Legislature(2025 - 2026)SENATE FINANCE 532
03/19/2025 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Updated Fiscal Outlook by the Legislative Finance Division | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
March 19, 2025
9:00 a.m.
9:00:47 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 Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Mike Cronk
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
None
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division.
SUMMARY
PRESENTATION: UPDATED FISCAL OUTLOOK BY THE LEGISLATIVE
FINANCE DIVISION
Co-Chair Hoffman reviewed the meeting agenda. He noted the
committee would hear a three-year fiscal outlook update
from the Legislative Finance Division (LFD).
^PRESENTATION: UPDATED FISCAL OUTLOOK BY THE LEGISLATIVE
FINANCE DIVISION
9:01:29 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
provided a PowerPoint presentation titled "Updated Fiscal
Outlook," dated March 19, 2025 (copy on file). He began on
slide 2 titled "Fiscal Summary of Governor's Amended Budget
with Spring Revenue Forecast." The most significant change
was to the spring revenue forecast, which was a fiscal
summary showing the governor's amended budget with the
spring forecast, and also incorporated amendments received
through the previous week. In FY 25 the governor added
three amendments with Unrestricted General Fund (UGF)
impact. The change was shown on the governor's
supplementals line, which was up to $91.4 million, after
previously being about $84 million. In FY 25 the spring
revenue forecast had almost no change and was less than a
million difference. The deficit before the supplemental for
FY 25 was $81 million. With the supplemental the FY 25
deficit was projected to be $172.5 million. In FY 26 the
revenue forecast was down about $70 million, representing
$2 in oil price as well as a few other changes. The agency
operations number from the governor was a little higher due
to amendments.
Mr. Painter continued that the governor's amendments
received the previous week included three bargaining unit
contracts. There were six more contracts expected to be
renegotiated in the current year. The renegotiations
included the Alaska Correctional Officers Association
(ACOA), one of the University unions, and teachers at Mt.
Edgecumbe. The bargaining unit contracts totaled about $16
million, and the other numbers were unchanged. The
amendments brought the deficit up. The FY 26 deficit from
the governor's budget was projected to be $1.5 billion at
the beginning of session and the current projection was
$1.65 billion. The difference was due to the amendment
packages and the lower revenue forecast. Post-transfer, the
deficit in the governor's budget was 1.655 billion, which
would draw over half the $3 billion remaining balance in
the Constitutional Budget Reserve (CBR). With the FY 25
deficit and the FY 26 deficit (following the governor's
proposed budget) it would draw a little over half the CBR
balance.
9:04:33 AM
Co-Chair Hoffman relayed the committee was working with the
other body to address the FY 25 supplemental. He hoped to
work with the committee to come up with a plan in the next
30 days. He relayed that since the budget was voted on by
the last legislature and it was their position to try to
fund the gap with the CBR. He mentioned the lower-than-
expected price of oil and lower production, resulting in
less state income. He noted that there had not been
adequate funds contained in the budget and mentioned other
traditional items in the supplemental including fire
suppression and corrections. He mentioned trying to address
the FY 25 budget and get it resolved in order to work on
the FY 26 budget. He pondered that with every update the
deficit continued to grow, which was a problem the
committee and legislature as a whole would continue to
address. He noted that the next day was the 60th day of
session, meaning there were 60 days remaining.
Co-Chair Stedman asked if Co-Chair Hoffman had considered
any room in the $172 million deficit for use in the event
of unforeseen circumstances such as "slippage" of revenue.
Co-Chair Hoffman responded affirmatively. He cautioned
ending up in a short funding scenario again that would
necessitate the legislature coming back into a session to
address the issue.
9:08:14 AM
Co-Chair Hoffman noted there were more slides.
Mr. Painter turned to slide 3 titled "K-12 Funding
Legislation." He noted that there was an update that
referenced HB 69. He noted that there was a slight increase
due to amendments, and part of the difference was due to a
simplified long-term look at the K-12 funding formula. The
difference raised the cost a bit in FY 27 and FY 28, and
slightly for FY 26. He thought it was important to
recognize that the fiscal summary with deficit did not
include any additional funding for K-12 education. The
governor had his own bills, and the House had passed a bill
in the Senate Education Committee that would cost about
$275 million per year. The Senate Finance Committee had
asked LFD to look at an increase similar to the previous
year at about $172 million plus an increase to the pupil
transportation formula. He considered the governor's
deficit of $1.65 billion, and the addition of $100 million
to $275 million if the legislature added money outside the
formula or adopted the bills.
• The FY25 budget included $174.7 million in funding
above the Foundation Formula (equivalent to $680 in
the Base Student Allocation) and $7.3 million above
the Pupil Transportation formula ($182.0 million
total).
• The Governor proposed two major K-12 bills this year:
SB 66 (Tribal Compacting) and SB 82 (Education
Omnibus). HB 69, which is currently in the Senate
Education Committee, would increase the BSA by $1,000
and add reading incentive grants that were proposed in
the Governor's bill.
• The amounts for this bill have been updated to match
the Department of Education and Early Development's
fiscal notes reflecting all amendments made in the
House.
9:10:28 AM
Mr. Painter addressed budget scenarios on slide 4 including
the spring revenue forecast and the governor's amendments.
The two items changing had increased the overall deficit.
Mr. Painter advanced to a table on slide 5 showing the
Senate Finance FY 26 budget scenario with a $680 Base
Student Allocation (BSA) increase and a 75/25 Permanent
Fund Dividend (PFD). He remarked on the placeholder for new
contracts. As the contracts had come in, it was higher than
the baseline percentage. He discussed the calculation for
contract increases. The University agreement showed an
expected increase of 2.75 percent, and the others were
estimated for 3 percent. The increases for ACOA and
Teachers' Education Association of Mt. Edgecumbe (TEAME)
were at 11 percent and 5.6 percent, respectively. He
commented that the reason had to do with the timing of the
contracts. He detailed that ACOA had not reached an
agreement the previous year, so there had been a zero
percent increase in FY 25 while others had seen significant
increases. The Supervisory Union had received more than 11
percent in two years.
Mr. Painter continued that when unions had been negotiating
contracts in 2022 it was a big inflation year, so many did
not know the extent of inflation, and therefore the
contracts did not keep up with true inflation that year.
The updated contracts would account for the inflationary
increases. He would not be surprised to see more than
inflationary increases because they were trying to make up
for the past shortage. He summarized that the contracts had
been more variable than the placeholder had been able to
account for.
Mr. Painter detailed that the other items on the slide were
the same as in a past presentation. There was $10 million
for childcare, a foundation formula increase of $172.7
million or a $680 BSA increase, a pupil transportation
increase of $7.3 million, matching funds for Community
Assistance, an amount for fire suppression, matching funds
to the previous year's AMHS backstop funds, a $350 million
capital budget, and $20 million for miscellaneous additions
that could come in. Additionally, there was a 25 percent of
the percent of market value (POMV) PFD, which equated to
about $1,400 per person. The scenario resulted in a FY 26
deficit of $454.6 million plus a $50 million placeholder
for future supplementals.
9:15:34 AM
Mr. Painter turned to slide 6 and addressed the House
Finance Co-Chair's FY 26 budget scenarios.
• A House Finance Co-Chairman did a similar exercise in
a March 5, 2025 meeting, but included several PFD
scenarios:
1. 75/25 PFD
2. $1,000 PFD
3. $2,000 PFD
4. Statutory PFD
5. "Balanced Budget" PFD
• The Senate Finance Co-Chairs asked to show Scenario 5
in this presentation. The remaining scenarios are part
of the meeting documents for the March 5 House Finance
Committee meeting.
• This presentation shows that scenario modified to use
the Governor's amended budget and the spring forecast
as the starting point, plus the House-passed version
of HB 69 rather than the pre-amendment version.
Mr. Painter moved to slide 7 and reviewed a table titled
"Modified by SFIN to Add Spring Forecast, 3/13 GovAmends,
and full HB 69 Cost." The difference in the slide from the
previous week was due to the spring forecast, and the
governor's amended budget. The foundation formula amount
was the total amount for HB 69. Most of the policy choices
were similar to the Senate version, with the exception of
fire suppression and disaster relief funds matching the
governor's number, and the "other changes" $40 million
placeholder that was a little larger than the Senate's
number. The House Finance budget subcommittees closed out
with about a $41 million increase over the governor's
budget, including the childcare funds shown on line 8. The
scenario showed a balanced budget PFD of $406.3 million or
about $570 per recipient.
Mr. Painter advanced to slide 8 showing the FY 26-FY 28
Senate Finance Committee scenario.
• Assumes existing schedules for statewide items, adds
$7.8m placeholder for new school bond debt starting in
FY27.
• Agency operations and the capital budget grow with
inflation (2.5%) over FY26 levels (from scenario on
previous page), except Medicaid is shown with a 4.5%
growth rate. This change has also been applied to the
House scenario.
• Adds additional $66.5 million for AMHS in FY28 to
replace expired federal funds.
• $50.0 million supplemental budget placeholder in FY26
and beyond.
Mr. Painter addressed a table showing the Senate Finance FY
25 - FY 28 Scenario with a $680 BSA increase and 75/25 PFD
on slide 9. He mentioned the $677 million deficit across FY
25 and 26, which was the hole the legislature needed to
deal with during the legislative session. In FY 27, the
deficit was a little higher due to growing expenditures. In
FY 28 revenue grew a lot slower. He cited a flatter POMV
draw between FY 27 and FY 28, with a smaller increase in
revenue as well as a downward trajectory forecast for oil
prices. There was a projected larger deficit of $728
million in FY 28 based on inflation growth and the AMHS
funding addition.
9:20:00 AM
Mr. Painter highlighted the table on slide 10, which showed
the House Finance version of the FY 25 to FY 28 Scenario 5
with modifications from Senate Finance and including the
balanced-budget PFD. The balanced budget calculation was
based on appropriations that session, and the supplementals
were not factored in. There was a resultant $50 million
deficit each year after the supplementals were factored in.
The scenario was similar to the previous scenario. He
thought one could look at the PFD number to see that it
would be relatively level between FY 26 and FY 27 then drop
significantly in FY 28 for the same reason that the deficit
grew in the previous scenario.
Co-Chair Hoffman noted that line 11 was most problematic.
He observed the previous year's budgeted dividend and
considered FY 28's dividend of $310. He thought everyone
could see that following the budget approach, the dividend
would be eliminated in a decade. He noted that the
legislature was looking at additional revenue sources but
there was still much work that needed to be done after
getting through the FY 25 budget.
Senator Cronk mentioned the POMV draw and asked about the
scenario if the POMV draw was lowered to 4.5 percent.
Mr. Painter replied that lowering the POMV draw by .5
percent would increase the deficit by about $400 million.
In the scenario where the PFD did not depend upon the POMV
draw, there would be a $400 million deficit increase; but
if the scenario used the 75/25 dividend approach, there
would also be a $100 million reduction in the PFD.
Co-Chair Stedman stated that when the POMV payment was
moved down, the state lost cash flow in the short run but
would have asset growth in the long run.
Co-Chair Hoffman noted there was a lot of work to be done
between the present day and the end of session.
ADJOURNMENT
9:23:59 AM
The meeting was adjourned at 9:23 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 031925 LFD SFIN Updated Outlook 3-19-25.pdf |
SFIN 3/19/2025 9:00:00 AM |