HOUSE BILL NO. 53 "An Act making appropriations for the operating and loan program expenses of state government and for certain programs; capitalizing funds; amending appropriations; making supplemental appropriations; making reappropriations; 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." HOUSE BILL NO. 55 "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." ^SUBCOMMITTEE CLOSEOUT REPORTS 8:35:32 AM ^OFFICE OF THE GOVERNOR BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER, reviewed the finance subcommittee recommendations for the Office of the Governor (copy on file): RECOMMENDATIONS: The House Finance Budget Subcommittee for the Office of the Governor submits the following recommended operating budget for FY2026 to the House Finance Committee: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $31,407,100 Designated General Funds (DGF) $0 Other Funds $432,600 Federal Funds $151 900 Total $31,991,600 The Unrestricted General Fund difference from FY26 Adjusted Base to the House Subcommittee budget recommendation is an increase of $183,200, or 0.6%. 8:37:00 AM Representative Johnson stated that she did not have the report. 8:37:08 AM AT EASE 8:37:26 AM RECONVENED Mr. Anderson continued reading the report: Positions Permanent Full-time 147 Permanent Part-time 1 Temporary 24 Total 172 BUDGET ACTION: The House Finance Budget Subcommittee for the Office of the Governor reviewed the FY2026 Governor's budget request, including amendments, and recommends the following actions: Accept all the Governor's proposed budget. This includes the following items: • Transfer in of $175.8 thousand of Unrestricted General Fund from the Department of Administration in accordance with Administrative Order 356, which transferred labor relations functions from the Department of Administration to the Department of Law • Replace $7.4 thousand of Inter-Agency Receipts Authority with Unrestricted General Funds • Approve the structure change creating a new allocation for the Facilities Rent - Non-State Owned to in accordance with Alaska Statute 37.07.020(e) and rename the Allocation and Appropriation ATTACHED REPORTS: The House Finance Budget Subcommittee for the Office of the Governor adopts the attached BA Report. 8:39:09 AM Representative Galvin asked for more context around why funds would transfer from "labor" to the Department of Law (DOL). Mr. Anderson responded that it was a transfer of funds in from the Department of Administration's (DOA) labor division and was the result of an administrative order. He suggested that Mr. Alexei Painter add more details. Representative Galvin stated that more details were not necessary. 8:40:01 AM ^LEGISLATURE Mr. Anderson reviewed the finance subcommittee recommendations for the Legislature (copy on file): RECOMMENDATIONS: The House Finance Budget Subcommittee for the Legislature submits the following recommended operating budget for FY2026 to the House Finance Committee: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $91,382,500 Designated General Funds (DGF) $655,300 Other Funds $455,600 Federal Funds $0 Total $92,493,400 The Unrestricted General Fund difference from FY26 Adjusted Base to the House Subcommittee budget recommendation is an increase of $255,500, or 0.3%. Positions Permanent Full-time 298 Permanent Part-time 256 Temporary 27 Total 581 BUDGET ACTION: The House Finance Budget Subcommittee for the Legislature reviewed the FY2026 Legislative Budget and Audit's, and Legislative Council's budget requests, including amendments, and recommends the following actions: 1) Accept all of the Legislative Budget and Audit's budget. 2) Accept all of the Legislative Council 's budget. 3) The subcommittee took two additional actions: • Accepted a Governor's amendment of $210.2 thousand of Other funds to reflect the correct Restorative Justice Account distribution calculation • $15.4 thousand increase in Program Receipts to reflect a Wells Fargo Lease Revenue Increase in the Legislative Council Appropriation. ATTACHED REPORTS: The House Finance Budget Subcommittee for the Legislature adopts the attached BA Report. 8:42:31 AM Representative Stapp relayed that he had a few questions about the classifications in the attached budget action (BA) report (copy on file). He understood that under item 3, nine permanent part-time employees were being moved to permanent full-time employees. He added that another nine permanent part-time employees were being moved to permanent full-time employees under item 9. He asked if the nine employees were the same employees being moved around, or if the action would impact 18 employees. Mr. Anderson asked if Mr. Painter or Representative Hannan, the subcommittee chair, could respond. He noted that nine of the positions were for administrative services and nine other positions were for legal and research services. Representative Hannan replied that she could not recall all of the details, but she could offer reassurance that there were not 18 new positions. 8:44:22 AM ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION, responded that the positions in both cases were previously reflecting the budget as 11-month positions. The positions were now being reflected as 12-month positions. Many of the employees were now working the full year and the month off was no longer applicable for most employees. Representative Stapp noted there was an additional increment for one non-permanent position to clear an administrative backlog. He asked how substantial the administrative backlog was. Representative Hannan responded that the position in question was within the Ethics Office. There was an 18- month gap with significant staff changes and much of the confidential paperwork and filing was not completed during that time period. She explained that it was a temporary increment because the expectation was that the additional staff would eliminate the backlog. 8:46:15 AM ^DEPARTMENT OF REVENUE 8:46:20 AM Mr. Anderson reviewed the finance subcommittee recommendations for the Department of Revenue (DOR) (copy on file): RECOMMENDATIONS: The House Finance Budget Subcommittee for the Department of Revenue submits the following recommended operating budget for FY2026 to the House Finance Committee: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $33,816,400 Designated General Funds (DGF) $2,599,200 Other Funds $353,474,200 Federal Funds $92,952 600 Total $482,842,400 The Unrestricted General Fund difference from FY26 Adjusted Base to the House Subcommittee budget recommendation is an increase of $144,000 or .4%. Positions Permanent Full-time 839 Permanent Part-time 24 Temporary 22 Total 885 BUDGET ACTION: The House Finance Budget Subcommittee for the Department of Revenue reviewed the FY2026 Governor's budget request, including amendments, and recommends the following actions: 1) Accept the Department's transaction for Taxation and Treasury Division, Alaska Retirement Management Board, Permanent Fund Division, Child Support Enforcement, and Administration and Support. 2) Accept all transactions for the Long-Term Care Ombudsman Office, which includes the following: • $144.0 thousand of Unrestricted General Funds for the addition of one new position. 3) Accept the Alaska Housing Finance Corporation transactions including: • New structure for the Alaska Sustainable Energy Corporation and transfer of $457.0 thousand of Unrestricted General funds into the new allocation 4) Accept the Alaska Permanent Fund Corporation transactions, except for the following: • Deny the request to create a single appropriation for APFC Operations. • Retain the two-appropriation structure for "APFC Juneau Office Operations", and "APFC Investment Management Fees". Recommendations: The House Finance Budget Subcommittee for the Department of Revenue recommends the following for consideration in House Finance Committee: 1) Structure change including an Appropriation titled "APFC Anchorage Office Operations", with the minimal amount of funding required. ATTACHED REPORTS: The House Finance Budget Subcommittee for the Department of Revenue adopts the attached report: • The House Finance Subcommittee for the Department of Revenue Budget Action Report 8:50:12 AM Co-Chair Josephson noted that Mr. Anderson stated that the Alaska Permanent Fund Corporation (APFC) had dissolved the Anchorage appropriation, but the corporation had been still operating an Anchorage office. He asked if his understanding was correct. Mr. Anderson responded in the affirmative. The governor vetoed the funding for the Anchorage office and the appropriation for the office was dissolved. There had been discussion about whether money used in a location that did not fall under a specific appropriation was legal. The office was currently being funded through APFC Juneau operations. Representative Stapp understood that APFC indicated last year that it wanted an Anchorage office, but the request was vetoed. He understood that the veto meant that the corporation could not operate an Anchorage office because it was not given any money to operate the office. He understood that APFC had decided to operate the Anchorage office despite this. Co-Chair Foster responded that last year, the House did not make any changes to the Anchorage office funding, but the Senate indicated that it did not want APFC to operate an Anchorage office; however, the allocation was ultimately included in the budget that was transferred to the governor. He explained that the governor vetoed the funding and the structure of the funding. The Senate had created a separate line item for the Anchorage office and indicated that it would only fund the office with $100, which was intended to decommission the office. Part of the discussion was that some people wanted to retain the resources of the Anchorage office in Juneau and did not want the corporation to move to Anchorage over time. Many people were not pleased with APFC defying the legislature's wishes. The issue ultimately came down to creating structures to disallow APFC to create the Anchorage office. 8:53:42 AM Representative Johnson noted that APFC had established the office prior to the current budget process, during the middle of the previous year. When the budget was later considered, the question was not whether to start the office, but whether to continue funding it or to decommission it. She asked about item 2 in the BA report (copy on file), which concerned the addition of a new position in the Ombudsman's Office. She stated that she had not done any research on the matter and asked why the position was needed. She asked whether there had been an increase in Ombudsman-related activity. Mr. Anderson responded that the Office of Long-Term Care Ombudsman exclusively conducted investigations related to long-term care facilities such as the Alaska Pioneer Home. He stated that the current caseload had increased to the extent that it exceeded the capacity of the existing staff. As a result, the budget included the creation of one new position and another position that had been transferred to assist with the caseload of active investigations. Co-Chair Josephson relayed that the committee would hear a revenue forecast update from DOR in a few days. Representative Allard stated that she recalled requesting a job description from DOR when it had previously come before the committee. She asked whether the document had been distributed to Co-Chair Josephson. Co-Chair Josephson asked for clarification regarding which job description she was referring to. Representative Allard responded that the request was for a new hire, which she believed was listed at approximately $397,000. Co-Chair Josephson replied that he would look into it. Co-Chair Foster addressed Representative Allard and asked whether she was referring to item number 25, which involved adding a portfolio manager in support of the private income team for $391,000. Representative Allard replied that she believed that was the correct item. She clarified that she had requested the job description to determine whether she wanted to offer an amendment. 8:56:24 AM ^DEPARTMENT OF ENVIRONMENTAL CONSERVATION 8:56:37 AM TIMOTHY CLARK, STAFF, REPRESENTATIVE SARA HANNAN, reviewed the finance subcommittee recommendations for the Department of Environmental Conservation (DEC)(copy on file): The House Finance Budget Subcommittee for the Department of Environmental Conservation held a total of three meetings and submits the following recommended department operating budget for FY26 to the House Finance Committee. Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $23,384.2 Designated General Funds (DGF) $23,922.1 Other Funds $24,640.9 Federal Funds $42,913.0 Total $114,860.2 Compared to the FY26 Governor's Amended budget proposal, the Subcommittee recommendations represent a reduction of $1,323.7 (-5.4%) in Unrestricted General Funds, for a total reduction of $1,323.7 (-1.1%) in all funds. Positions Permanent Full-time 558 Permanent Part-time 0 Temporary 9 Total 567 BUDGET ACTIONS The subcommittee adopted all of the governor's proposed Budget Action items except Item 8. This item would have appropriated $1,450.1 to begin an effort by the department to assume state primacy over the Clean Water Act's Section 404 Dredge and Fill permitting. This permitting is currently carried out by the federal government at no cost to the state. The subcommittee also added one item-number 9. Item 9 adds an Environmental Program Specialist III for the department's Commercial Passenger Vessel Environmental Compliance Program. This will enable the program to conduct more compliance inspections of cruise ships. The cost of this permanent full-time position is $126.4 in Unrestricted General Funds. Additional Budget Item of Note • Item 5: The only approved method for detecting paralytic shellfish poisoning in Alaska shellfish is the mouse bioassay. Recently, the Environmental Health Laboratory's previous supplier of laboratory mice suddenly ceased operations, forcing the lab to turn to a significantly more expensive source. Hence, the governor's request for a UGF increment of $40.0. SUBCOMMITTEE AMENDMENTS The chair welcomed amendments from all members. One was offered and debated and was not adopted. ATTACHED REPORT The House Finance Budget Subcommittee for the Department of Environmental Conservation forwards the attached report: • The House Finance Subcommittee for the Department of Environmental Conservation Budget Action Report 9:00:41 AM Representative Tomaszewski asked whether the administration had provided an explanation for why it wanted to assume responsibility for administering Section 404 of the Clean Water Act instead of continuing to allow the federal government to do so. Mr. Clark responded that DEC had appeared before the finance subcommittee and explained its reasoning. He reported that the department believed state primacy could improve local knowledge. He added that the department had also cited the importance of providing certainty to industry and presented additional arguments in support of the initiative. He noted that the $1.45 million included in the budget represented only the beginning of additional costs to the state. The cost was expected to increase significantly over a relatively short period of time. He relayed that previous estimates had indicated that the cost could reach $4.9 million and could continue to increase to between $6 million and $8 million. He noted that the cost was currently borne by the federal government. Representative Tomaszewski asked if there had been any discussion about the timeliness of decisions governed by the Clean Water Act. He asked whether there had been issues related to processing delays. Mr. Clark responded that he did not recall any specific examples of significantly delayed decisions by federal officials administering the program. Co-Chair Josephson noted the committee would move on to hearing subcommittee recommendations for the Department of Public Safety. Representative Allard requested to ask a question on the previously reviewed budget. Co-Chair Josephson acknowledged her question and asked Mr. Clark to return to the table. Representative Allard referred to item 8 of the BA report (copy on file) and asked about the addition of five full- time positions totaling $1,450,000. She asked if the figure was correct. Mr. Clark responded in the affirmative. Representative Allard asked if each position cost an average of $290,000. Mr. Clark responded that he had not done the math but the figure sounded correct. Co-Chair Josephson clarified that the five positions had been rejected and would not be funded. 9:04:15 AM ^DEPARTMENT OF PUBLIC SAFETY 9:04:18 AM RACHAEL GUNN, STAFF, REPRESENTATIVE NELLIE JIMMIE, reviewed the finance subcommittee recommendations for the Department of Public Safety (DPS) (copy on file): The House Finance Budget Subcommittee for the Department of Public Safety submits the following recommended operating budget for FY26 to the House Finance Committee. Note that that all dollars are in thousands and the Subcommittee's recommendations are limited to the numbers section of the operating budget. Source of Funds Total Change Percent Unrestricted General Funds (UGF) 283,589.9 10,496.1 3.8% Designated General Funds (DGF) 9,214.8 -387.1 -4% Other Funds 16,047.4 1,727.7 12.1% Federal Funds 41,124.3 0.0 0.0% Total 349,976.4 11,836.7 3.5% *Funding changes are in comparison to the FY25 Adjusted Base + Positions Permanent Full-time 1,008 Permanent Part-time 12 Temporary 34 Total 1,054 BUDGET ACTIONS: The House Finance Budget Subcommittee for the Alaska Department of Public Safety carefully reviewed and discussed the Office of the Governor's FY26 operating budget request and amendments from its members and the Governor. Budget Action • Item 5 - Alaska State Troopers, 25% Reduction in Personal Services for the Four Troopers and One Criminal Justice Tech to Re-Establish Talkeetna Post • Item 9 - Replace: Purchase Two Transit Vans for Crime Scene Response in Palmer • with Item 10 - Purchase One Transit Van for Crime Scene Response • Item 15 - 25% Reduction in Personal Services for One Wildlife Trooper Position • Item 22 - Village Public Safety Operations - Deny Gov Amend Request for Additional Funding for Northwest Arctic Borough Village Public Safety Officer Program • Replace with Item 23 - Village Public Safety Operations - Add Funding for Five New Village Public Safety Officer, Housing, and Support Co-Chair Josephson noted that he wanted to confirm that he was understanding items 22 and 23 correctly. He understood that the governor had proposed funding five additional Village Public Safety Officers (VPSO) and asked whether the recommendation from the DPS finance subcommittee was to fund the five positions. Ms. Gunn responded that the governor's amended request was not for five new VPSOs but for support services related to retention in the Northwest Arctic Borough (NAB), which she described as a geographic strategy. She stated that the subcommittee had denied the request. Instead, the subcommittee had added a request for five new VPSO positions, with an associated cost of approximately $1.2 million. She relayed that an additional $400,000 would support services and housing. Co-Chair Josephson asked if the budget added 10 VPSO positions or five VPSO positions. Ms. Gunn responded that the budget added 10 VPSO positions overall. She stated that the addition was consistent with the previous year, in which 10 VPSO positions had also been added. 9:08:27 AM Representative Stapp remarked that he appreciated Co-Chair Josephson's attention to detail. He thought that it appeared that the governor had proposed targeted funding for five VPSOs specifically in NAB. He thought it looked like the subcommittee instead recommended funding for five VPSOs wherever the officers were needed, allowing for the officers to be distributed based on demand. He acknowledged that the program was grant-based and asked if there were any other regions outside NAB that were prepared to proceed with five VPSO hires. Ms. Gunn responded that there were applicants in most regions of Alaska ready to be brought online. She clarified that the governor's amended budget request did not include the five additional VPSO positions; instead, the governor's request was for support services. She explained that it was more expensive to staff VPSOs in NAB because many were armed and required different training. Additionally, there was significant competition in salaries and grant program structures in the region. She clarified that the subcommittee's intention was to bring five additional VPSOs online and allocate $400,000 in support services in high- need areas across the state. She commended the program for operating efficiently and for its effectiveness in identifying areas of highest need. Representative Hannan stated that it appeared that the five VPSO positions under item 22 had been denied by the subcommittee. Ms. Gunn responded that item 22 from the governor's request did not propose bringing five additional VPSOs online, but instead provided support services for the VPSO program in NAB. She explained that the subcommittee had reallocated the same funding amount under item 3, repurposing it to support five additional VPSOs across the state along with $400,000 in support services. Representative Hannan responded that she remained confused. She stated that Co-Chair Josephson had asked whether ten positions were being added or just five, to which Ms. Gunn had responded that ten were being added. She noted that the funding seemed to only account for five positions. Co-Chair Josephson asked if it was possible that in the original budget released on December 12, 2024, there were five requested VPSOs, and the governor requested an additional five be added around a month ago. He suggested that perhaps five were added initially, but five were deleted in response to a second request. He asked what happened to show a net of ten positions. Ms. Gunn replied that there were two separate VPSO-related items in the BA report and both items requested five VPSOs. In addition, there was a separate item allocating $1.6 million for support services. She directed attention to item 21, which funded five VPSOs, item 22, which proposed additional support services that were denied, and item 23, in which the subcommittee added funding for five more VPSOs. She confirmed that item 21 included a $1.2 million allocation. Representative Hannan acknowledged that item 21 had been on the previous page of the report, which had initially confused her. 9:12:30 AM ^DEPARTMENT OF FISH and GAME 9:12:39 AM AT EASE 9:13:06 AM RECONVENED KEENAN MILLER, STAFF, REPRESENTATIVE NELLIE JIMMIE, reviewed the finance subcommittee recommendations for the Department of Fish and Game (DFG) (copy on file): The House Finance Budget Subcommittee for the Department of Fish and Game submits the following recommended operating budget for FY26 to the House Finance Committee. Note that that all dollars are in thousands. RECCOMENDATIONS Source of Funds Total Change Percent Unrestricted General Funds (UGF) 74,262.5 1,695.4 2.3% Designated General Funds (DGF) 12,941.5 (500.0) (3.7%) Other Funds 87,670.4 8,592.0 10.9% Federal Funds 92,568.4 265.0 0.3% Total 267,442.8 10,052.4 3.9% *Funding changes are in comparison to the FY25 adjusted Base + Positions Permanent Full-time 853 Permanent Part-time 586 Temporary 1 Total 1,440 BUDGET ACTIONS: The House Finance Budget Subcommittee for the Department of Fish and Game carefully reviewed the Office of the Governor's FY26 operating budget request and amendments from its members and the Governor. The Subcommittee accepts the budget proposal submitted by the Office of the Governor with the following changes: - Convert a $300.0 UGF IncOTI allocated to Southeast Region Fisheries Management to an IncT spanning FY26- 27, to stabilize groundfish assessment funding despite steadily shrinking Test Fishery receipt revenue. Test Fishery receipts historically supported the salaries and work of research staff. This change will promote program stability. - Convert $65.0 UGF allocated to the Anchorage and Fairbanks Hatcheries' base operating budget to $65.0 Fed, leveraging in-kind contributions for facility construction as match for federal Dingell-Johnson receipts. Approximately $58,000.0 remains in in-kind contribution. This conserves Unrestricted General Funds for other priorities. - Add a One-Time Increment (IncOTI) of $90.0 UGF allocated to AYK Region Fisheries Management for an additional sonar unit to support critical sonar assessment projects. Currently, an area-wide backup sonar is being used for routine management. The purchase of an additional unit ensures redundancy should a unit failure disrupt critical research and monitoring. - Add an Increment of $100.0 UGF allocated to AYK Region Fisheries Management for extended operation of Kuskokwim River Sonar monitoring into the August coho season. Previously, federal grants supported an additional month of in-season monitoring. The Department has not received this grant in years, and funding will restore the project. - Reduce the total amount of Test Fishery receipt authority allocated to Westward Region Fisheries Management by $500.0. This eliminates hollow receipt authority. Test fisheries are first and foremost a scientific instrument; they should not serve as a primary stream of revenue, especially when generated from closed or limited fisheries. - Deny the Governor's request to add $112.3 UGF and a permanent full-time position to Wildlife Conservation because SB 189 (the legislation it is intended to support) remains under legal challenge. - Deny the Governor's request to add 14.4 UGF allocated to Boards of Fisheries and Game, also because SB 189 remains under legal challenge. We also recommend the following intent language to the House Finance Committee: "It is the intent of the Legislature that the Department prepare a detailed report of all public fees, past and present, that shows their date of inception and historical increases. The report should include the total amount of annual revenues and expenditures for each fee and fund source for the past ten years. The report should be submitted to the Co- chairs of the Finance committees as well as the Legislative Finance Division by December 20, 2025." Thoughtful adjustments to these fees, which have not changed since 2016, could provide additional revenue for the critical and increasingly costly management of Alaska's wildlife. ATTACHED REPORTS: The House Finance Budget Subcommittee for the Department of Fish and Game adopts the Subcommittee Report (Budget Action Report) provided by the Legislative Finance Division. 9:17:48 AM Representative Stapp asserted that in items 1, 18, and 22, in the BA report, the column labeled "House Subcommittee Action" should say "struck" rather than "N/A" if the subcommittee had indeed chosen to eliminate the appropriation. He understood that the position discussed in item 18 had been deleted because the associated bill had not passed, but the action was listed as N/A, which he thought was confusing. Mr. Miller responded that he believed "N/A" stood for "not applicable," meaning the item did not exist. Co-Chair Josephson commented that he had encountered the same issue during his own subcommittee closeouts. He explained that he had needed to clarify that the item had been struck. Representative Hannan asked for clarification on the recommended intent language. She asked if the report of all fees referred specifically to the cost of fishing licenses, game tags, and commercial permit fees. She noted that "fees" was not always the term used and wanted to confirm whether it also included licensure costs and tag costs. Mr. Miller responded in the affirmative. Co-Chair Josephson thanked the subcommittee chairs and aides for their hard work. He acknowledged that the legislature had coordinated with the departments on scheduling and topics, evaluated departmental and division budgets, and provided recommendations to the committee. He also thanked the House Finance members and aides and the Legislative Finance Division (LFD). HB 53 was HEARD and HELD in committee for further consideration. HB 55 was HEARD and HELD in committee for further consideration. Co-Chair Josephson reviewed the agenda for the afternoon's meeting.