Legislature(2023 - 2024)SENATE FINANCE 532
02/29/2024 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Fiscal Summary Update and Scenarios – Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 29, 2024
9:04 a.m.
9:04:40 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:04 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.
SUMMARY
FISCAL SUMMARY UPDATE and SCENARIOS LEGISLATIVE FINANCE
DIVISION
Co-Chair Stedman relayed that the committee would discuss
current revenue and expenditures for the FY 25 budget. The
director of the Legislative Finance Division (LFD) had
prepared a presentation. He wanted the committee,
legislature, and public have a briefing of the states
fiscal position before assembling the budget.
^FISCAL SUMMARY UPDATE and SCENARIOS LEGISLATIVE FINANCE
DIVISION
9:05:51 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed a presentation entitled "Fiscal Update" (copy on
file). He looked at slide 2, "Fiscal Summary of Governor's
Amended Budget," which was an updated fiscal summary that
did not include any amendments. He noted that the fall
revenue forecast was the top line of the table, and that he
was expecting the Spring Revenue Forecast in about two
weeks. He noted that numbers were tracking pretty closely
to the fall forecast, and the present forecast would be
only slightly higher. For FY 24, there was $6.5 billion in
Unrestricted General Fund (UGF) revenue, and for FY 25
there was $6.3 billion. The governors amendments added
about $30 million to agency operations above the original
budget.
Mr. Painter recalled that the slides the Office of
Management and Budget (OMB) director had recently shared
showed a $20 million difference. He noted that the
difference was that LFD had already backed out some of the
one-time items that were reflected in the governor's
amended budget. The OMB and LFD reports currently matched,
but previously the LFD reports had shown lower spending.
There were no changes to statewide items. The governor had
reduced the capital budget a bit for FY 25, primarily due
to lower projected need for federal highway matching funds
and also shifting a Department of Fish and Game fishing
vessel project from the FY 25 budget to the supplemental
budget.
Mr. Painter detailed that the governor's number for the
Permanent Fund Dividend (PFD) of $2.3 billion would likely
be updated with the Spring Revenue Forecast. He noted that
the APFC had an updated investment forecast with realized
income figures. He thought the number would not be hugely
different after the incorporation of an additional year in
the calculation. He spoke to energy relief payments, which
based on the fall forecast was $110.6 million. He recalled
a provision from the FY 24 budget that stipulated that if
revenue exceeded the spring revenue forecast, the amount
over the forecast would be split equally between the
Constitutional Budget Reserve (CBR) and energy relief
payments that would go out in FY 25 with the regular PFD.
Based on the fall forecast, the amount would be $110.6
million for each of the two split items. With the slightly
higher oil prices, the amount got slightly higher, and the
current data showed an estimated energy relief payment of
an additional $175 to add to the FY 25 PFD.
Mr. Painter continued to address slide 2 and highlighted
that the total budget before supplemental items in FY 24
was $6.1 billion, and the FY 25 governors budget was $7.3
billion, with the largest change being a switch to the
statutory dividend for an increase of just under $1.2
billion. In FY 24, before fund transfers there was a
surplus of $416 million. He pointed out the largest item
being the transfer to the CBR of $110.6 million. The post-
transfer surplus to spend in FY 24 was 292.7 million. If
the surplus was not spent it would revert back to the CBR.
The governor's total supplemental budget including
amendments was $183 million, which left was a post-transfer
surplus of about $109.3 million which could be appropriated
for additional supplementals or lapse back to the CBR.
Mr. Painter continued that in FY 25, there was a pre-
transfer governors proposed budget showed a deficit of
about $996.3 million. After fund transfers the total was
$1.16 billion. The governor proposed to fill the deficit by
drawing from the remainder of the Statutory Budget Reserve
(SBR) and $1 billion from the CBR.
9:10:58 AM
Co-Chair Stedman asked Mr. Painter to discuss the post-
transfer surplus/deficit for FY 24, which was forecast to
be around $109 million. He asked if it would be prudent to
leave some of the funds on the table in order to balance
the books for FY 24 in case of a potential revenue call.
Mr. Painter explained that with the way the Energy Relief
and CBR transfer worked, there was a sizeable buffer
between projected revenue and the amount of the transfer.
If projected revenue fell short of the fall forecast, the
transfer to the CBR and energy relief would go down. Under
the fall forecast there would be an approximately $220
million buffer. If the legislature spent up to the amount
of the transfer, it would have the energy relief as a
buffer.
Mr. Painter added that with the number of unfilled
positions in state government, the state had been lapsing
significant amounts of funds in the last few years, which
could be accounted for by moving unspent funding. He had
heard anecdotally with preliminary numbers that there was a
substantial lapse of over $100 million of appropriations
primarily due to the vacant positions. He agreed that
having some sort of buffer was prudent, but that between
the energy relief and the potential lapsed money there was
a potential buffer.
Mr. Painter continued that if the legislature was concerned
about a potential $1 billion deficit in FY 25, he thought
it might be prudent to leave the CBR to fill the deficit.
Co-Chair Stedman relayed that the legislature would adjust
the $1 billion deficit.
Co-Chair Olson considered the FY 24 column on slide 2 and
observed that the Community Assistance Fund was foremost in
his mind. He asked if the fund was included.
Mr. Painter relayed that $30 million appropriated by the
legislature for the fund had been vetoed out of the FY 24
budget and was not included in the totals for FY 24.
9:14:32 AM
Mr. Painter spoke to slide 3, "SB 140 (House Amended)
Fiscal Notes," which showed the bill provisions and
projected costs for SB 140 [a bill offered in 2023 that
related to funding for Internet services for school
districts] as passed by the legislature. He noted that the
bill was currently on the governor's desk. He had brought
the fiscal notes and made a document that was available on
Basis. He discussed how the timing of the bill made it so
the notes were not available to be attached to the bill. He
noted that the fiscal notes were prepared by the Department
of Education and Early Development (DEED) and were
submitted through OMB.
Mr. Painter listed a number of fiscal impacts of the bill
and listed the Broadband Assistance Grant estimated to cost
$39.4 billion, a $680 Base Student Allocation (BSA)
increase estimated to cost $174.6 million, a pupil
transportation increase estimated to cost $7.3 million, and
a change in the correspondence student rate estimated to
cost $14.55 million. He noted that the increase included
the impact of the proposed BSA increase.
Mr. Painter continued to list budget impacts of the bill
including a new charter school coordinator position for
$186.4, and a provision for a $500 per-student payment to
districts for K-3 reading improvement plans estimated to
cost $5.2 million. The reading plans estimate was based on
the mid-year reading assessment scores in the new
assessment from the Reads Act. He noted that LFD had made
an estimate based on the MAP state assessment that was
closer to $10 million. He encouraged the committee to use
the $5.2 million estimate, which he thought to be more
accurate. The total for the entire bill was $241.2 million.
Senator Merrick referenced a remark by the governor in a
press conference that posited that there was nothing in SB
140 that was related to the Alaska Reads Act. She asked if
Mr. Painter would disagree with the statement.
Mr. Painter explained that the bill was not directly
related to the Alaska Reads Act but would provide
additional funding to students not meeting the assessment
from the act. He thought the bill was related to the act.
9:19:05 AM
Mr. Painter referenced slide 4, "Major Outstanding Items":
• Senior Benefits Legislation (SB 170): Passed Senate
with $23.5 million UGF fiscal note
• Alaska Energy Authority Electrical Grid Grant: Not
yet included in Governor's budget. Estimated need for
this year is $30-35 million
• Alaska Marine Highway: Shortfall in CY25 of up to
$38.0 million
• Ongoing Employee Bargaining Negotiations: three
unions (Alaska Correctional Officers Association,
Alaska Public Employees Association Supervisory Unity,
and Labor, Trades and Crafts) are currently
negotiating new contracts to begin in FY25.
Mr. Painter noted that there was childcare legislation that
had passed that House and which he had neglected to add to
the summary. The fiscal note was under $1 million and there
were possible tax implications. He discussed the Alaska
Energy Authoritys Electrical Grid Grant and the potential
for using existing bond funds or going out for new bonds.
He thought under most scenarios, if the legislature wanted
the work to proceed in the current year it would have to
put forward the approximately $30 to $35 million in
matching funds.
Mr. Painter discussed the maximum Alaska Marine Highway
System (AMHS) shortfall and explained that the shortfall
would be a maximum of $38 million if AMHS received the same
grants in CY 25 as in CY 24 and the state tried to run the
same schedule in CY 25 as in CY 24. Items that could reduce
the shortfall would include running less ships than the 7
planned or receiving a larger grant than expected. He
suggested that the legislature consider backstop language
in case the AMHS did not receive the full federal grant.
Mr. Painter recalled that the legislature had put in $10
million in backstop language the previous year, which was
really only to cover the difference between the amount of
federal authority in the governors budget for the maximum
grant the state was eligible for. He contended that it had
not technically been backstop language because it was known
that the state would need the funds. The legislature had
put in a $20 million backstop, which the governor had
vetoed. He summarized that if the legislature wanted a
backstop in the case of not getting the grant, it would
want to go beyond what was in the current governors
budget.
Mr. Painter discussed the three ongoing union negotiations.
He noted there was a new bargaining unit in the University
of Alaska of graduate student employees trying to get a
first contract. He estimated there were potentially as many
as four new contracts, and that the contracts were often
received after the statutory deadline of day 60 of the
legislative session. He recalled that a few years
previously, Co-Chair Stedman had offered an amendment on
the Senate floor to add in a late arriving contract. He
noted that for the supervisory unit, there was language
from a bill passed a couple years previously that indicated
that exempt salaries would follow the supervisory unit
contracts. He thought there was some concern the language
would not be effective as currently drafted, but if the
change was implemented it could add several million.
9:24:14 AM
Senator Kiehl asked about the grid modernization grant and
thought Mr. Painter had indicated that the state had to
provide a one-to-one match. He asked if the requirement was
part of the grant or if the funds could come from
ratepayers that would buy electricity.
Mr. Painter believed the funds did not have to be from the
state. He explained that the Alaska Energy Authority (AEA)
had to come up with the matching funds, but it could be
from a source other than state General Fund dollars.
Senator Kiehl assumed that there would be a split and the
state would come up with a portion of the funds. He
wondered if the timing would allow for rate payers to come
up with some of the funds for a portion of the match in the
first year.
Mr. Painter was not certain, and relayed that when he
talked to AEA it was still working on potential plans
without providing details on timing. He hoped details would
be available in the near future.
9:25:37 AM
Mr. Painter turned to slide 5, "Getting to a Balanced FY25
Budget," which showed a table suggested by the chair to
illustrate building a budget. He highlighted that the table
showed the fall revenue forecast at the top, then
subtracting the governors operating budget and fund
transfers and the governors capital budget. There was a
total of $1.3 billion left to spend before accounting for
other items such as the PFD. The next category was
legislation passed by both bodies. He mentioned SB 140 and
a bill for senior benefits, which accounted for $241.3
million and $235 million respectively. There were
additional items that the legislature might want to account
for, including items listed on the previous slide. He
estimated that a 75/25 dividend (the amount the legislature
appropriated the previous year) for $914.3 million,
combined with the other expenditures above on the table,
would leave a surplus of $55 million. A 75/25 PFD was
estimated to be $1,360 per person, with an additional $175
energy relief payment.
Mr. Painter addressed the next line on the table, which
considered if legislature paid a 50/50 PFD for about $1.8
billion, it would leave a deficit of $859 million. The
statutory PFD proposed by the governor would total $2.3
billion, which would leave a deficit of about $1.3 billion.
He clarified that the 50/50 PFD was estimated to be $2,277
plus $175 of energy relief, and the statutory PFD was
estimated to be $3,513 plus $175 of energy relief.
Co-Chair Stedman pondered the scenario with a $55 million
surplus.
Mr. Painter answered affirmatively.
Co-Chair Stedman remarked that it looked as though the
capital budget was in peril and the committee had work to
do.
Mr. Painter considered slide 6, "Other Potential Budget
Items," which showed a table of items that there may be
demands for. He listed the Renewable Energy Fund, which had
put out a total of $32 million in grants and the governor
had put in $5 million. The governor funded the top project
on the school construction list for $4 million, and the
entire list was $260.5 million. He noted that the entire
project list could be found on DEEDs website. He cited
that the governor had funded the top two projects on the
school major maintenance list, and the entire list had a
total of $249 million.
9:29:56 AM
AT EASE
9:30:07 AM
RECONVENED
Mr. Painter continued to address slide 6 and spoke to the
deferred maintenance list. He noted that the governor had
funded $28.2 million using the Capital Income Fund. The
entire list was $2.1825 billion. He noted that $1.5 billion
and the majority of the list was from the University, which
had requested an additional $35 million through HB 236. The
rest of the list of approximately $700 million.
Co-Chair Stedman relayed that normally the entire major
school maintenance was not funded. He noted that for major
school maintenance, the legislature would often fund part
of the list for $25 million to $40 million, and in stronger
revenue years up to $100 million. He relayed that for UA it
was not uncommon to fund from $25 million to $30 million.
9:31:31 AM
Senator Wilson asked for information on average historical
legislative funding.
Mr. Painter was happy to provide a historical information.
He noted that there was not a set funding plan, but rather
the legislature seemed to appropriate what was available
from year to year. He mentioned the School Bond Debt
Reimbursement Program, with a moratorium that was in effect
since 2015. The moratorium was set to expire July 1, 2025,
after which districts would be able to go out and bond and
seek state reimbursement for 40 percent to 50 percent per
year.
Mr. Painter displayed slide 7, "Other Potential Budget
Items (cont.)":
• Governor vetoed $30.0 million FY24 capitalization of
Community Assistance Fund; without that, the FY25
distribution will be $20.0 million instead of the full
$30.0 million.
• Fiscal notes for Governor's bills:
Governor's Alaska Affordability Act (SB 237) could
cost up to $237.6 million in tax revenue.
Governor's Teacher bonuses bill (SB 97) has an
estimated cost of $54.5 million.
• Legislative capital budget additions and district
projects are not yet included.
• Other potential additions include:
University of Alaska ($18.6 million UGF operating
difference between Regents' request and Governor's
budget, $27.0 million difference in the capital
budget).
Additional items that emerge in subcommittee
process.
Mr. Painter expanded that the legislature had the option of
a one-time payment to the Community Assistance Fund. He
thought the governor had introduced over 50 bills in each
body. He discussed the teacher bonuses bill and noted that
LFD did not think the fiscal notes fully matched the bill
text. He mentioned potential additions to the budget from
the University or from within the subcommittee process.
9:35:55 AM
Senator Bishop asked Mr. Painter to repeat what he said
about the governor's teacher bonus bill and how it would be
funded.
Mr. Painter reiterated that the bill had an estimated cost
of $54.5 million, and he thought the fiscal note was
slightly higher with UGF for a three-year program.
Senator Bishop thought Mr. Painter had mentioned the
Teachers' Retirement System (TRS).
Mr. Painter explained that when the bonuses were paid,
there would be deductions for the employee contributions to
TRS. The bill stipulated that the bonus would be less the
amount. The way the fiscal note was written, the teacher
would receive the bonus and the state would pay the TRS
contribution on behalf of the teacher, which did not quite
match the bill text. He thought the fiscal note could be
aligned with the bill at some point, and the $54.5 million
reflected the funding necessary to do so.
Co-Chair Hoffman addressed the teacher bonuses, and
recounted that the governor had stated our work isnt
done. He thought the governor was referring to the item on
the slide. He referenced slide 3 and discussed SB 140. He
noted that the Senate had added $40 million, and the other
body had increased the other items. He mentioned a lot of
discussion in the Senate. He did not see where there would
be room to address the teacher bonuses given the state's
financial position and the overwhelming support for SB 140
received by both bodies.
9:38:35 AM
Mr. Painter highlighted slide 8, "Fire and Disaster
Funding":
• FY14-23 actual UGF spending for Fire Suppression
averaged $49.3 million. The FY25 Governor's budget is
$14.2 million, a difference of $35.1 million.
• The FY24 Governor's supplemental includes $94.0
million for this purpose.
• Underbudgeting this item leads to routine
supplemental needs.
FY16-23 average spending from the Disaster Relief
Fund is $20.5 million. The Governor's FY25 budget
requests $5.0 million, a difference of $15.5 million.
• Disasters are unpredictable, but annually funding
the average usage would make the budget more
consistent.
Mr. Painter thought that the state had not necessarily
funded the items on the slide up to the expected cost each
year. He addressed the graph that showed the legislature
had not met the funding need each year, even though it
increased funding in FY 20. The green line showed average
spending. He noted that the 10-year average did not account
for any anticipation of costs going up due to inflation or
other factors. The governor's budget did account for an
increase in firefighter pay he was proposing as part of the
budget. He summarized that the impact of the underfunding
was an increase in supplemental items.
Mr. Painter addressed the graph on slide 8 that showed
deposits and expenditures to the Disaster Relief Fund. The
legislature had funded the fund thought larger amounts of
funding periodically, with smaller amounts from year to
year. He noted that the average spending from the fund was
$20.5 million. The Governor's FY25 budget requests $5.0
million, a difference of $15.5 million. He noted that the
legislature put $50 million in FY 22. Based on the current
spending level of $20 million per year, there would be a
shortfall in the fund in FY 25.
9:41:53 AM
Senator Bishop referenced testimony from firefighters
around the state with requests for increased funding after
losing crew to out of state where there were better wages.
Co-Chair Hoffman asked if Mr. Painter had looked at the
problem of snow removal, which seemed to be a recurring
issue in areas of the state such as Anchorage, Fairbanks,
and Juneau. He asked if there was an estimated number to
determine if the last two years were the norm.
Mr. Painter did not have the numbers at hand. He noted that
the governor's budget included an additional $1 million for
snow removal, which was about the amount needed for one
weather event. He noted that there was often more than one
snow event. He added that funding could come from emergency
weather events appropriations using lapsing balances. He
thought the governor had a proposal for the funding in the
current year, but the amount was smaller than the previous
years available funding. He offered to provide further
details related to actual spending.
Co-Chair Stedman noted that the funding had been a topic of
a subcommittee meeting with the Department of
Transportation and Public Facilities.
9:44:15 AM
Co-Chair Stedman asked to go back to slide 5, and
considered the three different PFD calculations and amounts
at the bottom. He thought the PFD would likely be one of
the three scenarios listed on the slide and noted that
historically the committee had used the 75/25 calculation.
He thought it looked as though the scenario with the $55
million surplus would result in the funds being absorbed by
fire disaster and disaster relief as mentioned on the
previous slide. He noted there would be a revenue update on
March 15, after which there would be a list of expenditures
to prioritize.
Co-Chair Hoffman asked Mr. Painter to provide a number for
the buffer that the legislature used for the previous five
years.
Mr. Painter agreed. He noted that in some years there had
been a balanced budget but there had also had access to the
CBR with a three-quarters majority as a backstop. He
thought there probably needed to be a buffer if the CBR
access was not available in the case that oil prices ended
up below the forecast. He reminded that in FY 23, the state
had not had a very large buffer and had to go back for a
CBR vote in the supplemental budget because of an oil price
drop.
Co-Chair Stedman thanked Mr. Painter for his testimony and
noted that the discussion had not included funds set aside
as a dollar target for fiscal notes. He commented that all
legislation had a cost.
Co-Chair Stedman discussed the agenda for the afternoon
meeting.
ADJOURNMENT
9:48:18 AM
The meeting was adjourned at 9:48 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 022924 SFIN Fiscal Update 2-29-24.pdf |
SFIN 2/29/2024 9:00:00 AM |
|
| SB140CS(FIN)AM-EED-SSA-2-23-24 - watermarked.pdf |
SFIN 2/29/2024 9:00:00 AM |
SB 140 SB 186 |
| SB140CS(FIN)AM-EED-PEF-2-23-24 - watermarked.pdf |
SFIN 2/29/2024 9:00:00 AM |
SB 140 SB 186 |
| SB140CS(FIN)AM-EED-MEHS-2-23-24 - watermarked.pdf |
SFIN 2/29/2024 9:00:00 AM |
SB 140 SB 186 |
| SB140CS(FIN)AM-EED-BAG-2-23-24 - watermarked.pdf |
SFIN 2/29/2024 9:00:00 AM |
SB 140 SB 186 |
| SB140CS(FIN)AM-EED-PT-2-23-24 - watermarked.pdf |
SFIN 2/29/2024 9:00:00 AM |
SB 140 SB 186 |
| SB140CS(FIN)AM-EED-FP-2-23-24 -watermarked.pdf |
SFIN 2/29/2024 9:00:00 AM |
SB 140 SB 186 |