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." 3:57:37 PM ^AMENDMENTS 3:57:40 PM Co-Chair Josephson relayed that the committee rolled amendments 94 through 96 to the bottom of the amendment process. He encouraged members to offer any remaining amendments they may have. He discussed his intent for the remainder of the meeting. 4:00:11 PM AT EASE 4:01:40 PM RECONVENED Co-Chair Josephson asked if there were members who wanted to offer amendments. Representative Stapp MOVED to ADOPT Amendment 42 (copy on file): Agency: Corrections Appropriation: Administration and Support Allocation: Office of the Commissioner Transaction Details Title: Zero-Based Budgeting for Agency Wordage Type: Intent Linkage: Agency - Corrections Wordage It is the intent of the legislature that the Commissioner submit a report by December 20, 2025 to the Co-chairs of the Finance committees and to the Legislative Finance Division that encompasses a Zero- Based Budget. The report must include an analysis and justification for every position and expense. Explanation During difficult fiscal times, it is necessary for the Legislature to look at the entire budget, down to the minute details, in search of government efficiencies. Zero-Based budgeting, where a department must justify all expenses from zero, improves accountability and optimizes cost management. Recognizing that such a dramatic shift in how we prepare our budget within one year would cause significant issues, this language provides for the Department of Corrections to serve as a pilot for this style of budgeting. Co-Chair Josephson OBJECTED for discussion. Representative Stapp explained the amendment. The amendment included intent language that would direct the commissioner of the Department of Corrections (DOC) to submit a report by December 20, 2025, to the finance committees and the Legislative Finance Division (LFD) that encompassed a zero- based budget. The objective was to get a handle on general fund expenses. He stated it was getting very challenging to see discrepancies in how budgeting was done via baseline. He elaborated that requiring a department or RDU component to come before the finance committee or subcommittee to justify its expenses from zero would be helpful for legislature to understand where the money went and what it did. He asserted that zero-based budgeting improved accountability and optimized cost management. He recognized it was probably unrealistic to transition the entirety of the state's budget over to a zero-based process. He thought DOC was too large to attempt to make the change in a single year, but he thought the committee may be able to have a discussion about finding an RDU component or another department for zero based budgeting. Representative Hannan opposed the amendment. She believed that out of all the departments, DOC was least likely to be able to predict its costs. She stated that DOC was a downstream agency. She elaborated that if the department went to zero based budgeting at the beginning of the current year and started with no inmates and no programming, it would have to specify who it expected to get, in what condition, for how long, and what services the individuals needed. Hypothetically, the department could say it expected zero sex offenders, zero inmates in for lifetime sentences, and no inmates in need of kidney dialysis; however, instead they received medically complicated long-term inmates. Yet the department had only budgeted for short-term offenders with minimum security. She believed that due to the nature of DOC, it was the least probable to succeed at zero based budgeting. She thought the budgets would be very inaccurate. 4:05:14 PM Representative Johnson thought it could be done. She acknowledged it would never be specific and 100 percent accurate. She stated that was not the point of the process, the point was to break out where the actual costs resided. She highlighted that the DOC budget was continually increasing and had large supplementals. She stressed that the legislature needed to get a handle on the reason costs were continuing to increase. She did not believe the increases were aligned with the number of inmates. She thought there was something else that appeared to be going on, which likely had to do with management. She believed an honest try to begin the process and provide the legislature with a report would be a good way to start to get a handle on the situation. She stated that the legislature had to do some management and oversight of the budget at some point. She supported the amendment. Representative Bynum supported the amendment. He stated that after talking with the legislative finance team, he understood there were things that could be done in addition to zero-based budgeting to help the legislature get a better handle on what was occurring throughout departments and divisions. He highlighted his experience as a previous utility director and relayed that it was possible to use zero-based budgeting with uncertainty. For example, there were times in a utility where it was not possible to predict the cost of diesel fuel, disasters, copper, shortfalls in labor, and more. He stated there were many challenges running a utility, just like there were challenges running DOC. He explained that it required quantifying the anticipated unknowns and budgeting around them. He furthered that it would mean a department would identify items to the legislature and accompanying assumptions used to come up with a budgetary number. He thought DOC had the ability to do the work. He added that the department should know what its costs were. He thought the exercise would be very helpful for all of the departments to undertake. 4:08:27 PM Co-Chair Josephson asked Mr. Painter with the Legislative Finance Division (LFD) to join the committee. He thought DOC would start with the fact it had a given number of prisoners and there were laws about how many correctional officers were needed and collective bargaining agreements to honor. Additionally, DOC had to heat the prisons, feed inmates, and provide them with dental and medical care. He referred to the Cleary decision [from the Alaska Supreme Court] related to prisoners' rights. He thought that if a department went to the bottom of its budget, the budget would come right back up with many mandatory requirements. ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION, answered that in a zero based exercise, a department would have to label its constraints. Some constraints included collective bargaining contracts and other statutory requirements. He remarked that they may end up in a similar place. He believed the intent of zero-based budgeting was that a department evaluate each expenditure and justify it to the legislature even if they already had reasons for things. He noted that it was a different way to look at budgets. He stated that Alaska generally had incremental budgeting for the operating budget, and the capital budget was essentially a zero-based budget. He was not certain the result would come to a different place, but it would be a different lens. Co-Chair Josephson asked if Mr. Painter had seen similar intent language in the budget previously. Mr. Painter replied that he could not think of an example of zero-based budgeting language in the budget in the past. Representative Tomaszewski supported the amendment. He thought it was the legislature's fiduciary responsibility to understand what the departments were doing. He thought it was a great first step in the process. He believed it could and should be done. He thought the legislature should be looking into zero-based budgeting tactics for other agencies in the future. 4:11:36 PM Representative Allard supported the amendment. She likened the intent language to a forced audit and thought it would provide true transparency. She thought all departments should use zero-based budgeting. 4:11:52 PM Representative Galvin asked if the exercise would retire time or funds on the department's behalf. She wondered if departments would have to hire someone to help guide them through the process of compiling a report to provide to the legislature. Mr. Painter answered that it would be up to the department to determine. He elaborated that departments had budget staff and the Office of Management and Budget (OMB) had staff. He did not know if that would be sufficient or if departments would need to contract out or shift resources. Representative Johnson asked if Mr. Painter knew of other states doing zero based budgeting. Mr. Painter responded that he was not familiar with what other states did. He relayed that the Alaska Mental Health Trust Authority (AMHTA) used zero-based budgeting. He elaborated that AMHTA's increments were all temporary and the agency did not have anything in the base budget. Representative Johnson hoped zero-based budgeting was a good way for the legislature to figure out where the costs resided and to look at the budget in a different way. She asked Mr. Painter if he had other suggestions on a way to get to the numbers if zero-based budgeting was not the answer. 4:14:28 PM Mr. Painter replied that there were a few other approaches, specifically related to DOC, which he was aware of due to a bill introduced the previous session in Florida. He explained that Florida's version of OMB and LFD conducted joint forecasts for some items including prison populations. He noted that there was not a lot of joint forecasting done in Alaska. Other states had varying degrees of the practice used in Florida. He noted there had been intent language in the DOC budget the previous year for DOC to work on projections cooperatively between the branches, but that did not really occur. He noted it could work, but due to turnover within DOC, it had been unable to do so in the past year. Representative Johnson stated her understanding that Florida, Texas, and possibly one other state did zero-based budgeting. She remarked that the Texas budget had to be large. She highlighted that Alaska had a lot of vacancies and different things where the legislature did not know where the money was being spent. She pointed out that the DOC budget was high and continuing to grow. She supported the amendment in order for legislators to get their eyes on the budgets and to get a sense they were adhering to their constitutional responsibility. Representative Bynum stated another valid reason to support the amendment was to ask the department to undertake the exercise and talk about what it was doing in its expenditures. The alternative was to offer amendments in committee to take large cuts to the department's budget and to hear from the department later about why it really needed the funds. For example, the budget for some of DOC's facilities had grown by nearly 30 percent since FY 21, despite the addition of no new personnel. He thought it begged the question about what was actually taking place within the department. He wanted to have a great relationship with the departments and did not want his support for the amendment to indicate otherwise. As appropriators, he believed legislators needed to have all of the information available. He did not have a good understanding of what the departments were actually doing with their budgets because of how the budgets were being passed from one year to the next. He compared it to a game of telephone. He clarified that he was not in favor of doing zero-based budgeting annually because it was a heavy lift. He thought it should be done regularly or through performance audits, which had to be requested by the legislature. 4:18:45 PM Representative Stapp provided wrap up on the amendment. He appreciated the comments by committee members. He relayed that several states including Georgia, Florida, and Texas used zero-based budgeting. He underscored that the Texas budget was $321.3 billion. He was proposing a much smaller version. He remarked that legislators were frequently told by educators that the legislature had not made the same increases in the education budget, but the DOC budget continued to grow exponentially. He noted that one of the committee members mentioned the DOC budget had grown 30 percent in the past handful of years. He stated that if the expenses were justified, the legislature had to pay them. He did not know exactly why DOC's numbers continued to rise when the prison population went down. He noted that Representative Hannan had highlighted there were constitutional obligations and fixed costs associated with prisoners and he did not believe the legislature could spend any time on those items. He agreed the legislature needed to pay collective bargaining agreements to employees. He recognized there may be a valid reason for the expenses, but he wanted to know where the rest of the money was going because it did not all go to constitutional obligations. Co-Chair Josephson MAINTAINED the OBJECTION. A roll call vote was taken on the motion to adopt Amendment 42. IN FAVOR: Stapp, Allard, Tomaszewski, Bynum, Johnson OPPOSED: Jimmie, Hannan, Galvin, Schrage, Foster, Josephson The MOTION to adopt Amendment 42 FAILED (5/6). 4:21:17 PM Representative Stapp MOVED to ADOPT Amendment 18 (copy on file): Agency: Administration Appropriation: Office of Information Tech Allocation: Chief Information Officer Transaction Details Title: Utilization of AI for Zero-Based Budgeting Wordage Type: Intent Linkage: Agency - Administration Wordage It is the intent of the legislature that the agency utilize Artificial Intelligence technology to assist with Zero-Based Budgeting principles. Explanation During difficult fiscal times, it is necessary for the Legislature to look at the entire budget, down to the minute details, in search of government efficiencies. Zero-Based budgeting, where a department must justify all expenses from zero, improves accountability and optimizes cost management. Agency: Administration Appropriation: Office of Information Tech Allocation: Licensing/Infrastructure/Servers Transaction Details Title: Funding for Microsoft 365 Copilot AI Tools for State Employees Section: Section 1 Type: Inc Line Items (Amounts are in thousands) Personal Services: 0.0 Travel: 0.0 Services: 732.7 Positions Permanent Full-Time: 0 Permanent Part-Time: 0 Temporary: 0 Funding (Amounts are in thousands) 1004 Gen Fund 732.7 Explanation Microsoft 365 Copilot provides AI assistance which greatly enhance the productivity and utilization of current Microsoft products. This amendment restores the funding that was disapproved in subcommittee. Agency: Administration Appropriation: Office of Information Tech Allocation: Licensing/Infrastructure/Servers Transaction Details Title: Artificial Intelligence Projects Section: Section 1 Type: IncOTI Line Items (Amounts are in thousands) Personal Services: 0.0 Travel: 0.0 Services: 360.0 Commodities: 0.0 Capital Outlay: 0.0 Grants: 0.0 Miscellaneous: 0.0 Total: 360.0 Positions Permanent Full-Time: 0 Permanent Part-Time: 0 Temporary: 0 Funding (Amounts are in thousands) 1004 Gen Fund 360.0 Explanation The Department of Administration is seeking to build initial AI tools in an effort to reduce administrative waste by increasing productivity. This amendment aims to restore the funding that was disapproved in subcommittee. Representative Hannan OBJECTED for discussion. Representative Stapp explained that the amendment looked to utilize an artificial intelligence (AI) appropriation reduced by the subcommittee. The purpose was to start to achieve the ability to do a zero-based budget. He stated that in the previous amendment, the committee member from Juneau had asserted to the ability of the department to form the task. He stated it was a valid argument. He suggested that if the state was going to start utilizing AI for efficiencies in departments, allowing the AI tool to be utilized for the purpose of zero-based budgeting was a worthy goal. He agreed that zero-based budgeting could be complicated and resource intensive. He thought it was a good use of AI Copilot. Representative Bynum supported the amendment. He thought it was a valuable opportunity for the state to use AI as a tool. He knew many individuals in the technical world were deploying the technologies and creating tremendous improvements in productivity. He stated the tools were not meant to replace people, but they would allow state employees to maximize their time and bring information forward that may not have been readily available. He stated it was a tremendous opportunity to increase productivity and he strongly supported the amendment. He thought it would be money well spent. He believed the departments would be able to come back to the legislature to outline how it was beneficial. 4:23:55 PM Representative Hannan stated that when she met with the Office of Information Technology (OIT) on the two AI components, the division's description did not include zero-based budgeting. She could wrap her head around the amendment if it was for OIT to attempt zero-based budgeting. She noted OIT had fairly predictable costs and employees. However, the department had requested the funds for a new product to pilot for a specific purpose related to payroll. She underscored that the amendment would fund the increment but directed the department to use it for zero-based budgeting. She had seen no analysis or argument from the department indicating it would use the AI product for zero-based budgeting. Co-Chair Josephson shared that he met with Department of Administration (DOA) officials and there was no discussion of zero-based budgeting. Co-Chair Schrage opposed the amendment. He recalled the requested increment was for about 2,000 licenses to deploy out to various employees throughout the state, but he did not hear much of a plan about what training would be provided and how the Copilot services would be utilized. He thought there had not been a lot of thought given to choosing the number 2,000. He had not heard substantial reasoning that justified the expense. He was not saying there was no value in using AI in the future, he thought it could make employees more efficient and information more readily available. He had not heard of any connection to zero based budgeting from the department. He recalled there was a small pilot program planned for later in the spring and he wanted to wait for the results prior to investing more money. Representative Stapp noted there was someone available from DOA who could answer the questions. He had shared Co-Chair Schrage's concerns when the item had moved out of subcommittee. He had subsequently talked to the department and had communicated he was looking at transitioning some of the budgetary process from a baseline budget to zero- based budgeting. He had asked the department if it could utilize the [AI] resources to not only improve employee efficiency, but to give a targeted purpose to do so. He asked if the department could address the members' questions. Co-Chair Josephson noted that the individual was not currently in the room and he was inclined to go to a vote. 4:27:31 PM Representative Hannan MAINTAINED the OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Johnson, Allard, Bynum, Tomaszewski, Stapp OPPOSED: Hannan, Jimmie, Galvin, Foster, Schrage, Josephson The MOTION to adopt Amendment 18 FAILED (5/6). Representative Bynum MOVED to ADOPT Amendment 17 (copy on file): Agency: Administration Appropriation: Office of Information Tech Allocation: Licensing/Infrastructure/Servers Transaction Details Title: Add Funding for GA: Microsoft 365 Copilot AI Tools for State Employees Section: Section 1 Type: Inc Line Items (Amounts are in thousands) Personal Services: 0.0 Travel: 0.0 Services: 365.0 Commodities: 0.0 Capital Outlay: 0.0 Grants: 0.0 Miscellaneous: 0.0 Total: 365.0 Positions Permanent Full-Time: 0 Permanent Part-Time: 0 Temporary: 0 Funding (Amounts are in thousands) 1004 Gen Fund 365.0 Explanation Funding for approx 1000 AI CoPilot Licenses. Representative Hannan OBJECTED for discussion. Representative Bynum explained that the amendment pertained to the same technology [as in the previous amendment] applied in a different way. The amendment would enable DOA to use AI tools to fully integrate into the Microsoft Office suites. He stated it would be advantageous to the departments and would provide the ability to navigate Microsoft tools with ease and increased productivity. The amendment would add funding of $365,000 and would provide productivity for 1,000 personnel. He emphasized that the tool would increase government efficiency. He knew people who were using the [AI Copilot] tool at work in the healthcare field. He shared that they were immediately able to use the tool to make meetings more productive and it had increased the capability for staff to communicate with colleagues. He considered discussions about how to deploy the program within state government. He highlighted the Department of Health where there were tremendous constraints on employees being able to provide services. He noted that the tool did not require years of training. He detailed that the individual he had spoken with had been using the product for two weeks and they were already putting it to tremendous use. He stated that much about learning the tool would be self-exploratory and he thought it would take some time to explore the use. He pointed out that AI had not replaced him as an engineer or legislator, but it had made him more productive. He strongly supported deploying AI technology to increase efficiency in deploying resources more efficiently for citizens. 4:31:31 PM Co-Chair Schrage generally agreed with many of the remarks made by Representative Bynum. He believed the tools could be very powerful, but he was concerned that new tools could come with new challenges, and he had personally used [AI] tools in the past and had seen errors and other mistakes made. He thought there needed to be a plan for how the tool would be rolled out and how employees would be trained in order to be aware of some of the problems that could occur. He pointed out that there had been issues in state government where AI tools were used and official documents had false references and other errors that never would have occurred if a human produced the document without the use of AI tools. He was not indicating the tools were not powerful, useful, and helpful, but he believed they needed to be applied with the proper training to avoid unintended consequences, especially when implemented in a department that he believed was already strained. He opposed the amendment. Representative Bynum provided wrap up on the amendment. He understood that concerns voiced by Co-Chair Schrage could happen. He shared that in his experience using the technology, it was able to capture ideas, go through emails and documents, and bring the ideas into one space that he could read. He relayed that he checked any references included in the information for accuracy. He stressed that the tools had brought information to his attention that he would not have thought to look at, which had been a tremendous resource. He stated the tools saved substantial time. He agreed that if someone used the tool to do all of the work, it was a bad tool. He did not believe the change in technology took away the need for due diligence. 4:34:12 PM AT EASE 4:36:17 PM RECONVENED A roll call vote was taken on the motion. IN FAVOR: Bynum, Stapp, Johnson, Tomaszewski OPPOSED: Hannan, Jimmie, Allard, Galvin, Schrage, Foster, Josephson The MOTION to adopt Amendment 17 FAILED (4/7). 4:37:08 PM Representative Bynum remarked that he had [in a previous meeting] made a motion to rescind action on Amendment 14 (copy on file). However, after discussion with members, he did not believe it would have a positive result. He had many concerns about the unallocated cut and had previously made his concerns known. He had provided a solution to the co-chairs and he thought it was a way to get around the potential unconstitutional unallocated cut; however, he would not offer it because he did not believe he had the votes to pass it. 4:38:10 PM Representative Bynum stated there had [previously] been substantial discussion about Amendment 49 (copy on file) that had been tabled [Amendment 49 would provide funding for the unfunded HB 230 (33rd Legislature), AS 14.20.225, providing $5,000 to certified teachers and reimbursement for teachers pursuing initial certification or renewing certification]. He wondered whether Co-Chair Josephson or Representative Galvin planned to bring the amendment back before the committee. Representative Galvin stated her intent to remove Amendment 49 from being tabled. There being NO OBJECTION, it was so ordered. Representative Galvin thought a conceptual amendment had previously been adopted to Amendment 49. She believed Representative Bynum had something he wanted to say. 4:39:32 PM Representative Bynum shared that he had worked with LFD and Legislative Legal Services to come up with a conceptual amendment to address some of the previously expressed concerns from committee members. He MOVED to ADOPT conceptual Amendment 2, 34-LS8001\A.8 (Marx, 4/2/25) (copy on file) to Amendment 49: Page _, following line _: Insert a new bill section to read: "*Sec.A. DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT. The sum of $554,000 is appropriated from the general fund to the Department of Education and Early Development, education support and administrative services, student and school achievement, for teacher incentive payments and reimbursements for national board certification, as authorized by AS 14.20.225, as follows: (1) the amount necessary to make all reimbursement payments authorized by AS 14.20.225(b); (2) the remaining balance to make national board certification incentive payments authorized by AS 14.20.225(a), to be distributed on a first-come, first-served basis." Representative Hannan OBJECTED for discussion. Co-Chair Josephson recognized Representative Julie Coulombe in the committee room. Representative Bynum requested an at ease. 4:40:40 PM AT EASE 4:43:00 PM RECONVENED Co-Chair Josephson reviewed that Amendment 49 pertained to teacher incentive payments and reimbursements for national board certification. The legislature had passed a law the previous session as a way of commending and honoring the skill required to get the award. The committee had previously adopted an amendment [conceptual Amendment 1 (copy on file)] to reduce the amount of the grants from $750,554 to $554,000. The committee was currently hearing conceptual Amendment 2 to Amendment 49. 4:43:54 PM Representative Bynum explained the conceptual amendment would move the money out of the numbers section into the language section of the bill and clearly outlined how the money was to be spent. The money was first to reimburse actual expenses, with the remaining balance to be made available for national board certification incentive payments authorized by AS 14.20.225(a), to be distributed on a first-come, first-served basis. Representative Galvin appreciated the maker of the amendment working hard to align with the statute. She highlighted that there may be changes necessary in the future if the number of teachers utilizing the grants was large. She described the individuals as the "black belt of teachers." She wanted to ensure they were encouraging individuals to become the highest and best teachers possible. She believed the amendment was good in making sure the legislature was being fiscally prudent. She especially appreciated the word "reimburse" because it helped to ensure it was not doing anything extra but meeting the needs of nationally board certified teachers. She supported the conceptual amendment. Representative Hannan asked if moving the item from the numbers section would result in a one-time increment as opposed to a base increment. She noted the funding had previously been in the base under the original Amendment 49. She noted that the dollar amount in the amendment had been reduced because the number of teachers who would take advantage of the funding was unknown and it changed annually. She looked at the verbiage "to be distributed on a first-come, first-served basis" on line 11 of the conceptual amendment. She was concerned about a scenario where first 100 teachers received the funding, but there was not enough money to pay the 101st and 102nd applicants. She wondered if the individuals would be excluded. Alternatively, she wondered if the language meant that all applicants would be paid, but in the order they applied. 4:47:32 PM Co-Chair Josephson asked to hear from Mr. Painter. Mr. Painter responded that how the language was written was a policy call. He stated it could be written as an open- ended estimate for however many people came forward with reimbursements, which would enable anyone who applied to receive the funds. Alternatively, if the number was fixed at a certain amount, the department would need instruction about what to do if the appropriated amount was not enough. He elaborated that with the language "first-come, first- served" the first people who applied would receive the full reimbursement and others would not. Alternatively, the funds could be prorated so everyone would have to come forward for reimbursement and the department would decide the number of people who received reimbursement and prorate the funding. He suggested that if the committee did not want to limit the funding, the appropriation would need to be open-ended to encompass however much it may cost. He remarked that it would be a very different policy call than limiting the appropriation at a certain sum. Representative Galvin relayed that her office had done more research in the past couple of days to get an updated list of qualifying individuals. The updated information showed the number of individuals was currently 85 instead of 101. She believed the $554,000 could accommodate the number of individuals for the year; however, the number may need to be adjusted if there were many more applicants in the future. Co-Chair Josephson believed language amendments were revisited annually. Representative Allard OBJECTED. Representative Bynum provided wrap up on the amendment. There had been a concern that with the increment in the numbers section, the committee had been unable to specify how the funding would be deployed. The intention of the conceptual amendment was to ensure individuals who had spent money on the certification would be reimbursed. He explained if there was any money left over it went to the incentive payment. He elaborated that the number had been adjusted down by conceptual Amendment 1 and would assume to cover all eligible individuals. He underscored that he wanted to make sure the funding went to people who had actually spent money first. He noted that the amendment language was written in a way in order to have a defined specific amount. A roll call vote was taken on the motion. IN FAVOR: Jimmie, Johnson, Galvin, Stapp, Allard, Tomaszewski, Bynum, Hannan, Foster, Schrage, Josephson OPPOSED: None The MOTION PASSED (11/0). There being NO further OBJECTION, conceptual Amendment 2 to Amendment 49 was ADOPTED. 4:52:11 PM Representative Tomaszewski MOVED to ADOPT conceptual Amendment 3. He highlighted Amendment 47 by Co-Chair Schrage to remove $400,000 in general funds for the Imagination Library. He suggested the funding could be used for paying for Amendment 49. The conceptual amendment would remove $400,000 from the Imagination Library. Co-Chair Josephson OBJECTED. Representative Tomaszewski provided wrap up on the amendment. He recognized the importance of reading, but the state was in a budget crunch. He stated the funding could be used for many things in education funding. 4:53:30 PM AT EASE 4:56:34 PM RECONVENED Representative Galvin addressed conceptual Amendment 3. She was concerned about displacing early learning funds in any way. The subcommittee had chosen to make an investment in early learning. She relayed that Alaska had the lowest investment in early learning in the nation. She stated the readiness of kindergarten children was about 30.7 percent. She detailed that when children arrived with 11 out of 13 of the skills they should have (e.g., vocabulary and understanding of how to work as a group), they were one or two years behind. She highlighted that 81 percent of parents were reading more to children because of the Imagination Library. The program was a tool for parents, especially for low income families. Representative Galvin discussed the benefits of the Imagination Library. The program helped children to grow their vocabulary. One of the major ways for children to increase brain development was for parents to sit with them with a book. Over 140 communities in Alaska were serving families with books. She listed communities throughout the state that were benefiting from the program. The funding sources included funding from communities, foundation funding, state, corporate, and other. She stressed that investing in the program meant K-12 money would go further. She emphasized that 70 percent of kindergarteners needed extra help to get up to speed. She discussed the overly large class sizes. There were not enough reading specialists in Alaska. She stated that things were happening that she did not support like pulling kids from recess and lunch to gain the skills. She stressed it was not fair to the children. The good work happening in communities was not enough. She highlighted things like expressive and receptive communication skills and cognitive awareness gained through reading. The kindergarten developmental profile looked at things like whether kids could sustain attention to tasks and persist facing challenges. She stressed that the time a child spent on a parent's lap was essential. Representative Galvin discussed that members around the committee table likely bought books for their children, but there were many families in the state where a book sent to them by mail made all of the difference. She stressed that social workers successful with families showed up with extra gifts for the families. She stated it was how to develop a relationship with the families in order to tell them how to work with their kids. She noted that the average literacy rate in Alaska was 5th grade. She stressed the importance of loving time spent with children. Families were reminded there were other ways to interface with children when they received a book. She emphasized the cost spent on education. The books were about lifting children's spirits. She stated that Best Beginnings would like to expand to more families. There were other things that needed to be done in early learning. She provided examples. She emphasized the Imagination Library was a proven program. 5:07:35 PM Representative Galvin continued her remarks. She stated that 14,981 kids were enrolled in the program. There were about 50,000 kids in the age range in Alaska. She emphasized that children who participated in the program had higher rates of kindergarten readiness. She provided a definition of readiness. The finding was consistent across student groups including English language learners, Native students, and economically disadvantaged students. She relayed that in 2016, 30 percent of Imagination Library participants were Kindergarten ready compared to 25 percent of similar students who did not participate. She believed it mattered. She shared that teachers reported having to deal with multiple grade levels at a time and had overly large class sizes. She asked what was being done to the K- 12 system. She stressed that kids were being started off on the wrong foot and the Imagination Library helped. 5:10:52 PM Co-Chair Josephson remarked that several minutes earlier Representative Galvin had stated she wanted to make sure the committee's time was not wasted. He replied that she had not wasted one moment of his time. Representative Jimmie acknowledged the remarks by Representative Galvin. She believed it was great what Representative Galvin was doing. She knew they were both mothers and grandmothers. She stated that reading was important and it was not fair to kids when they were not able to read at a good level. She referenced fighting for funding for the Base Student Allocation (BSA) and stated it was also not fair for students in her district who had schools that were not functional, had no running water, and broken windows. She shared that she had recently watched a video from the Yupik School District, and it was facing numerous challenges. She did not see it as the time to expand the [Imagination Library] program, but to find funds to improve school infrastructure. She stated that Representative Galvin's heart was in the right place, and she understood where she was coming from. Representative Galvin replied that she would continue to support Representative Jimmie's schools. Representative Jimmie stated that she could not support [the additional increment for Imagination Library] at the current time. Co-Chair Josephson asked if there was any dispute the amendment reflected an increase of funding from the base. Representative Allard believed Representative Tomaszewski's conceptual amendment would cut $400,000 from the Imagination Library to use for Amendment 49. Representative Tomaszewski agreed. He believed the funding for the Imagination Library increment had been added to the base in subcommittee. He explained that the conceptual amendment would not eliminate funding for the program, it would remove the increase adopted in subcommittee. Representative Allard stated that Representative Galvin's remarks were a marathon speech. She had been leaning one way, but the remarks resulted in her going in a different direction. She stated the Dolly Parton Imagination Library was a nonprofit used in 70 Alaskan communities. She stated that because the state had magnificent libraries, she would vote against increasing the funds for the program. She remarked that everything she had read indicated that the program was available to every child. She did not want to "keep throwing bad money after bad." She stated that Alaska spent more money on education for its children than any other state. She supported conceptual Amendment 3. 5:15:03 PM Co-Chair Schrage stated that it was a hard situation. He stated the conceptual amendment was essentially an amendment he had drafted but had not yet introduced. He had not offered the amendment yet because he felt the committee had made progress holding down its budget. He had shared privately with committee members that Amendment 49 gave him some concern, not because he did not believe in rewarding teachers who went after the certifications. Co-Chair Schrage underscored there was limited money, and it was not possible to do all things. He stated that the conceptual amendment helped to make Amendment 49 more cost neutral. He stated it was not possible to do everything despite the value of so many of the things. He could not disagree with anything Representative Galvin said. He agreed on the importance of reading, but if he wanted to be able to adequately fund the K-12 education system and do things like provide bonuses for teachers to get certifications in order to be able to handle students in their classes, it was necessary to allocate the scarce resources the best he could and it involved making tough choices. He relayed there was $320,000 in the base [for the Imagination Library] and the subcommittee had more than doubled the figure with an increment of $400,000. He did not know it was the fiscal environment where the state could afford to double the funding, especially if the committee was going to fund reimbursements for certifications. He stated it was a tough issue for him and his family was signed up for the Imagination Library. He did not want anyone to think he was dismissive of Representative Galvin's position and that he did not see the value in the program. The state had limited resources to allocate to all of the important things. Co-Chair Schrage would support the amendment in order for the teachers to be able to get advanced training and be as prepared as possible to handle difficult class sizes. He remarked that teachers had students with many different levels of reading comprehension and readiness for school. He wanted to make sure teachers were prepared. He was confident many students would still receive Dolly Parton books in their early years. He supported the conceptual amendment in order to be able to support the underlying Amendment 49. 5:18:33 PM Representative Johnson appreciated the Dolly Parton foundation and what Dolly Parton had done. She highlighted that the state put in $325,000 for the program and the program provided matching funds. She stated that the amendment would not take away books from any child. She would support the conceptual amendment. She expressed her appreciation for the program and was glad it had been funded at the level currently in the base. She thought they were doing good work. She appreciated Representative Galvin's impassioned speech, but she clarified that the committee was not cutting out existing funds for the program, it was removing the addition that doubled the funding. 5:20:02 PM Representative Bynum had not been sure how removing the funding would impact the [Imagination Library] program, but currently there were 20,000 participants in the program according to Dolly Parton's website. He wondered about the number of kids impacted and whether the program was being removed altogether. He understood they were not removing the program and the amendment would remove an increase. He did not know the accurate number of participants, but the Dolly Parton website listed Alaska's number at 20,000. He thought it sounded like a robust program in Alaska, and he agreed with many of the other committee members' remarks. He would support the conceptual amendment. Representative Tomaszewski provided wrap up on the amendment. He supported the Imagination Library, but he did not support doubling the increment in a year where the legislature was searching for money for important things like education, public safety, and all of the other departments. He thanked Representative Galvin for her impassioned speech on the positive aspects of the program. He believed the committee needed to use its fiduciary responsibility and use it wisely. He supported the amendment. A roll call vote was taken on the motion to adopt conceptual Amendment 3 to Amendment 49. IN FAVOR: Allard, Tomaszewski, Bynum, Johnson, Jimmie, Stapp, Schrage OPPOSED: Hannan, Galvin, Foster, Josephson The MOTION PASSED (7/4). There being NO further OBJECTION, conceptual Amendment 3 to Amendment 49 was ADOPTED. Co-Chair Josephson stated that the conceptual amendment effectively adopted Amendment 47 but would be treated as part of Amendment 49. 5:23:13 PM Representative Galvin heard members' concerns about the budget and understood. She also understood that with the $400,000 [added to the Imagination Library increment in subcommittee] she had been trying to reach an additional 10,000 kids out of the 50,000 total. She shared that there had been no inflationary increase for the program. She MOVED to ADOPT conceptual Amendment 4 that would remove $200,000 from the Imagination Library instead of $400,000 to go towards Amendment 49. Representative Allard and Representative Stapp OBJECTED. Co-Chair Josephson clarified there had been three previous conceptual amendments to Amendment 49. He stated that the conceptual amendment would add $200,000 to the Imagination Library. Representative Galvin highlighted that over the past couple of days the committee had been doing things like paying $1.1 million for energy ratings that did not yet need to be paid in one area of the state. She stressed that the increment in the conceptual amendment was not for her district; it was for Alaska's children. The amendment would reduce the increment to $200,000 to be sensitive to concerns around being fiscally responsible. She asked the committee to consider adding the increment with recognition there had been no inflationary additions. She noted inflationary additions had been added for most other departments and programs. A roll call vote was taken on the motion. IN FAVOR: Galvin, Hannan, Jimmie, Bynum, Schrage, Foster, Josephson OPPOSED: Johnson, Stapp, Allard, Tomaszewski The MOTION PASSED (7/4). There being NO further OBJECTION, conceptual Amendment 4 to Amendment 49 was ADOPTED. 5:27:14 PM Co-Chair Josephson noted there had been a series of amendments adopted to Amendment 49. Representative Johnson asked for an explanation of the amendment as amended. Co-Chair Josephson explained that Amendment 49 was about a bill passed the previous session carried by Representative Rebecca Himschoot. He stated it was an unfunded law and the committee was trying to provide the funding. There was an amendment adopted to reduce the $750,000 to $554,000. Additionally, conceptual amendments had been adopted to decrease funding added for the Imagination Library by $200,000. There was also an amendment by Representative Bynum that identified how the monies for the Representative Himschoot bill would be paid. Representative Allard OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Jimmie, Hannan, Stapp, Galvin, Bynum, Johnson, Tomaszewski, Foster, Schrage, Josephson OPPOSED: Allard The MOTION PASSED (10/1). There being NO further OBJECTION, Amendment 49 was ADOPTED as amended. 5:29:51 PM Co-Chair Josephson asked if there were other amendments from committee members. Representative Stapp stated that he did not have any additional amendments. He noted that some items were tabled, but he did not feel the need to make a motion to remove items from table. He assumed the majority could un- table any items it may want to take up. Representative Bynum MOVED to ADOPT Amendment 51 (copy on file): Agency: Environmental Conservation Appropriation: Water Allocation: Water Quality Infrastructure Transaction Details Title: Add Funding for Clean Water Act Section 404 Assumption Section: Section 1 Type: Inc Line Items (Amounts are in thousands) Personal Services: 750.3 Travel: 34.0 Services: 625.8 Commodities: 40.0 Capital Outlay: 0.0 Grants: 0.0 Miscellaneous: 0.0 Total: 1,450.1 Positions Permanent Full-Time: 5 Permanent Part-Time: 0 Temporary: 0 Funding (Amounts are in thousands) 1004 Gen Fund 1,450.1 Explanation Add Funding for the Dept of Environmental Conservation to assume the duties of permitting under section 404 of the clean water act from the Army Core of Engineers. Representative Stapp OBJECTED. Representative Bynum explained the amendment that would add $1.450 million for the Department of Environmental Conservation (DEC) to assume the duties of permitting under section 404 of the Clean Water Act from the U.S. Army Corps of Engineers. He detailed that the particular section of the 404 Clean Water Act dealt with the dredging of areas like ports and harbors often necessary to get large ships into ports. The section also dealt with the filling of wetlands for the various reasons. He stated the issue was important to Alaska. He spoke to the need to ensure there was enforcement uniformity by the Army Corps of Engineers within Alaska. He highlighted that Alaska was very different than places like New Jersey, Texas, and other places in the U.S. where the Army Corps of Engineers had jurisdiction. He stated it was important because Alaska was made up of approximately 43.6 percent of wetlands, accounting for 63 percent of all the U.S. wetlands. One of the things that had been a theme was ensuring Alaska had some level of self-determination. Representative Bynum remarked that the Army Corps of Engineers was an outstanding organization that he had been a member of in the past. He noted that when he had been a member there had been a joke that the word bureaucracy was invented by the Army Corps of Engineers. He noted it was not meant in a negative way. He thought it was an opportunity for Alaska to have self-determination over its permitting and fill for wetlands for construction. He asserted it was a major issue for his district and many regions around the state to have a bit of autonomy to better utilize the permitting process and do the work responsibly. He suggested that if Alaska was to take over the duties currently assigned to the Army Corps of Engineers, it would mean the state could adopt better regulations that were more tailored to Alaska, and it would be able to achieve better outcomes for things like housing development. He stressed that affordable housing was a very important part of the overall economic need in Alaska. He stated that regulatory oversight from the federal government stifled the state's ability to do that. 5:33:45 PM Representative Hannan opposed the amendment. She stated that every dime of the current cost associated with Alaska's 404 permitting was borne by the federal government. She stressed that the $1.45 million would just be the beginning of a phased in approach that would take three years to reach a cost of $6 million to $8 million annually and require about 30 positions. She believed it was a ridiculous thing to add given the state's dire fiscal predicament and the fact that the scope of federal change was present. She noted that the Army Corps of Engineers who worked on Alaska's 404 permitting were Alaskans working in Alaska. She highlighted that no other state had successfully achieved any savings by implementing 404 permitting. She noted that most states had given primacy back to the federal government. She believed taking on a new duty with a large ticket price, which currently cost the state nothing, was fiscally irresponsible. He urged members to vote against the amendment. 5:35:08 PM Representative Johnson supported the amendment. She stated that Alaska currently had an opportunity it had not had for a number of years. She stressed the state had been fighting and fighting the federal government. She emphasized that it gave the state the chance to potentially be in charge of its own destiny instead of using fiscal responsibility as an excuse. She had seen a lot of tantrum throwing and discussion about fiscal responsibility but she had not seen a whole lot of it based on actions by the committee. She emphatically supported the amendment for Alaska to have primacy and its own oversight. She believed it was tremendously important for the future of Alaska and its children. She underscored that having a job, home, and income was a way to make a better future for Alaska's children. She stressed that she "could not sit here and listen to this any longer." She supported the amendment and believed it was the right thing to do. 5:36:37 PM Co-Chair Josephson did not think Representative Johnson had impugned anyone and he did not believe there had been any tantrums either. Representative Stapp supported the amendment. He stated that most permits that were denied were related to wetlands. He believed the state should assume primacy over wetlands 404 permits, which would help develop all of the projects desired in Alaska, help deploy all of the Infrastructure Investment and Jobs Act (IIJA) money the state received, and help employ all the projects for Broadband Equity, Access, and Deployment (BEAD) grants. He noted that Florida's costs had increased because they tripled the number of permits issued. He believed the only way Alaska would survive was if it was able to grow its way out of the problem with resource development. He highlighted that everywhere the change had been implemented had seen increased development. He thought it was a very good thing. He supported increased development, which would result in more money in state coffers in order to pay for things. He pointed out the session was half over, and the legislature had not done anything substantive to try to move Alaska forward. He reiterated his support for the amendment. Representative Tomaszewski supported the amendment. He remarked on the program's importance and thought it was necessary for legislators to think about what they wanted the state's future to look like. He asked if they wanted a federal government telling Alaska how to develop its resources. Alternatively, he wondered if they wanted to take Alaska's destiny in their own hands. He believed in the latter option. He believed the state needed to capitalize on tremendous opportunities coming in the future. 5:38:49 PM Co-Chair Schrage would not disagree there may be some merit in the state taking over 404 primacy in the future. He recalled when the issue came before him the first time in the 32nd legislature. He could see some merit in having Alaskans manage their wetlands. However, his consistent question was about how the state would pay for it. He continued to receive 10-year plans from the governor showing the state continuing to run into the red. He thought the incentive to receive 404 primacy had decreased given that the federal government paid everything for the work at present and there was a federal government in place that was much more supportive of resource development. He highlighted that the state's track record was not a good one when it came to the administration of services or any of its state duties. He heard complaints from the business industry and resource development industry when it came to the time it took for the state to permit things and to renew business licenses. He pointed out that basic state functions were currently under strain and he was not confident it would work out well for Alaska to take on more responsibility. He thought if the state took 404 primacy it could potentially result in worse performance when it came to permitting projects. He remained open to the idea but would not support it at present. Co-Chair Josephson stated that the majority caucus was passionately opposed to the idea for fiscal and other reasons. He agreed with Co-Chair Schrage that the federal administration would do what it wanted with the Army Corps of Engineers. He believed the price tag exceeded $10 million. He would vote in opposition to the amendment. 5:41:55 PM Representative Bynum provided wrap up on the amendment. He stated that although the employees working with the Army Corps of Engineers in Alaska may be long-term Alaskans, it did not mean they were not operating under the rubric of "what is the Army Corps of Engineers." He had worked with the organization for 10 years and assured members the organization did not move swiftly on things like dredging, river operations, and dealing with wetland issues. He recognized the organization was thorough and provided a good product, but it was not swift. He remarked that it was problematic when trying to get things done. Representative Bynum stressed that the state would pay for the expense with additional development in Alaska. He underscored that every day a project was delayed was a lost opportunity. He remarked that legislators talked about school issues, being able to buy groceries, and being able to heat homes. He stated that one of the major driving factors for doing those things in his communities was the cost of having a home. He stated that the ability to build housing would bring Coast Guard and National Oceanic and Atmospheric Administration (NOAA) families. He stressed that in order to ensure utilities had employees and there were schoolteachers coming to Alaskan communities, it was necessary to make sure they had housing. He emphasized that hurrying the process meant communities would become more prosperous faster. He was not advocating for bypassing environmental standards or cutting corners, but he thought Alaskans could do the work better. Representative Bynum was tired of seeing his communities suffer from the high cost of housing because they could not get permitting for wetlands. He pointed out that it was not possible to step off the road in Ketchikan or Wrangell without stepping in wetlands. He stressed that for housing and development in oil, gas, mining, and timber, the state needed access locally. He shared that when he was a utility employer, the company operated at about 65 percent of effective staffing. He shared that he would put out an advertisement for an engineer and they would come to town and look at the cost of housing and leave. He stated it was the same situation for schoolteachers looking to come to Alaska. The Coast Guard did not want to bring families to Ketchikan because of the cost of housing. He emphasized that all of the state's industries were impacted by the situation. He listed other issues facing the state such as lack of childcare and declining student enrollment. Representative Bynum stressed that 404 primacy could mean flourishing industries, reduced cost in power, more affordable homes, and increased student enrollment. He argued that it all came down to the state's ability to develop on its own terms. He strongly supported the amendment. A roll call vote was taken on the motion. IN FAVOR: Tomaszewski, Bynum, Stapp, Johnson, Allard OPPOSED: Hannan, Jimmie, Galvin, Schrage, Foster, Josephson The MOTION to adopt Amendment 51 FAILED (5/6). 5:47:35 PM Representative Stapp MOVED to ADOPT Amendment 12 (copy on file): Agency: Fund Transfers Appropriation: General Fund (Revenue) Allocation: General Fund (Revenue) Transaction Details Title: 4.85% Draw from Earnings Reserve Account Section: Language Type: Lang Line Items (Amounts are in thousands) Personal Services: 0.0 Travel: 0.0 Services: 0.0 Commodities: 0.0 Capital Outlay: 0.0 Grants: 0.0 Miscellaneous: 0.0 0.0 Positions Permanent Full-Time: 0 Permanent Part-Time: 0 Temporary: 0 Funding (Amounts are in thousands) Explanation This amendment represents a 4.85% draw from the Percent of Market Value (POMV) from the earnings reserve account. The reduction is in the amount appropriated to the general fund. Co-Chair Schrage OBJECTED for discussion. Representative Stapp explained that the amendment would reduce the percent of market value (POMV) draw taken from the Permanent Fund Earnings Reserve Account (ERA). He detailed that the defined benefits bill [HB 78] had a five- year smoothing average in which Alaska Retirement Management Board (ARMB) was required to make a decision in the event the plan was unfunded. He elaborated that it would mean ARMB would either have to take away employee retirements or post-retirement pension adjustment (PRPA) payments, or increase contributions for existing employees in order to fund the liability. He explained that if the smoothing average was applied to the past five years of the POMV draw, the fund had performed less than 5 percent plus inflation. He asked whether the legislature would respond as if it expected ARMB to respond and take action or whether the legislature would take no action and continue taking 5 percent from the fund despite lower returns in the past five years. Representative Hannan opposed the amendment. She believed the amendment pertained to the next year's draw. She stated that if it was a bill addressing the POMV draw in the statute she would probably be in favor for the reasons Representative Stapp described. However, the change in the amendment would only go into the operating budget for one year and would not change the overall fiscal policy. Representative Galvin agreed with statements made by Representative Hannan. She would like to have a conversation with the Department of Revenue. She thought the proposal was a very good idea and something the legislature should consider down the road with a bigger conversation. 5:51:02 PM Co-Chair Josephson saw some fiscal wisdom in the amendment. He stated that experts talked about draws of 4.25 and 4.5 percent. Unfortunately, he could not consider reducing the draw from 5 percent. Representative Stapp WITHDREW Amendment 12. 5:51:31 PM Co-Chair Josephson RECESSED the meeting until 7:30 p.m. [Note: the meeting never reconvened.] HB 53 was HEARD and HELD in committee for further consideration. HB 55 was HEARD and HELD in committee for further consideration. 5:52:08 PM RECESSED