HOUSE BILL NO. 263 "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 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. 265 "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 2:12:26 PM ^DEPARTMENT OF MILITARY AND VETERANS AFFAIRS 2:12:31 PM Mr. Anderson reviewed the finance subcommittee recommendations for the Department of Military and Veterans Affairs (copy on file): RECOMMENDATIONS: The House Finance Budget Subcommittee for the Department of Military and Veterans Affairs submits the following recommended operating budget for FY2027 to the House Finance Committee: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $18,554.4 Designated General Funds (DGF) $ 1.1 Other Funds $14,812.5 Federal Funds $36,379.8 Total $69,747.8 The Unrestricted General Fund difference from FY27 Adjusted Base/House Committee Substitute 1 to the House Subcommittee budget recommendation is an increase of $29.0 of Unrestricted General Funds, which is .2% above the FY27 Adjusted Base. Positions: Permanent Full-time 286 Permanent Part-time 0 Temporary 3 Total 286 BUDGET ACTION: The House Finance Budget Subcommittee for the Department of Military and Veterans Affairs reviewed the FY2027 Governor's budget request, including amendments, and recommended the following actions: 1) Accept the Department's transaction for Office of the Commissioner, adding two Program Managers for Public Protection and Infrastructure Support. This includes the following items: • $318.6 thousand Federal Receipts. • 2 Permanent Full-time positions 2) Approve the transactions for Information Technology Classification Study Implementation: • $49.0 thousand in the Office of the Commissioner - $16.3 thousand UGF, the rest in Fed and Other funds. - $25.5 thousand in Homeland Security and Emergency Management -- $12.7 thousand UGF, the rest in CIP Receipt 3) Accept the Department's transaction for Army Guard Facilities Maintenance, adding two Environmental Program Specialists Positions for Hazardous Waste and Water Resource Management. This includes the following items: • $ 252.2 thousand Federal Receipts. • 2 Permanent Full-time positions 4) Approve the decrement of $27.4 DGF in Army Guard Facilities Maintenance due to uncollected rental fees. ATTACHED REPORTS: The House Finance Budget Subcommittee for the Department of Military and Veterans Affairs adopts the attached report: • The House Finance Subcommittee for the Department of Military and Veterans Affairs Budget Action Report 2:16:20 PM Representative Tomaszewski asked for more information about uncollected rental fees. Mr. Anderson responded that due to the decrease of rentals and armories, the department was able to reduce authority and lower rental fees. Many of the armories were either not in use or not being utilized, and those in remote locations had no armory attendants. ^DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT 2:17:05 PM CAROLINE HAMP, STAFF, REPRESENTATIVE CALVIN SCHRAGE, reviewed the finance subcommittee recommendations for the Department of Labor and Workforce Development (copy on file): The House Finance budget subcommittee for the Department of Labor and Workforce Development (DOLWD) recommends the following Fiscal Year 2027 budget: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $23,364.7 Designated General Funds (DGF) $28,683.5 Other Funds $17,094.3 Federal Funds $98,031.7 Total $167,174.2 Positions: Permanent Full-time 672 Permanent Part-time 32 Temporary 8 Total 712 Compared to the FY27 House Committee Substitute 1, the subcommittee recommendation represents a decrement of $534.0 (or -2.2%) in Unrestricted General Funds, a decrement of $5,724.3 (-16.6%) in Designated General Funds, a decrement of $1,453.8 (-7.8%) in Other Funds, and a decrement of $2,591.8 (-2.6%) in Federal Funds. Budget Actions: The House Finance budget subcommittee for the Department of Labor and Workforce Development held two informational meetings with the Department and one close-out meeting during the review of the FY2027 budget requests. The subcommittee adopted: • all Governor proposed budget changes with two fund source changes (detailed in Member Amendments below); • a technical transaction correction from the Legislative Finance Division; • a transfer of the State Training and Employment Program (STEP) from the numbers section to the language section; and • a deletion of two positions within the Commissioner's office. Member Amendments: The Chair set an amendment deadline, welcomed amendments from all members, and received an amendment to change the fund source for a Workers' Compensation increment. DOLWD requested a one-time increment of UGF to maintain Workers' Compensation operations. The Worker's Safety and Compensation Administration Account (WSCAA) is currently underfunded due to a decrease in revenue derived from employer-paid insurance premiums and lack of reverse sweep, leaving no carryforward funding. Due to a member amendment, the subcommittee voted to change the increase ($1,405.0) from UGF to Timber Sale Receipts. A member conceptual amendment was also adopted to fully fund ($478.9) the Office of Citizenship Assistance and its three positions through STEP funds instead of previously-used UGF. Attached Reports: The Finance Budget Subcommittee for the Department of Labor and Workforce Development (DOLWD) adopted the BA Report and corresponding Legislative Finance Division documents, which are attached. 2:20:34 PM Representative Hannan asked how money from a different department's receipts could be taken to fund workers' compensation, which was a legal obligation. She asked what would happen to timber receipts if there was no timber sale. Ms. Hamp responded that the timber sale receipt could be used for any public fund source. There was collaboration on the change with the Office of Management and Budget (OMB) and the Legislative Finance Division (LFD) to ensure that there were currently sufficient timber sale receipt funds to fund the item. Representative Hannan noted that she had previously been a member of the Department of Natural Resources (DNR) finance subcommittee, but she was not currently on the subcommittee. She understood that timber receipts were typically used to support operations within the Division of Forestry. She asked whether the change would require a reduction in the DNR budget for previously planned uses of timber receipts or whether the funds were considered excess and available for reallocation. Ms. Hamp responded that there were sufficient funds for the current fiscal year. She explained that adequate funding was available both within the existing DNR budget and through the one-time allocation, because the item was a one-time increment. Representative Hannan asked whether both the $84,000 in UGF and approximately $343,000 in interagency receipts associated with two positions in the commissioner's office were being removed. She asked if the positions were being removed also. Ms. Hamp confirmed that both the funding and the positions were proposed for deletion. Representative Hannan stated that she intended to pursue restoring at least one of the positions. She explained that one of the positions was a legislative liaison for the Department of Labor and Workforce Development and played an important role in assisting constituents, particularly with unemployment-related issues. She indicated that the department was willing to fund the position internally using interagency receipts, but removal of the position authority would prevent that option. She expressed her intent to work with the committee to restore the position while still allowing for the reduction in general fund support. 2:25:11 PM Representative Galvin asked for a brief explanation of the decision to change the fund source for the Office of Citizenship Assistance (OCA) from unrestricted general funds (UGF) to statutory designated program receipts. She asked whether the change would make funding for the program less stable. Ms. Hamp responded that the subcommittee had sought opportunities to reduce UGF spending and determined that a fund source change would allow the program to continue operating while achieving savings. She did not have a definitive answer regarding the long-term stability of the funding. Representative Galvin asked for clarification on whether the fund source change would require annual reconsideration to maintain funding for OCA. Ms. Hamp responded that the program would remain in the base budget even with the use of statutory designated program receipts and would not necessarily require reauthorization each year. ^DEPARTMENT OF NATURAL RESOURCES 2:27:13 PM Ms. Hamp reviewed the finance subcommittee recommendations for the Department of Natural Resources (copy on file): The House Finance budget subcommittee for the Department of Natural Resources recommends the following Fiscal Year 2027 budget: Subcommittee Recommendations (Numbers Section Only): Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $23,364.7 Designated General Funds (DGF) $28,683.5 Other Funds $17,094.3 Federal Funds $98,031.7 Total $167,174.2 Positions: Permanent Full-time 672 Permanent Part-time 32 Temporary 8 Total 712 Compared to the FY27 House Committee Substitute #1, the subcommittee recommendations represent an decrease of $272.5 (-0.4%) in Unrestricted General Funds, an increase of $3,896.5 (7.3%) in Designated General Funds, $1,355.2 (2.5%) in Other Funds, and $7,609.9 (41.6%) in Federal Funds. Budget Action: The House Finance budget subcommittee for the Department of Natural Resources (DNR) held two informational meetings with the Department and one close-out meeting. The subcommittee adopted: • All of the Governor's proposed budget requests except changes to create the Department of Agriculture, which included denying structure changes and two increments totaling $301.1 of various fund sources (the subcommittee recommendation is to keep the Division of Agriculture housed within DNR); • A decrement of $641.1 UGF to delete four vacant forester positions located in Anchorage, Haines, and Ketchikan; • A $900.0 fund source change from UGF to Timber Sales Receipts to pay for forestry related positions, reversing action taken in FY25; • A deletion of the recently vacated Deputy Commissioner position; • A one-time increment of $1,956.6 in Vehicle Rental Tax to fund revenue-generating facilities and infrastructure projects within Parks Management and Access. Compared to the FY27 Governor Amend budget, the subcommittee recommendations represent a decrease of $1,960.5 (-2.6%) in UGF. Subcommittee Amendments: The Chair set an amendment deadline, welcomed amendments from all members, and received one amendments that ultimately was not offered during the close-out meeting. A conceptual amendment was offered but failed. Attached Reports: The House Finance budget subcommittee for the Department of Natural Resources (DNR) adopted the attached BA Report. Co-Chair Josephson asked whether the proposed use of the vehicle rental tax in the final bulleted item of the narrative would exceed the available revenue or whether sufficient funds existed. Ms. Hamp responded that the proposal would exceed the typically allocated amount and would result in over- appropriating the vehicle rental tax. Co-Chair Josephson asked whether expenditures would be limited to the available revenue or whether spending could continue. Ms. Hamp requested assistance from LFD for a more detailed explanation. 2:30:46 PM ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION, responded that the legislature typically appropriated vehicle rental tax revenue based on actual receipts from a prior completed fiscal year. He clarified that the proposal would exceed the amount of revenue collected in FY 25, which was the prior fiscal year. He explained that the vehicle rental tax functioned as a tracking code within the general fund rather than as a standalone fund with a retained balance. As a result, if appropriations exceeded the recorded revenue, general funds would be used to cover the additional spending. Co-Chair Josephson asked if he would effectively be able to tell his constituents in Anchorage that spending on parks management, access, and infrastructure had increased by $1.95 million. Mr. Painter responded that the situation was unusual because the vehicle rental tax was classified as a designated general fund rather than a standalone fund with its own balance. He explained that the revenue ultimately rolled up into the general fund. In past instances where small over-appropriations occurred, the excess had simply been covered by the general fund. He added that the state had not previously intentionally over-appropriated by a significant amount and that it was unclear how the governor or the Division of Finance would respond in such a case. Representative Galvin asked whether the vehicle rental tax had originally been intended, either in statute or intent language, to support tourism marketing efforts such as those carried out by the Alaska Travel Industry Association (ATIA). Mr. Painter responded that statute designated the entire amount of vehicle rental tax revenue for tourism marketing purposes. Representative Hannan asked for clarification on how much the fund was being over-appropriated. Mr. Painter explained that the over-appropriation was approximately equal to the proposed increment of about $1.9 million. He noted that the fund had already been slightly overspent by a small amount prior to the addition by around $50,000. 2:34:39 PM Representative Hannan asked for confirmation that the calculation accounted for all relevant appropriations drawing from the vehicle rental tax, including those within the Department of Transportation and Public Facilities (DOT) and the Department of Commerce, Community, and Economic Development (DCCED). Mr. Painter responded in the affirmative. Representative Bynum asked whether the budget currently funded tourism marketing. Mr. Painter responded in the negative. Representative Bynum expressed concern that the state maintained a revenue source designated for tourism marketing while not allocating those funds toward the intended purpose. He thought complications could be created in future budgeting decisions by requiring reliance on UGF instead of the intended revenue stream. Co-Chair Josephson asked Mr. Painter whether ATIA was sometimes funded in the capital budget rather than the operating budget. Mr. Painter responded that ATIA had been included in the capital budget more often than not, although it had occasionally appeared in the operating budget. He added that, in the current governor's proposal, it was included in neither. Representative Galvin relayed that she had been advised against shifting positions from designated general funds to UGF due to potential accounting issues or statutory concerns. She asked for clarification on how that guidance applied to the current discussion. Mr. Painter responded that the positions in question were tied directly to the collection of receipts, making the designated general fund an appropriate funding source. He explained that there was a prior policy decision that had shifted funding to UGF in order to free up timber sale receipts for capital projects. He noted that the governor currently proposed using timber receipts for capital purposes, and that the present change would effectively revert to using timber receipts for operating expenses, consistent with earlier practice prior to that shift. 2:38:07 PM Representative Bynum asked for clarification on item 12 related to fire suppression and land and water resources forestry management development. He noted that the item proposed deletion of four vacant forestry positions and asked whether the deletions were based solely on vacancy status or whether there had been discussion regarding the operational need for the positions. Ms. Hamp responded that the deletions were partially a cost-saving measure and partially due to the positions being vacant. She added that the budget included federal Good Neighbor Authority funding intended to support a forestry position in Ketchikan, which was expected to help offset staffing impacts. ^DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT 2:39:15 PM DAVID JIANG, STAFF, REPRESENTATIVE ALYSE GALVIN, reviewed the finance subcommittee recommendations for the Department of Education and Early Development (copy on file): The House Finance Budget Subcommittee for the Department of Education and Early Development (DEED) held a total of seven meetings and received eight presentations on department and division budgets, including the Governor proposed and amended budget actions. Based on that information and related discussions, the Subcommittee accepted all Governor operating budget actions and added seven items. The Subcommittee submits the following recommended FY 27 operating budget to the House Finance Committee. RECCOMENDATIONS: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $105,018.7 Designated General Funds (DGF) $38,364.6 Other Funds $38,416.3 Federal Funds $267,354.3 Total $449,153.9 Compared to the FY27 governor's amended budget proposal, subcommittee recommendations represent an increase of $4,900.1 (+4.9%) in UGF. Importantly, the amounts above are for the Department of Education & Early Development and do not include public education funds that go directly to districts based on formula funding, base student allocation (BSA) or Pupil Transportation, which accounts for $1,233,953.1 and $72,826.1 UGF respectively, since these are considered language items not in the purview of the subcommittee. Should these items be included, the increment of $4,900.1 UGF discussed would account for a 0.3 percent increase. Positions: Permanent Full-time 280 Permanent Part-time 10 Temporary 16 Total 306 [Due to length, please view the copy on file for the Budget Action section of the summary.] 2:49:22 PM Co-Chair Josephson commended Representative Galvin and her staff for presenting a strong and well-supported case for the requested increments. Representative Hannan directed attention to items 21 and 22 related to the Higher Education Investment Fund (HEIF). She asked would happen to those increments if the fund was not recapitalized. Mr. Jiang deferred the question to LFD. 2:50:11 PM CONNOR BELL, FISCAL ANALYST, LEGISLATIVE FINANCE DIVISION, responded that HEIF was subject to appropriation. He stated that sufficient funding existed for the current fiscal year to support the increments regardless of whether recapitalization occurred. He cautioned that without recapitalization, the fund would continue to be drawn down at an unsustainable rate relative to expected market returns, leading to a gradual depletion over time. ^JUDICIARY 2:51:07 PM KEENAN MILLER, STAFF, REPRESENTATIVE NELLIE JIMMIE, reviewed the finance subcommittee recommendations for the Judiciary (copy on file): The House Finance Budget Subcommittee for the Judiciary (Court System) held a total of 2 meetings and submits the following recommended operating budget for FY27 to the House Finance Committee: RECCOMENDATIONS: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $105,018.7 Designated General Funds (DGF) $159,591.6 Other Funds $0.0 Federal Funds $2,812.0 Total $1,805.3 Compared to the FY27 Governor's Amended budget, the Subcommittee recommendations appropriates $1,085.3 more UGF (0.7%). Positions: Permanent Full-time 755 Permanent Part-time 38 Temporary 6 Total 799 BUDGET ACTIONS The Governor's proposed budget was accepted with the following changes: - Add $600.3 UGF for inflationary increases to lease, utility, and service payments. - Add $115.5 GF/MH for salary and benefit increases of two paralegals for centralized competency calendar management (IncT; FY27-28) - Add $6.0 UGF to the Commission on Judicial Conduct for increasing annual travel expenses of quarterly in- person commission meetings. SUBCOMMITTEE AMENDMENTS The Chair received one amendment from subcommittee members in advance of the deadline. The following was adopted: - Add $363.5 UGF to address increased court visitor caseload and backlog. ATTACHED REPORTS The House Finance Budget Subcommittee for the Judiciary (Court System) adopted the attached Budget Action Report provided by the Legislative Finance Division. ^DEPARTMENT OF PUBLIC SAFETY 2:54:02 PM Mr. Miller reviewed the finance subcommittee recommendations for the Department of Public Safety (copy on file): The House Finance Budget Subcommittee for the Department of Public Safety held a total of 4 meetings and submits the following recommended operating budget for FY27 to the House Finance Committee: RECCOMENDATIONS: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $290,560.7 Designated General Funds (DGF) $9,984.2 Other Funds $16,604.4 Federal Funds $41,352.6 Total $358,501.9 Compared to the FY27 Governor's Amended budget, the Subcommittee recommendations appropriates $2,292.0 more UGF (0.8%). Positions: Permanent Full-time 1,009 Permanent Part-time 11 Temporary 38 Total 1,058 BUDGET ACTIONS The Governor's proposed budget was accepted with the following changes: - Add $1,200 UGF for inflationary increases for direct service provider grants for survivors of domestic violence and sexual assault. - Add $500.0 UGF to replace lost federal Victims of Crime Act funding and provide legal services to survivors of domestic violence and sexual assault. - Adds $592.0 UGF to replace reduced Restorative Justice Funds allocated to the Violent Crime Compensation Board and used to capitalize the Crime Victim Compensation Fund. SUBCOMMITTEE AMENDMENTS The Chair received 10 amendments from subcommittee members in advance of the deadline. None were adopted. ATTACHED REPORTS The House Finance Budget Subcommittee for the Department of Public Safety adopted the attached Budget Action Report provided by the Legislative Finance Division. ^DEPARTMENT OF FISH AND GAME 2:56:41 PM Mr. Miller reviewed the finance subcommittee recommendations for the Department of Fish and Game (copy on file): The House Finance Budget Subcommittee for the Department of Fish and Game held a total of 4 meetings and submits the following recommended operating budget for FY27 to the House Finance Committee: RECCOMENDATIONS: Fund Source: (dollars are in thousands) Unrestricted General Funds (UGF) $77,802.1 Designated General Funds (DGF) $12,875.8 Other Funds $92,639.4 Federal Funds $95,906.9 Total $279,224.2 Compared to the FY27 Governor's Amended budget, the Subcommittee recommendations spend equal UGF funds. It adds three temp positions. Positions: Permanent Full-time 868 Permanent Part-time 576 Temporary 4 Total 1,448 BUDGET ACTIONS The Governor's proposed budget was accepted with the following changes: - Add $400.0 UGF to the commercial Fisheries/Westward Region Fishery Management to supplant contributions made by the Bristol Bay Science and Research Institute to the Port Moller Test Fishery. The Port Moller Test Fishery is used to generate estimates of sockeye salmon stock and age composition and is deemed a core program by the Bristol Bay Fisheries Collaborative, of which the Department is a member. The subcommittee Chair recommends a technical correction to transfer this increment from Commercial Fisheries/Westward Region Fisheries Management to Commercial Fisheries/Central Region Fisheries Management in the full Finance Committee. The correction would change nothing about the intended use of this funding. - Replace $1,160.3 in CFEC receipt authority with UGF in the Commercial Fisheries/Statewide Fisheries Management allocation. This eliminates the Commercial Fisheries Entry Commission's (CFEC's) projected negative carryforward balance. - Add $532.9 in CFEC receipt authority to the CFEC Appropriation to fund three positions related to records reduction, Bristol Bay permitting, and IT modernization; restore the services budget to sustainable levels; and reclassify IT positions. - Add a $150.0 FY27-FY29 IncT to give the Commercial Fisheries Entry Commission the CFEC receipt authority needed to fund its IT modernization project. - Replace $682.8 CFEC receipt authority with UGF in the statewide fisheries management allocation to again eliminate CFEC receipt overdraw. - Replace $2,243.1 UGF with FED so the hatcheries can leverage in-kind contributions from construction costs for the use of Dingell-Johnson funds. SUBCOMMITTEE AMENDMENTS The Chair received no amendments from subcommittee members in advance of the deadline. ATTACHED REPORTS The House Finance Budget Subcommittee for the Department of Fish and Game adopted the attached Budget Action Report provided by the Legislative Finance Division. Co-Chair Josephson asked whether item 7 might be amended to move the item from the Westward Region to the Central Region. Mr. Miller replied that an amendment could be offered and explained that the original designation had been an error. He clarified that the mistake resulted from referencing the location where the study was conducted rather than the region in which the department actually administered the program. 3:01:12 PM Representative Hannan asked for more information about the Commercial Fisheries Entry Commission (CFEC) projected negative carryforward balance. She asked for confirmation that the anticipated negative balance applied to the current fiscal year. Mr. Miller responded that he would prefer to consult LFD for a precise answer. He understood that at the current rate of overdraw, the CFEC balance was expected to reach approximately negative $1.2 million in the following fiscal year. Representative Hannan asked how many staff CFEC currently had, especially highly paid positions such as commissioners and the executive director. She asked if there were any vacant positions. Mr. Miller responded that as of February of 2026, there were five vacant positions within CFEC. He relayed that the commission had already folded the positions into its organizational structure. Representative Hannan asked how the agency could be accruing a negative spend prediction despite having a high number of vacancies, given its relatively small total staff size. She did not understand how CFEC was spending a high amount of money despite having five vacancies. Mr. Miller responded that the deficit was driven by overall expenditures exceeding projected receipt revenue rather than staffing levels alone. He outlined that expected receipt revenue for FY 27 was approximately $6.5 million, while combined expenditures included about $4.023 million for CFEC operations, approximately $3.579 million for commercial fisheries expenditures, and about $300,000 was expected for the Fishermen's Fund. The combined expenditures resulted in a projected negative carryforward balance of roughly $1.16 million. Representative Hannan asked whether the subcommittee had considered eliminating any of the existing vacant positions within CFEC, separate from positions related to IT modernization. Mr. Miller responded in the negative. HB 263 was HEARD and HELD in committee for further consideration. HB 265 was HEARD and HELD in committee for further consideration. Co-Chair Josephson reviewed the agenda for the following day's meetings.