Legislature(2025 - 2026)
02/24/2025 09:00 AM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| HB65 | |
| Office of Management and Budget: Governor's Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
February 24, 2025
9:00 a.m.
9:00:59 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:00 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Mike Cronk
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
Senator Donny Olson, Co-Chair
ALSO PRESENT
Jane Pierson, Staff, Representative Louise Stutes; Lacey
Sanders, Director, Office of Management and Budget; Senator
Cathy Giessel.
SUMMARY
HB 65 RAILROAD CORP. FINANCING
HB 65 was REPORTED out of committee with six "do
pass" recommendations and one previously zero
fiscal note: FN 1 (CED).
OFFICE OF MANAGEMENT and BUDGET: GOVERNOR'S AMENDMENTS
HOUSE BILL NO. 65
"An Act authorizing the Alaska Railroad Corporation to
issue revenue bonds to finance the replacement of the
Alaska Railroad Corporation's passenger dock and
related terminal facility in Seward, Alaska; and
providing for an effective date."
9:02:54 AM
Senator Cronk MOVED to ADOPT Amendment 1, 34-1S0448\A .2,
Walsh, 2/17/25 (copy on file):
Page l , line 3, following "Alaska;":
Insert "authorizing the Alaska Railroad Corporation to
issue revenue bonds to 3 finance the completion of the
Port MacKenzie Rail Extension in Point MacKenzie,
Alaska;"
Page 2, following line 7:
Insert a new bill section to read:
"* Sec. 2. The uncodified law of the State of Alaska
is amended by adding a new section to 9 read:
LEGISLATIVE AUTHORIZATION AND APPROVAL. (a) The Alaska
Railroad I l Corporation is authorized to issue
revenue bonds under AS 42.40.250 to finance the
completion of the Port MacKenzie Rail Extension in
Point MacKenzie, Alaska, and associated costs,
including, without limitation, reserves for debt
service and capitalized 14 interest, if necessary or
appropriate, and costs of issuance. The maximum
principal amount of bonds that the Alaska Railroad
Corporation may issue under this section is
$58,000,000. The Alaska Railroad Corporation may issue
the bonds in a single issuance or in several
issuances, without limitation as to number of
issuances or timing, and as the Alaska Railroad
Corporation determines best furthers the purpose of
financing the extension of the Alaska 19 Railroad
Corporation's rail from Point MacKenzie, Alaska, to
Houston, Alaska, and associated costs. The bonds shall
be repaid from revenue or other funds available to the
Alaska Railroad Corporation. The general credit of the
Alaska Railroad Corporation and the state may not be
pledged for the repayment of the bonds.
(b) The authorization under (a) of this section
extends to bonds issued to refund the
-1- Drafted by Legal Services
34-LS0448\A.2 bonds authorized in this Act. The
principal amount of the bonds authorized in this Act
may be 2 increased in an issue of refunding bonds in
an amount equal to the costs of refunding.
(c) This section constitutes the approval
required by AS 42.40.285 for the issuance of 4 the
bonds described in this section.
(d) The bonds authorized to be issued under this
section are issued by a public 6 corporation and an
instrumentality of the state for an essential public
and governmental 7 purpose.
(e) In this section, "bond" means a bond, bond
anticipation note, note, refunding bond, or other
obligation."
Renumber the following bill section accordingly.
Senator Merrick OBJECTED for discussion.
9:03:09 AM
Senator Cronk explained the amendment.
Senator Cronk WITHDREW the AMENDMENT.
9:04:15 AM
JANE PIERSON, STAFF, REPRESENTATIVE LOUISE STUTES, thanked
the committee.
9:04:53 AM
Co-Chair Stedman explained the fiscal note.
9:05:26 AM
Co-Chair Stedman MOVED to REPORT HB 65 from committee with
individual recommendations and attached fiscal note. There
being NO OBJECTION, it was so ordered.
9:05:46 AM
AT EASE
9:05:52 AM
RECONVENED
HB 65 was REPORTED out of committee with six "do pass"
recommendations and one previously zero fiscal note: FN 1
(CED).
9:06:15 AM
AT EASE
9:07:52 AM
RECONVENED
^OFFICE OF MANAGEMENT and BUDGET: GOVERNOR'S AMENDMENTS
9:08:16 AM
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
(OMB) discussed "FY2026 Governor Amended Budget" (copy on
file). She looked at slide 2, "FY2026 Updated Fiscal
Summary She stated that the most recent amendments from
the governors office were sent on February 18, 2025. She
relayed that the slide showed an updated fiscal summary
that incorporated the amendments, which included FY2025
Supplemental Requests and FY2026 budget amendments. She
stated that FY2025 Operating Supplemental requests
submitted totaled $40 million in All Funds, of which $36.2
million was Unrestricted General Funds (UGF). The amendment
increased the total for Operating Supplementals to $453.2
million, of which $83.7 million was UGF. She spoke to the
Capital Supplementals, which totaled a reduction of $1.9
million, but an increase of $500,000 UGF. The total for
Capital Supplemental was $74.3 million, $500,000 of which
was UGF. The total of all Supplementals submitted was $522
million, $84.2 million in UGF. The overall deficit for 2025
was approximately $157 million.
Ms. Sanders spoke to the Operating Budget Amendments. She
shared that for FY2026 the Operating Budget amendments
submitted totaled $300 million in All Funds, and $32
million in UGF. The Operating Supplementals totaled $12
million, an increase of $11.6 million in UGF. The total for
amendments was $312 million, of which $43.9 million was
UGF. She noted the bottom of the slide which showed the
total overall deficit for FY2026 totaling $1.56 billion.
9:11:26 AM
Co-Chair Hoffman interjected that Ms. Sanders had
misspoken, calling the Operating Budget the Capital Budget.
9:11:27 AM
Ms. Sanders clarified that she was discussing the Operating
Budget amendments. She stated tat the total of all
amendments was $312 million. Operating amendments totaled
$300 million and Capital Budget amendments totaled $12
million.
9:11:46 AM
Co-Chair Stedman asked for more clarity about the second
line on the slide, POMV ERA Draw For Government. He asked
where the Permanent Fund Dividend was located on the slide.
9:12:06 AM
Ms. Sanders replied that the second line on the chart
showed revenue available for appropriation.
9:12:40 AM
Co-Chair Stedman asked whether the line reflected the
operating expenditures of the permanent fund.
9:12:46 AM
Ms. Sanders replied that the permanent fund appropriation
was the Permanent Fund Dividend, and the line showed the
amount that would be appropriated in 2026 and showed a full
statutory dividend.
9:13:03 AM
Co-Chair Stedman thought that the label could be confusing
for the public. He asserted that the POMV draw was a draw
into the general treasury to be disbursed. He thought it
would ben helpful if expenditures were clearly delineated.
9:13:59 AM
Co-Chair Hoffman clarified that the percent of market value
(POMV) draw was the 5 percent maximum and was not
overdrawing the fund.
9:14:12 AM
Ms. Sanders agreed.
9:14:22 AM
Ms. Sanders looked at slide 3, "Operating Governor Amend
Requests." The slide encompassed the governors Operating
Budget requests by department. She highlighted each
department She said that the amendments incorporated the
changes for the implementation of EO 136, which would
establish the Department of Agriculture. There were two
pieces to the request: the transfer of the existing 37
positions and $2.7 million from the Department of Natural
Resources, and new funding of $2.7 million for 13 new
positions and start-up costs. There were two requests from
the Department of Administration of Artificial Intelligence
(AI) initiatives. The first was offering Microsoft 365 Co-
Pilot to 2,000 state employees, and two short term AI
projects one in the Department of Environmental
Conservation to improve forms and permitting processes, and
a second in the Department of Administration to improve
payroll processes. Two significant adjustments were shown
under the Department of Corrections: a $4.1 Million
increase for Community Residential Centers and a technical
correction related to Restorative Justice funds of $5
million. She noted changes to the Department of Education
budget for the Alaska Performance Scholarship and Alaska
Education Grants. She continued to the Department of
Environmental Conservation, which contained a new item for
the Clean Water Act Section 404 Dredge and Fill Permitting
Program totaling $1.4 million. She furthered that in the
Department of Health, the updated Medicaid projections
brought an increased need $19.6 million UGF and $220
million in anticipated federal receipts. She noted two
additional items in Public Assistance, one for $8.2 million
- $4.1 UGF and $4.1 federal receipts, and another for
administrative work totaling 1.6 million - $814.9 UGF and
$814.9 in federal receipts. She spoke to changes in the
budget for the Department of Natural Resources associated
with the EO 136 transfer from the Department of Natural
Resources to the Department of Agriculture. She highlighted
the in the Department of Public Safety there was a request
for $1.6 million to increase a grant to the Northwest
Arctic Borough Public Safety Office Program.
9:21:37 AM
Ms. Sanders remarked that there were many pages of
transactions that showed a net zero that reflected changes
to address intend language added the previous year by the
legislature and adhered to AS 37.07.020(e) and reflected
annual facility maintenance operations and repairs
throughout the university's budget structure. She concluded
that there were two technical adjustments in Debt Services
and Fund Capitalization, both changes aligned the Public
School Trust fund with the Fall Revenue Forecast as well as
a technical adjustment in the calculation for community
assistance through the Power Cost Equalization Program.
9:22:40 AM
Co-Chair Hoffman announced that the amendments would be
submitted to the budget subcommittees for consideration. He
commented that the state was currently in deficit spending
and the committee did not plan to use the Constitutional
Budget Reserve (CBR) to pay for the substantial increase to
a budget already in deficit. He spoke to $680 increase for
the Base Student Allocation and the 75/25 split for the
Permanent Fund Dividend and the need to address the already
$500 million deficit. He asserted that the state could not
spend money it did not have.
9:24:12 AM
Senator Kiehl asked about the request for funding for AI to
improve functionality of the payroll system. He understood
that the current payroll system involved three manual steps
and had heard that the attempt to digitize timesheets
instead of printing them had been shelved. He wondered how
the state was going to get AI to help with manual
processes.
9:25:04 AM
Ms. Sanders replied that there were many improvements that
needed to be made surrounding the payroll processes. She
said that connecting the paperwork for new employees to the
payroll system was cumbersome and incomplete. She believed
that automation would streamline the process.
9:26:10 AM
Senator Kiehl agreed that reducing manual entry and paper
forms was a good goal but argued that AI was not the tool
to make the process more efficient.
9:26:32 AM
Senator Kiehl asked about the DEC supplemental request for
404 Primacy. He recalled that there had been policy
discussion about whether the state should pay for the work.
He wondered why the item was a supplemental and not a
regular budget funding request.
9:27:09 AM
Ms. Sanders clarified that the request was an FY2026
request and not a supplemental request.
Co-Chair Hoffman said that the line item had been addressed
in the past and subsequently denied.
9:27:32 AM
Co-Chair Stedman wondered why the administration would come
forward with additional expansions, such as the proposed
Department of Agriculture, given the size of the deficit.
9:28:10 AM
Ms. Sanders relayed that the administration ad grappled
with the budget for several years. She felt that the
changes that would appropriately stand up the new
department needed to be brought before the committee. She
said it was her job to bring the requests before the
committee.
9:28:53 AM
Co-Chair Stedman thought that expansion of state services
could be investigated when there was additional revenue,
but that this was not the current situation.
9:29:16 AM
Co-Chair Hoffman agreed.
9:29:45 AM
Ms. Sanders addressed slide 4, "Capital Governor Amend
Requests She highlighted the two items under the
Department of Commerce, Community, and Economic
Development. The first was federal receipt authority for
the Alaska Energy Authority (AEA) Statewide Grid Resilience
and Reliability Project, which was receiving and additional
$2.7 million of federal funds. The second was the request
for $600 thousand that would provide three organizational
grants if a municipality was created under statute. She
noted a $1.5 million request for Mount Edgecumbe High
School under the Department of Education and Early
Development for installation of an elevator to meet
Americans with Disabilities (ADA) compliance. She said the
in the Department of Natural Resources there was a National
Historic Preservation Fund request for federal matching
funds. She spoke to the request for the Department of
Public Safety for the Fairbanks Post Remodel Evidence
Building and Site Work completion totaling $6.2 million.
She ended with a $2 million capital project for State
Managed Seaplane Base and Harbor Facility Funding.
9:32:44 AM
Co-Chair Stedman asked about the DOT&PF harbor project. He
shared that the state subsidized a handful of small harbors
that produced no revenue. He said that the issue could be
examined in subcommittee.
9:34:12 AM
Co-Chair Stedman spoke to the elevator at MEHS. He asserted
that the problem had existed for over a decade and wondered
why the request had taken so long.
Ms. Sanders replied that in previous years classes had been
relocated to accommodate students that needed to use the
elevator. She said that the number of students that needed
the elevator had increased and now also included faculty.
Co-Chair Stedman requested the maintenance list for MEHS
for the last several years. He wanted to see when the
elevator had first appeared on the list. He stated that
maintenance funds had been added by the committee in the
past for maintenance at the school, which had been
subsequently vetoed. He furthered that there were
maintenance issues at the Fairbanks Pioneer home that
should be addressed. He wondered about the administrations
long-term view for the home.
9:36:41 AM
Ms. Sanders replied that the home was on the
administrations radar. She lamented that the cost to
replace the home exceeded available funds. She assured the
committee that the home was operating and housing residents
and was still a topic of conversation by the
administration.
9:37:26 AM
Co-Chair Hoffman noted that CO-Chair Steman was the Chair
of the Capital Budget and would be bringing the issue back
to the table.
9:37:43 AM
Ms. Sanders pointed to slide 5, "Operating Supplemental
Requests The first item on the slide was under the
Department of Commerce, Community, and Economic Development
and was a reversal of the $50 million UGF request in the
Fast track Supplemental for AIDEAs backstop. Under the
Department of Corrections there was an addition of $7.5
million dollars, a fund source change from federal receipts
to UGF funds for federal man day billings. The addition
would be reflected in the FY2026 budget and was the result
of changed made by U.S. Marshalls resulting in less federal
man days that reduced collections for both FY2025 and
FY2026. She continued to the item under the Department of
Family and Community Services, which was also requested in
the FY2026 budget, $3 million to ensure continued
operations at the Alaska Psychiatric Institute. She
discussed the $5.9 million listed on the Department of
Health (DOH) line and the Special Appropriations line. The
DOH had been recently notified by the federal Department of
Agriculture that the states 2023 error rate for the
Supplemental Nutrition Assistance Program (SNAP) program
had been insufficient, which resulted in an $11.9 million
penalty. The penalty could be split, with half of the funds
being invested in new investments within the department.
The DOH funds would be used for one-time technology
improvements and the Special Appropriation would go from
the Department of Law to the U.S. Department of
Agriculture. She said that this was a reappropriation and
had a different tracking code due to a 2021 cyberattack,
which was no longer a threat.
9:42:43 AM
Senator Kiehl asked about the $10 million encumbered for
liability on the cyberattack.
Ms. Sanders said it was a combination of the $5.9 that
would be reinvested in DOH IT related project, and $5.9
that would be paid under Special Appropriations. She said
the $10 million was still available.
9:43:25 AM
Senator Kiehl remarked that the state could get some value
out of half of the penalty. He said that when DOH had
previously been before the committee he had asked about the
risk of federal penalties related to SNAP and had been
assured that the resources would fix the problem and that
the state would not face federal penalties.
9:44:20 AM
Ms. Sanders replied that she had not been a part of those
conversations. She said that the department knew about the
backlog in 2023 and had worked to address the backlogs with
one-time appropriations. She reiterated that the backlog
had resulted in the penalty. She offered to ask the
department to follow up with the committee.
9:44:55 AM
Co-Chair Hoffman noted that the current administration had
made the SNAP comments, and it would be appreciated if the
committee could get an answer on the matter. He stressed
that the committee relied on useful responses form the
Dunleavy Administration to do their work.
9:45:26 AM
Senator Kiehl asked whether the administration had decided
to bear the penalties rather than try to fix the backlog
problem.
9:46:04 AM
Ms. Sanders replied that she did not have the paperwork in
front her but would follow up with the committee. She
stated that the notification allowed for the $11.9 million
penalty but did not allow for the prior investment to be
included.
9:46:59 AM
Ms. Sanders continued to discuss slide 5. She noted the
item for the Department of Labor and Workforce Development.
She said that there were several items throughout the
budget for the supplemental that adjusted the Technical
Vocation Education Program distribution. She said that in
the FY2025 budget, appropriation for the TVEP program were
in the numbers section of the bill, which required OMB to
bring forth supplementals based on what was available for
grants. In 2026 the appropriations would be in the language
section so that they did not need to come before the
committee each time the estimate was adjusted. She noted
the $1 million request in the Department of Law for
contracting for assistance with negotiation of bargaining
unit agreements. She moved to Fund capitalization, which
was an additional $11 million for Disaster Relief.
9:50:51 AM
Ms. Sanders explained slide 6, "Capital Supplemental
Requests She noted that the two items were both within
the Department of Commerce Community and Economic
Development, one for the Blood Bank of Alaska to finalize
their doner testing laboratory, and a technical correction
for Alaska Oil and Gas Conservation Commissions data
management project.
9:52:11 AM
Ms. Sanders thanked the committee. She remarked that there
were two spreadsheets in the backup and was available for
questions.
9:52:46 AM
Co-Chair Hoffman discussed committee business.
ADJOURNMENT
9:53:16 AM
The meeting was adjourned at 9:53 a.m.
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