Legislature(2025 - 2026)SENATE FINANCE 532
01/26/2026 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Governor's Fy 27 Budget Request: Office of Management and Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
January 26, 2026
8:59 a.m.
8:59:17 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 8:59 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
Lacey Sanders, Director, Office of Management and Budget;
Senator Cathy Giessel.
SUMMARY
^GOVERNOR'S FY 27 BUDGET REQUEST: OFFICE of MANAGEMENT and
BUDGET
9:02:55 AM
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
(OMB) discussed the presentation, "State of Alaska, Office
of Management and Budget, Overview of the FY2027 Governor's
Budget, Senate Finance Committee, January 26, 2026" (copy
on file). She pointed to slide 2, "FY 2026 Budget."
9:04:39 AM
AT EASE
9:05:29 AM
RECONVENED
Co-Chair Stedman recalled that the Spring Forecast was used
to determine the revenue based on the forecasted price.
Ms. Sanders replied that the process that was established
was based on previous forecasts.
Ms. Sanders pointed to slide 3, "FY2027 Budget She
remarked that the Fall 2025 update was used as a frame of
reference for the current budget. She outlined some
adjustments in the revenue, leaving a budget deficit of $54
million before the supplemental budget that had been
introduced to the legislature.
9:11:18 AM
Ms. Sanders highlighted slide 4, "FY2027 Short Fiscal
Summary (UGF) She remarked that the summary was a frame
of reference based on a more comprehensive outlook. She
shared that the previous year's total revenue was projected
at $5.9 billion, and the budget for FY 27 was $6.2 billion.
She noted the slight uptick of the draw from the Permanent
Fund Earnings Reserve Account percent of market value
(POMV) of $200 million. She continued to outline the
details of the slide.
Senator Kiehl noted that there was no placeholder for the
supplemental budget in the upcoming year.
Ms. Sanders replied that there was no placeholder for
supplementals in the FY 26 budget request.
9:17:50 AM
Ms. Sanders replied that the state continued to rely on a
volatile revenue source, and remarked that there were
continued conversations about the appropriate budget level
of a variety of items. She stated that there needed to be a
conversation about what the state continued to fund within
the state. She stressed that the governor was open to
talking about revenue, a fiscal plan, and looking forward
in the state's fiscal situation.
Co-Chair Stedman understood that there was a statutory
permanent fund dividend (PFD), and suggested a modification
of that amount.
9:21:11 AM
Ms. Sanders agreed to have the conversation with the
governor on that issue.
Ms. Sanders addressed slide 5, "Operating Budget Comparison
FY2026 to FY2027 (UGF)." She looked at slide 6, "Operating
Budget Significant Highlights
Department of Administration
• Implement the statewide Information Technology
classification study
• Transition Shared Services of Alaska (SSoA) Travel
and Accounts Payable back to all departments to
address inefficiencies
• Transition Payroll Services back to respective
departments to improve accuracy and address specific
payroll needs of agency employees
Department of Agriculture
• Implement Executive Order 137 establishing the
Department of Agriculture
Department of Commerce, Community, and Economic
Development
• $2,238.8 UGF for the Alaska Gasline Development
Corporation for operational funding associated with
Alaska Liquefied Natural Gas (AK LNG) development
• $44,279.0 DGF (Power Cost Equalization Endowment
Fund) for the Alaska Energy Authority's Power Cost
Equalization Program
9:26:04 AM
Senator Kiehl wondered why there was a change in the
payroll.
Ms. Sanders replied that there were still functions that
would remain in the Division of Finance, but stated that
the agencies would like to see payroll in house. She spoke
to the issue specifically related to travel, and stressed
that it was important to the governor that people are paid
and reimbursed in a timely and accurate manner.
Senator Kiehl was anticipating the details of the proposed
change to determine the best way to move forward.
Senator Kaufman wondered whether there were any major IT
processes that might streamline payroll.
Ms. Sanders replied that the payroll was currently gone
through IRIS, and there would be changes in payroll. Those
changes were currently underway, with phased approaches.
Senator Kaufman wanted to examine the progress and resource
that might be unaware to the committee.
9:31:56 AM
Senator Cronk wondered whether there was money in the
budget for a new locality pay study, because it was "way
overdue."
Ms. Sanders replied that there was nothing in the budget
for that study.
Co-Chair Hoffman commented on the use of $44 million out of
the Power Cost Equalization (PCE) for the Alaska Energy
Authority. He felt that the PCE concept was not aligned
with that budget request. He felt that the purpose of the
fund should be to equalize the rates, rather than spending
money on programs to administer the funds.
Ms. Sanders pointed to slide 7, "Operating Budget
Significant Highlights (con't)
Department of Education and Early Development
• Foundation Program and Pupil Transportation full
statutory formula funding for school districts
• $3,293.8 DGF (Higher Education Investment Fund) for
Alaska Performance Scholarship projected increase in
awards
• $1,646.9 DGF (Higher Education Investment Fund) for
Alaska Education Grants projects increase in awards
Department of Health
• Senior Benefit Payment Program is fully funded based
on the statutory formula
• $2,700.0 Federal for Public Health to receive grants
to Help Me Grow, substance misuse and addiction
prevention, and equipment for the Medical related
Examiner's Office
• $585.0 Federal for Behavioral Health to support the
Crisis Contact Center
Department of Labor and Workforce Development
• $1,405.0 UGF for Worker's Compensation one-time
support for the loss of Workers' Safety and
Compensation Administration Account receipts being
swept and a decline in revenue as Alaskan businesses
are becoming safer
9:36:33 AM
Co-Chair Stedman wondered whether the proposal was an
accounting reversal to put the state into compliance.
Ms. Sanders replied "kind of", and stated that the account
was subject to the CBR sweep. She relayed that there ha
been conversations with Legislative Audit about the
account, and how the fund was established in statute.
Co-Chair Stedman understood that it was subject to the
sweep, but wondered whether all the funds were subject to
the sweep. He remarked that there was a need for
approximately 8000 workers for the proposed gas line. He
stated that most of those oil patch skilled workers were
already employed. He felt that there would be a massive
influx of out of state workers for that project. He
stressed that there should be a focus on younger workers
going into the industry.
Ms. Sanders replied that the governor introduced
legislation on the unemployment trust fund, and designating
a portion of that revenue toward training in the state.
9:41:19 AM
Ms. Sanders pointed to slide 8, "Operating Budget
Significant Highlights (con't)":
Department of Military and Veterans Affairs
• Deposits into the Disaster Relief Fund to provide
immediate response to disasters
.notdef FY2026 $40,000.0 UGF (Supplemental)
.notdef FY2027 $33,000.0 total ($24,000.0 UGF; $9,000.0
Federal)
Department of Natural Resources
• $3,300.0 total ($1,300.0 UGF; $2,000.0 Federal) to
maintain the National Historic Preservation Fund
Grant (moved from Capital to Operating)
• $5,825.0 Federal to maintain the Critical Minerals
Mapping Earth MRI Program (moved from Capital to
Operating)
• Deposits into the Fire Suppression Fund to provide
immediate response to fires
.notdef FY2026 $55,000.0 UGF (Fire Declarations)
.notdef FY2027 $73,482.7 total ($47,482.7 UGF; $5,500.0
Other; $20,500.0 Federal)
Co-Chair Hoffman asked for an explanation of the difference
between the fire suppression and declaration proposals.
Ms. Sanders replied that there was an effort to not
duplicated transmitted counting of fire declarations, so
there was not an official transaction.
Co-Chair Hoffman felt that the proper methodology would be
a supplemental, and not using the ratification in the
current year.
Ms. Sanders completed slide 8:
Department of Public Safety
• $1,303.0 UGF to maintain Body-worn and In-Car Camera
Operations and Equipment
• $550.0 DGF (GF/Program Receipts) to expand Training
and Certification Support for Law Enforcement
and Village Police Officers
9:47:24 AM
Co-Chair Stedman remarked that a three-quarter vote was
required to fund the supplemental request, and wondered
what would happen if that vote did not occur.
Ms. Sanders replied that a three-quarter vote was required,
and there would be a determination of next steps.
Co-Chair Stedman felt that the discussion about next steps
was essential before the vote.
Ms. Sanders replied that cash flow purposed were
approximately $500 million to $1 billion in the CBR, and
agreed that there should be a conversation about what would
happen if the CBR were not accessible.
Senator Kaufman remarked that there was incurred cost in
the proposed reduction of crime in Anchorage.
Ms. Sanders replied that there was no specific line item to
address the issue. She agreed to discuss with the
departments regarding a plan to reduce the crime.
Senator Kaufman agreed that that should occur.
9:50:32 AM
Ms. Sanders pointed to slide 9, "Operating Budget
Significant Highlights (con't)
Department of Transportation and Public Facilities
• $5,246.9 UGF to restore funding to levels proposed
in FY2026 prior to legislative reductions; reductions
were based on unrealizable surpluses and savings for
Highways and Aviation Maintenance
• $1,253.9 UGF to restore funding levels following a
one-time use of Alaska Housing Capital Corporation
funds by the legislature
• $1,768.9 DGF (Motor Fuel Tax) for Statewide
Guardrail and Roadside Hardware Repair
• $420.0 DGF (Motor Fuel Tax) for Statewide Wayside
Maintenance
Statewide Items
• $129,598.9 UGF for recapitalization of the Alaska
Higher Education Investment Fund from the
Constitutional Budget Reserve Fund (FY2026
Supplemental)
• $2.3 billion UGF to provide a full statutory
Permanent Fund Dividend of approximately $3,650 per
eligible individual
• $1.4 billion UGF for Permanent Fund Inflation
Proofing from the Earnings Reserve Account to the
Permanent Fund Principal
Co-Chair Stedman wondered whether any supplemental requests
were from the legislature.
Ms. Sanders asked for a restatement.
Co-Chair Stedman pointed out that the supplemental requests
were not requests from the legislature, but rather from the
administration to balance the budget. He stressed that it
was additional spending to balance the books, and pointed
out that the CBR vote was a requirement.
Ms. Sanders agreed.
9:54:17 AM
Ms. Sanders highlighted slide 10, "FY2027 Capital Budget
Breakdown (UGF) She pointed to slide 11, "Capital Budget
Significant Highlights
Department of Commerce, Community, and Economic
Development
• $15,300.0 Ocean Ranger Receipts to Alaska Energy
Authority for Cruise Ship Terminal Port
Electrification
Department of Environmental Conservation
• $272,500.0 total ($18,000.0 UGF; $500.0 Other;
$254,000.0 Federal Receipts) for Village Safe Water
and Wastewater Infrastructure Projects
• $50,944.6 total ($37,859.5 Other; $13,085.1 Federal
Receipts) for Clean Water and Drinking Water
Grant Funding including the additional Infrastructure
Investment and Jobs Act (IIJA) Funding and the
Water Infrastructure Improvement for the Nation Act
(WIIN)
Department of Fish and Game
• $3,300.0 UGF for Gulf of Alaska Chinook Salmon
Program
• $825.0 UGF for continued funding for the Alaska
Marine Salmon Program
• $6,800.0 Federal Receipts for Pacific Coastal Salmon
Recovery Fund activities
Ms. Sanders looked at slide 12, "Capital Budget Significant
Highlights (con't)
Department of Health
• $1,150.0 UGF for Mental Health Trust: Home
Modification and Upgrades to Retain Housing
Department of Military and Veterans' Affairs
• $5,000.0 Federal Receipts for Public Protection and
Infrastructure Support
• $26,765.9 Federal Receipts for State Homeland
Security Grant Programs
• $25,000.0 Federal Receipts for Deferred Maintenance,
Replacement, and Renewal
• $1,750.0 Federal Receipts for Air National Guard
Modernization and Sustainment
Department of Natural Resources
• $1,850.0 DGF (Timber Receipts) for Forest Inventory
Initiative Susitna and Tanana Valleys
• $4,800.0 total ($1,900.0 UGF; $2,900.0 Federal
Receipts) for Land and Water Conservation Fund Grant
Program
• $12,000.0 Federal Receipts for Cooperative Forestry
and Fire Programs
Co-Chair Stedman wondered whether there were any open items
related to the Tongass National Forest that needed
attention.
Ms. Sanders agreed to follow up with the Department of
Natural Resources (DNR).
Ms. Sanders pointed to slide 13, "Capital Budget
Significant Highlights (con't)
Department of Revenue
• $92,935.0 total ($22,900.0 UGF (AHFC Dividend);
$6,785.0 Other Receipts; $63,250.0 Federal Receipts)
for Alaska Housing Finance Corporation Annual Housing
Programs
Department of Transportation and Public Facilities
• $70,154.1 UGF State Match for Statewide
Transportation Improvement Plan (FY2026 Supplemental)
• $130,859.5 total ($107,760.0 UGF; $2,000.0 DGF;
$21,099.5 Federal Receipts) for Federal Program
Match
• $26,312.8 DGF (Alaska Capital Income Fund) for
Statewide Deferred Maintenance, Renovation, and
Repair
• $27,500.0 DGF (Marine Highway Funds) for Alaska
Marine Highway System Vessel Overhaul, Annual
Certification and Shoreside Facilities Rehabilitation
10:00:12 AM
Co-Chair Hoffman remarked that many legislators had been
contacted regarding the funding that was vetoed by the
governor for the statewide transportation. He felt that it
would be prudent to take care of the supplemental request
as early as possible to ease the concerns of many
contractors.
Ms. Sanders replied that she was aware of the concerns. She
had conversations with Commissioner Anderson, but the
funding was not needed in the current day. She shared that
it was the prerogative of the legislature to pass a bill
early, but hoped that the funding would be available to
Department of Transportation and Public Facilities (DOT/PF)
after the end of session.
Co-Chair Stedman recalled that DOT/PF did not need the
money until the end of the budget cycle. He also recalled
that a few years prior the legislature had appropriated
money to the Alaska Housing Finance Corporation (AHFC) to
move some uneconomical subdivisions forward. He felt that
the programs should be evaluated to perhaps open land for
subdivisions in the state.
10:04:30 AM
Ms. Sanders addressed slide 14, "Full-Time Positions
Budgeted versus Filled She remarked that the slide
represented a brief snapshot of the filled positions in the
state. She noted that in December 2024 there were
Co-Chair Hoffman //
Co-Chair Stedman //
Ms. Sanders replied that the ARM Board went through various
scenarios to determine the //
10:10:49 AM
Co-Chair Stedman recalled that //
Senator Kiehl //
Co-Chair Hoffman //
10:14:35 AM
Ms. Sanders looked at slide 15, "Vacancy Rates
Senator Kaufman wondered //
Ms. Sanders recalled that /
10:18:45 AM
Senator Kiehl asked
Ms. Sanders
Senator Kiehl //
Ms. Sanders replied that she saw it continuing into the
future.
10:21:24 AM
Ms. Sanders discussed slide 16, "Administrative Orders
Administrative Order 359 Budget Efficiency
• Establishes a Government Efficiency Review,
requiring the Office of Management and Budget to lead
an annual review of all executive branch agencies
• The review will identify cost savings, streamline
operations, modernize processes, and ensure every
public dollar is spent wisely
• Initial areas of focus include grants to non-state
entities and accounts payable
• Agencies will also be required to use technology and
artificial intelligence to improve transparency and
accountability in how public money is spent
Administrative Order 360 Regulatory Reform
• Launches a comprehensive Regulatory Reform
Initiative, replacing previous regulatory directives
with a new framework to reduce unnecessary burdens on
Alaskans and businesses
• Requires State agencies to review and streamline
existing regulations, guidance documents, and
materials incorporated by reference
• Agencies must reduce regulatory requirements by 15
percent by the end of 2026 and 25 percent by the end
of 2027
10:25:44 AM
Co-Chair Stedman remarked that the issues within the slide
were ongoing, and many past OMB directors had dealt with
the issues.
Senator Kiehl queried a quantification of resources on the
last bullet.
Ms. Sanders replied that each agency had identified a point
of contact, and there were no additional funds required for
the proposal.
Senator Kiehl wondered what additional resources had been
diverted to cover the issue.
Ms. Sanders stated that she would reclassify the work, and
not divert resources.
Senator Kiehl wondered how it would be charged per
department.
Ms. Sanders replied that it would be on a case by case
basis depending on the department.
10:29:37 AM
Senator Kiehl recalled a conversation related to a similar
issue, and wondered how those related to the current
proposal.
Ms. Sanders replied that she was not part of the process,
but agreed to follow up on the question.
Senator Kiehl wondered whether there would be proposed
bills brough to the legislature as a result of the effort.
Ms. Sanders replied that it was a possibility.
10:31:38 AM
Senator Kaufman wondered whether there was a framework to
ensure the process and results, and specifically asked
whether there were targets for the projects.
Ms. Sanders replied in the affirmative, and stated that
there were plans from each agency that would be provided to
the public.
Senator Kaufman recalled an example related to legislation
that allowed the administration to propose reports that
were required in an non-useful format. HE felt that there
was an opportunity to reduce unnecessary work.
Ms. Sanders agreed.
10:34:32 AM
Co-Chair Hoffman wanted to know how much money was spent on
fighting the case.
Co-Chair Stedman agreed, and wanted more information about
the issues within Mt. Edgcumbe.
Co-Chair Hoffman agreed.
Co-Chair Stedman remarked that there were roughly about 430
students, but there was currently remarkably high turnover
currently.
10:39:17 AM
Ms. Sanders agreed to follow up on the issue.
Senator Cronk recalled that there was a study in 2008, and
expressed concern from his rural district. He felt that
there was an issue in job retention. He felt that 18 years
from the last study was efficient due to the changes in the
economy.
Ms. Sanders replied that it was not in the budget.
10:41:15 AM
Co-Chair Stedman remarked that the legislature could
appropriate the funds, but agreed that money could be spent
in better areas.
Ms. Sanders agreed to have the conversations during the
budget process.
Senator Kiehl stressed that the legislature got the results
on the statewide salary study that showed that the state
was far behind the average without the geographic
differential.
Co-Chair Hoffman agreed.
Ms. Sanders looked at slide 19, "Appendix: 10-Year Fiscal
Outlook."
ADJOURNMENT
10:47:47 AM
The meeting was adjourned at 10:47 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01.26.26 OMB Senate Finance FY2027 Budget Overview final.pdf |
SFIN 1/26/2026 9:00:00 AM |