
• Additional revenue up to $102 per barrel will go
into the Public Education Fund to forward fund the K
12 formula
• Supplemental appropriations could change these
balancing points
Mr. Painter discussed slide 5, "2022 Session Recap":
One Time Items
$220.8 million to pay past unfunded School Bond
Debt Reimbursement from FY17
$84.0 million to repay past unfunded REAA
deposits from FY17
$199.0 million to the Permanent Fund Corpus to
satisfy an audit finding relating to FY17
royalties
$38.9 million in FY22 to bring the Community
Assistance Fund balance back $90.0 million
An additional $60.0 million in FY22 for oil and
gas tax credits in an effort to purchase the
remaining outstanding credits
9:15:45 AM
Mr. Painter pointed to slide 6, "Fiscal Outlook":
• Compared to the Spring 2022 Revenue Forecast, the
Fall 2022 Forecast projects $1.1 billion less UGF
revenue in FY23 and $0.7 billion less in FY24
• While the oil price spike in the first half of 2022
contributed to the CBR balance and financed a nearly
$1 billion UGF capital budget in the 2022 session, it
did not change the long term revenue picture
• Over the medium to long term, the Fall 2022 Forecast
is very similar to the Fall 2021 forecast
Mr. Painter looked at slide 7, "Fiscal Outlook (cont.)." He
noted that there was a substantial difference between the
FY 22 and FY 23 forecasts due to the price spike. He
remarked that by FY 27 and FY 28 there was virtually no
difference in the forecasts from the recent forecasts. He
noted that it was important to recognize that the price
spike brought more revenue in the short term, but did not
change the long-term fiscal picture, other than the extra
$1 billion in the Constitutional Budget Reserve (CBR).
Co-Chair Stedman remarked that there had been effort in
"shoring" up the municipalities and the state with the
understanding of the possible financial constraints in
upcoming years.
Mr. Painter discussed slide 8, "Fiscal Outlook (cont.)." He
stated that the slide showed the daily prices of Alaska
North Slope crude from January 2020 to current day. He
noted that the long-term forecast over year to year had
been relatively stable, the short term prices over recent
years had been very volatile.
9:20:53 AM
Co-Chair Stedman remarked that the statutory budget reserve
(SBR) could have been used for funding, but that was not
supported by the administration.
Mr. Painter displayed slide 9, "Fiscal Outlook (cont.)." He
stated that the slide was the fiscal sensitivity chart for
FY 24 for the governors budget. He remarked that the
dotted line represented the various revenues, and the solid
line represented the governors budget.
Mr. Painter pointed to slide 10, "Fiscal Outlook (cont.)."
He stated that the last year that showed a surplus was FY
12, so that was the starting point for the slide through FY
24. He noted that the blue area was petroleum revenue,
which was traditionally the largest source of revenue.
However, the petroleum revenue was roughly the same as the
percent of market value (POMV) draw.
Co-Chair Stedman asked for a definition about the issue.
Mr. Painter explained that the POMV draw from the Permanent
Fund was one of the largest sources of revenue for the
state since FY 19. He stated that the draw was 5 percent
equal to the market value for the previous five fiscal
years. He stated that it was approximately $3.5 billion for
the current year. He stated that prior to the POMV
creation, the Permanent Fund Dividend (PFD) came directly
from the Earnings Reserve Account (ERA).
Co-Chair Stedman wondered whether the funds could be used
for any purpose.
Mr. Painter replied that UGF were funds that could be used
for any purpose.
Mr. Painter addressed slide 11, "Fiscal Outlook (cont.)."
He stated that the slide layered on the budgets over the
years. He remarked that the background was the revenue from
previous charts. He stated that the foreground added the
budgets for each of the displayed years. He noted that the
blue color indicated the agency operations.
Mr. Painter looked at slide 12, "Fiscal Outlook (cont.)."
He remarked that the slide showed the savings balances. He
noted that the blue was the CBR and the red was the SBR. He
stated that the total savings balance was peaked at the end
of FY 13 at nearly $15 billion. He remarked that there was
a small deficit that year, and investment returns on those
accounts outweighed the deficit.
Senator Bishop commented that the large transfer into the
retirement system was a smart move.
9:29:27 AM
Mr. Painter discussed slide 13, "LFD's Budget Baselines":
• Two baselines to consider: current policy and
current law. These are intended to create a "clean"
starting point for the current budget rather than
previous years that are distorted by one-time items.
• Both scenarios use a slightly modified version of
the FY24 Adjusted Base for agency operations, the FY23
capital budget as the base for FY24. Since all
statewide items were fully funded in FY23, they also
both include full funding of statewide items. The only
difference in FY24 is the PFD.
• Current policy assumes a 50/50 PFD plus an energy
relief payment. 50/50 PFD (50 percent of POMV draw)
would be $1.76 billion, paying about $2,700 per
recipient. Adding a $420.1 million energy relief
payment would result in a total distribution of about
$3,350 per recipient.
• Current law assumes a statutory PFD.
• That is projected to be about $2.47 billion, paying
about $3,800 per recipient.
Mr. Painter pointed to slide 14, "LFD's Budget Baselines
(Cont.)." He remarked that there were s number of one-time
items in agency budgets. He pointed specifically to the $57
million for the K-12 formula, which was outside the
foundation formula. He stated that it had been removed from
the baseline moving into the next year. He noted that there
was nearly $30 million across the University of Alaska for
a number of multi-year research projects, but it was
designed as a one-time item, and not as an increase to
baseline funding. He pointed to a similar item in the
Department of Labor and Workforce Development (DOLFD) of
$7.4 million for the Alaska Marine Highway System (AMHS).
He noted that with the uncertainty around federal funds,
the legislature and governor had agreed to $20 million of
UGF as backstop if federal receipts were insufficient in FY
23. He stated that the money was also removed from the
baseline for FY 23.
Co-Chair Hoffman wondered whether the one-time increase for
K-12 funding was equivalent to a $100 increase to the Base
Student Allocation (BSA).
Mr. Painter replied that it was equivalent to approximately
$220.
9:34:20 AM
Mr. Painter discussed slide 15, "LFD's Budget Baselines
(Cont.)." He shared that the two statewide items were
identical for the baseline items. He stated that the school
debt reimbursement for the year was approximately $53.6
million of UGF plus additional DGF funds from the school
fund. He stated that the amount was down significantly from
past years because there was a moratorium on new debt since
2015. Therefore, the amount had decreased year to year. He
explained that the moratorium was scheduled to expire on
July 1, 2025.
Co-Chair Stedman queried the unfunded liability in the
retirement system.
Mr. Painter replied that it was approximately $7 billion.
Co-Chair Stedman asked whether it was a $1 billion increase
from the year prior.
Mr. Painter replied in the affirmative, and explained that
there were poor returns in FY 22 which were factored into
that average.
Mr. Painter looked at slide 16, "LFD's Budget Baselines
(Cont.)." The slide showed the two baselines through FY 24.
There was an expectation of $6.9 billion of UGF revenue. He
stressed that the numbers were identical through the pre-
PFD numbers of approximately $5.2 billion each.
Mr. Painter addressed slide 17, "Governor's FY24 Budget
Compared to Baselines." He stated that the governors
budget for agency operations was up $54.8 million over the
baseline, which was also 1.3 percent. He stated that it was
fairly close to the governors long-term ten-year plan.
9:40:28 AM
Mr. Painter pointed to slide 18, "Governor's FY24 Budget
(Cont.)
• Includes statutory PFD payment in FY24.
• Agency Operations is $54.8 million (1.3 percent)
above LFD baseline.
• Fully funds statewide items other than Community
Assistance.
• Pre transfer deficit of $322.5 million is filled
with a combination of ARPA revenue replacement ($10.6
million), drawing from FY23 forward funding of K 12
($114.1 million), and the SBR ($19.8 million) and CBR
($178.3 million)
Co-Chair Hoffman remarked that federal government provided
additional AMHS funds, and he believed that in order to
receive the funds there was an additional match required of
$40 million that was not included within the presentation.
Mr. Painter replied that the infrastructure provided
approximately $156 million in AMHS funds per year over five
years. He stated that the federal government had limited
how much could be spent on operating costs.
9:45:36 AM
Co-Chair Stedman stated that there would be a separate
presentation from AMHS to examine the cash flow needs.
Mr. Painter continued with slide 18:
• Governor did not submit supplementals on December 15
(they are due on the 15th day of session) but includes
an $85 million placeholder in the OMB fiscal summary.
Note that LFD does not include a similar placeholder,
so FY23 figures in our fiscal summary are pre
supplementals.
If FY23 forward funding is used to close the
FY24 deficit, any FY23 UGF supplemental
appropriation has the effect of increasing the
FY24 deficit.
Mr. Painter pointed to slide 19, "Governor's FY24 Budget
(Cont.)." He noted that the bottom line showed that pre-
transfer there was an FY 23 deficit of $422.5 million. He
stated that the two transfers from revenue replacement and
draw from the SBR to make up the deficit. He noted that
there was a deposit into the forward funding of $114.1
million, ending up with a balanced budget in FY 23.
Mr. Painter looked at slide 20, "Governor's FY24 Budget
(Cont.)." The slide showed the expenditures by agency and
type.
Co-Chair Stedman asked that definition for the two
different colors for the year be included in the x-axis.
Mr. Painter agreed to provide that information.
Mr. Painter discussed slide 21, "Governor's FY24 Budget
(Cont.)":
UGF Agency Operations are $54.8 million (1.3 percent)
above LFD baseline:
• ($20.9) million UGF (net zero all funds) by
utilizing Higher Education Fund for scholarship
programs and WWAMI
• $20.7 million UGF increase to Medicaid formula
$18.1 million for utilization and
inflation changes, $2.6 million to expand
postpartum coverage. 12/29 federal FMAP
phase out will change this number at
GovAmend
• No K 12 funding outside the formula, but funds
to statutory level including $30 BSA increase
authorized in 2022 session (HB 114)
$6.4 million UGF in other increases from
HB 114 fiscal notes
• $7.5 million increases to institutions in
Corrections, but $7.5 million decrease in
projected health care costs
• $6.2 million for DOH for tuberculosis and
congenital syphilis elimination plans
9:53:03 AM
Senator Wilson queried the estimate of the FMAP decrease,
and wondered whether that would be addressed in the
governors amended budget.
Mr. Painter felt that the issue would be reflected in the
governor's amended budget.
Senator Wilson recalled that agencies had struggled to hire
staff, and he wondered whether there would be a similar
issue in the current year. He asked if the legislature
should include more direct language.
Mr. Painter replied that the issue was more a question
specific to each individual agency.
9:55:42 AM
Co-Chair Stedman stated that there would be discussions
with OMB on the issue of the funded employees which did not
materialize.
Co-Chair Olson looked at the $6.2 million for syphilis
elimination efforts and asked how many people were affected
by congenital syphilis. He also asked whether the numbers
had increased or decreased over the last three years.
Mr. Painter replied that he did not have those details, and
agreed to provide that information.
9:57:22 AM
Mr. Painter pointed to slide 22, "Governor's FY24 Budget
(Cont.)":
Statewide Items total $359.0 million:
• School Debt Reimbursement, REAA Fund
Capitalization, State Assistance to Retirement
funded at statutory levels
• Oil and Gas Tax Credits funded with an
estimated $42.7 million to purchase remaining
credits
FY23 appropriation would have been
sufficient at Spring Forecast price but
leaves that amount unpaid based on the Fall
Forecast price
• No appropriation to Community Assistance Fund
(leaving $60.0 million balance, for a
distribution in FY25 of $20.0 million)
Co-Chair Stedman explained that there would be more detail
in a review of the Community Assistance Fund.
Mr. Painter looked at slide 23, "Governor's FY24 Budget
(Cont.)":
Capital Budget totals $276.4 million UGF, $2.1 billion
all funds:
• $171.3 million UGF to match federal funds
$125.8 million UGF for DOTPF federal match
$25.0 million UGF for Village Safe Water match
• Alaska Marine Highway System budget is incomplete in
Governor's December request due to timing issues with
federal funds
DOTPF received a response from the federal
government last week on its application for these
funds, so the Governor's amendments should
provide more clarity
10:00:58 AM
Mr. Painter discussed slide 24, "Long Term Outlook and
Governor's 10 Year Plan":
• LFD modeling baseline grows the current (FY23)
budget with inflation and all statewide items are
funded to statutory levels (this includes the PFD)
• With these baseline assumptions, deficits increase
from about $900 million in FY24 to $2.3 billion in
FY32, draining the CBR in FY26
• The Governor's 10 Year Plan makes several policy
changes relative to the baseline that reduce the
deficit, but still shows deficits each year that would
drain the CBR in FY27 absent new revenue
• The Governor includes new revenue targets increasing
from $300 million in FY24 to $900 million in FY27+,
with no specified source
Mr. Painter pointed to slide 25, "LFD Baseline Model." He
stated that the scenario was the current year's budget
adjusted for inflation in the out years.
10:04:33 AM
Co-Chair Stedman felt that there should be a focus on the
upcoming five years' cash flow to the state.
Co-Chair Hoffman looked at FY 26, and felt that there could
be a reduction of government or additional revenues. He
stated that in order to accomplish the goals there would be
breaking of state laws because the draw was over 5 percent
in the POMV.
Co-Chair Stedman remarked that the Alaska Mental Health
Trust Authority (AMHTA) had a draw of 4.25 percent, which
was much more resilient.
Mr. Painter discussed slide 26, "Long Term Outlook and
Governor's 10 Year Plan (Cont.)":
• Policy changes in Governor's 10 Year Plan:
Agency operations grow at 1.5 percent in FY 25+
PERS and TRS health care contributions are not
funded (as they were not in FY23/24)
Does not fund Community Assistance with UGF
Capital budget decreases to $276.5 million in
FY24, $220.0 million in FY25, and then grows by
1.5 percent per year
Assumption Differences in LFD Model:
Governor assumes supplementals and lapse cancel
out, LFD includes $50.0 million placeholder
LFD includes a placeholder for new school debt
after the moratorium ends in 2025, Governor does
not
10:11:11 AM
Co-Chair Stedman remarked that there should be a capital
budget that, at minimum, maintains the assets.
Senator Bishop added that there were two spending cap bills
in the current session.
Co-Chair Stedman stated that the people want spending caps
until there was an unfunded project.
Mr. Painter pointed to slide 27, "Long Term Outlook and
Governor's 10 Year Plan (Cont.)." He stated that the slide
compared the LFD baselines to the governors proposed
budget.
Co-Chair Stedman remarked that nearly half of the $4.2
billion it took for the agencies was formula driven, and
the other half was reductions.
10:16:04 AM
Mr. Painter addressed slide 28, "Governor's 10 Year Plan,
No New Revenue." He stated that the governors plan would
run out of money starting in FY 26.
Co-Chair Stedman noted that the projections were status quo
with the statutory PFD.
Mr. Painter agreed.
Co-Chair Stedman felt that there should be a discussion
about how to meet the obligations while working with the
statutory PFD.
Mr. Painter looked at slide 29, "Governor's 10 Year Plan,
with New Revenue ($300 900m per year)." He stated that the
slide showed the governors plan with the new revenue
targets.
Co-Chair Stedman thanked LFD for the presentation. He
discussed following day's agenda.
SB 40 was HEARD and HELD in committee for further
consideration.
SB 41 was HEARD and HELD in committee for further
consideration.
SB 42 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:20:43 AM
The meeting was adjourned at 10:20 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 013023 LFD FY24 Overview SFIN.pdf |
SFIN 1/30/2023 9:00:00 AM |
|
| 013023 SFIN Response from 1-30-23 Meeting.pdf |
SFIN 1/30/2023 9:00:00 AM |