HOUSE BILL NO. 68 "An Act making supplemental appropriations; amending appropriations; and providing for an effective date." HOUSE BILL NO. 84 "An Act making supplemental appropriations, reappropriations, and other appropriations; amending 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." 1:33:10 PM ^OVERVIEW: SUPPLEMENTAL BILLS BY OFFICE OF MANAGEMENT AND BUDGET 1:33:16 PM Co-Chair Merrick provided information about the meeting documents. NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, introduced a PowerPoint presentation titled "State of Alaska Office of Management and Budget: FY2021 House Finance Supplemental Budget Overview," dated March 11, 2021 (copy on file). He shared that supplemental items were funding requests for the current fiscal year and generally included items where an unanticipated need arose after the legislature finalized the appropriation process in the prior year. He began on slide 2 and spoke to elements of supplemental bills. The fast track supplemental bill addressed high priority projects and completion of the FY 21 capital budget. He explained that when the legislature had adjourned early the past year, it had passed an operating budget that did not include all of the capital projects. Some capital projects were accommodated through the RPL [revised program legislative] process, but some of the items were ineligible for that process. The fast track bill also included other items with urgent supplemental needs or needs the administration had prioritized in December. Mr. Steininger continued to review the elements of the supplemental bills on slide 2. He relayed that HB 69 and HB 70 included technical supplemental items, which primarily related to FY 22, but for technical reasons the appropriations were effective in FY 21. He relayed that HB 84 was the normal supplemental bill, which included requests the administration had not been aware of in December or were slightly less urgent than items introduced in December. Mr. Steininger addressed slide 3 showing a table titled "FY2021 Supplemental Summary." The first section of the table reflected the fast track supplemental. He detailed that the lion's share of the funding request fell under the statewide category for the completion of the FY 21 Permanent Fund Dividend (PFD) payment of $1.2 billion. Additionally, $53.4 million went to the completion of the capital budget. The fast track also included a handful of agency operating items. Mr. Steininger continued to address the supplemental summary table on slide 3. He relayed that most of the items in HB 69 and HB 70 were more technical in nature. He referenced a couple of negative funding numbers within the section. He explained that the negative numbers reflected a situation where a capital project had come in under budget; therefore, the funding was repealed and reappropriated for another use. He pointed to a -$12.8 million in the capital line and $12.8 million in the statewide line. The action removed the amount from a capital project that no longer needed funding and deposited it into a fund. Representative Josephson asked which fund Mr. Steininger was referencing. Mr. Steininger answered the administration had primarily recommended a deposit into the Alaska Capital Income Fund. Additionally, there were capital requests in the 2022 capital budget spending out of the Capital Income Fund on deferred maintenance. 1:38:32 PM Mr. Steininger referenced a spreadsheet titled "FY2021 Supplemental Bill Summary," dated February 2, 2021 (copy on file). Co-Chair Merrick noted the document was located under the summary tab in members' black binders. Mr. Steininger stated the document looked similar to slide 3 in the presentation and was eight pages in length. He began on line 3 and highlighted a supplemental request to address a school finance and facilities shortfall. He explained that when the School Bond Debt Reimbursement program was vetoed, funding for school finance activities was inadvertently eliminated. The issue had been addressed in the governor's FY 22 budget. The item on line 3 backfilled the funding for FY 21. Co-Chair Merrick directed members to the spreadsheet tab in their binders. Mr. Steininger moved to line 4 showing a reduction to the amount available in the Alaska Technical and Vocational Education Program (TVEP) funding. He elaborated that the TVEP funding had been reduced due to a lack of collections in the fund. He noted there would be negative supplemental items to reflect the reduction in collections to avoid inadvertently overbudgeting from the fund in FY 21. 1:40:40 PM Vice-Chair Ortiz looked at line 3 associated with funds the legislature had appropriated for school bond debt reimbursement. He understood the funds represented a restoration of funds the governor had vetoed. He asked if the original appropriation would have come from general funds, but the supplemental appropriation would come out of the school fund. Mr. Steininger explained that the facilities section within the Department of Education and Early Development (DEED) had been funded through a transfer from the school bond debt program in the past. He detailed that the school bond debt program was paid for with a combination of the school fund and unrestricted general funds (UGF). The proposal shown on the spreadsheet used the school fund to cover the facilities payments. He referenced the historical funding method for facilities activities and noted that the activities were not all associated with the school bond debt program. The activities were associated with maintaining major maintenance lists and school facilities conditions and working with districts on facilities needs. He explained that budgeting the item within school bond debt was not putting the cost in the program it was serving. Therefore, the administration had transferred the funding out of the school bond debt reimbursement program in the FY 22 budget and directly budgeted for the expense in school finance and facilities to ensure the connection to school bond debt did not create any problems in future years. Vice-Chair Ortiz asked about the net impact of the specific transfer. He asked if any municipalities had benefitted from the process that took place after the veto occurred. Alternatively, he wondered if only the state had benefitted. 1:43:17 PM Mr. Steininger replied that the staff supported by the $928,000 performed work that benefitted districts. The staff reviewed applications for school major maintenance funding, reviewed backlog lists of maintenance needs at school districts, and other work assisting districts and Regional Educational Attendance Areas (REAA) with facility- related activity. Vice-Chair Ortiz clarified that the idea behind school bond debt reimbursement was to help municipalities with their bond indebtedness. He asked for verification that none of the municipalities actually received any help with their bond indebtedness related to the specific item [on line 3 of the spreadsheet]. Mr. Steininger answered in the affirmative. He stated that the school bond debt program had been vetoed. The activities performed by the individuals funded through school bond debt in prior years was not necessarily associated with the school bond debt program. Mr. Steininger moved to line 5 showing a $13.5 million appropriation for the PFD hold harmless program. He elaborated that the funding would ensure the hold harmless program was sufficiently funded to complete the fiscal year 2021 dividend payment. He relayed lines 6 and 7 were related to the TVEP program shortfall addressed earlier. He moved to an increment on line 8 for operational support at Alaska Vocational Technical Center (AVTEC). He elaborated that AVTEC had seen substantial revenue shortfalls due to COVID; however, COVID relief from the federal government had not been sufficient to offset the shortfalls. 1:45:22 PM Representative Josephson looked at the PFD hold harmless program on line 5. He asked if line 5 would be moot if the legislature did not appropriate the $1.2 billion to complete the statutory dividend. Mr. Steininger replied affirmatively. Mr. Steininger briefly noted that item 9 related to the TVEP distribution. He moved to items in the capital numbers section of the fast track supplemental bill. He began with a replacement system for the Division of Retirement and benefits on line 13. He detailed the division was currently replacing two of its system servers that were close to end of support. The increment was $230,000 in retirement system funds. Line 14 included $7.7 million in federal receipts related to the Pacific Salmon Treaty Chinook Fishery Mitigation. He elaborated that the item was related to an RPL that placed money in FY 21 for one fiscal year. The increment would allow the money to move into the capital budget for use across several years (the full time period of the federal grant). Line 15 included a $500,000 appropriation for the Department of Fish and Game (DFG) from the Capital Income Fund for vessel, facilities, and aircraft maintenance. Line 16 included an increment for DFG for the Sportfish Recreational Boating and Angler Access Program. He expounded that the program used a significant amount of federal receipts with matching funds coming from the Fish and Game Fund. He noted the Fish and Game Fund was not eligible for the RPL process, which is the reason the funding was not done over the summer. 1:47:41 PM Mr. Steininger moved to line 17 on page 2 related to the Wildlife Management Research and Hunting Access program within DFG. The increment was federal funding matched by the Fish and Game Fund and Statutory designated program receipts (third-party contributions to the projects). Line 18 included a capital project to access money in the Election Fund that was provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. He explained that because expenditures from the Election Fund were not eligible for the RPL process, the funds had been deposited but had been inaccessible. He elaborated that during the intervening time period the Division of Elections utilized its existing operating appropriation to achieve the goals of election security the funds were intended for. The supplemental request was needed in order to transfer the expenditures to a capital project and maintain operations through the remainder of the fiscal year. Representative Josephson recalled during the RPL period in the summer of 2020 there were COVID relief funds available for state elections that the state had waived at the time. He recalled discussing the issue with colleagues. He asked if it was the same money that the state was receiving belatedly. Mr. Steininger confirmed that the monies were the same. He detailed that the CARES Act had included funding for making the election safe for COVID. The federal guidelines required the money to be deposited into the Election Fund in each state. He explained that the election fund could not be spent through the RPL process. The money had been deposited, but the state had been unable to spend it. The Division of Elections had used funds from its general operating appropriations for elections safety. He elaborated that the supplemental increment would let the division transfer the expenditures into the capital project for COVID security of elections and use the money to continue operations. 1:50:50 PM Mr. Steininger moved to line 19 showing a statewide deferred maintenance increment funded with the Capital Income Fund. He noted that the $5.9 million listed was significantly less than the FY 21 capital budget request. He explained there was not enough time left in the year to obligate the entirety of the funding. The increment reflected the available funding in 2021 and if the fast track supplemental bill was appropriated quickly, some projects could be obligated going into the summer season. Mr. Steininger reviewed a $4 million increment for prosecutor recruitment and housing to address sexual assault and sexual abuse of a minor case backlogs on line 20. He noted there was also $3 million in the Department of Law (DOL) base budget for prosecutor salaries. Representative Rasmussen asked if item 20 pertained to prosecutors hired in FY 21 or for new positions that had not yet been filled. Mr. Steininger replied that DOL was looking to create a surge of hiring of new prosecutors to address the backlog and the specific type of cases. He elaborated that the capital project would give the initial money in FY 21 once appropriated. The budget requests for FY 22 going forward paid for ongoing salary costs. The increment [on line 20] helped with the initial hiring influx. Representative Rasmussen asked about the number of positions the department was looking to add. Mr. Steininger believed it was 34 positions with support staff. He would follow up with the precise number. Representative Josephson expressed support for the increment, but not the funding source. He asked how he would explain to education advocates that $4 million [in higher education funding] should be used for a different purpose. Mr. Steininger replied that the budgets, particularly the supplemental, had been built with the understanding there was constraint on the balance of the Constitutional Budget Reserve (CBR). He explained that the prior appropriation bill did not include available UGF CBR headroom to make supplemental appropriations; therefore, the administration had used less traditional fund sources. He stated that while the proposal was not a designated use of the Higher Education Fund, it was still subject to appropriation controlled by the legislature. He stated the importance of addressing the backlog and explained that the administration had utilized available fund sources to meet supplemental needs. He remarked that some of the fund sources may not match up perfectly. 1:54:52 PM Representative Rasmussen considered that while paying the increment [on line 20] from the Higher Education Fund may not align perfectly, she thought it could be appropriate because it addressed the abuse of minors. She had been told by advocate groups that some of cases involving kids were delayed up to five or more years, which was lengthy and traumatic for children. She stated that the trauma could have long lasting impacts on children. She saw the increment as a possibility to eliminate some of the long- term effects due to delayed cases. She reasoned it would contribute to their higher education at some point. Representative LeBon asked if it impacted the university scholarship program, Alaska performance scholarships, or Washington, Wyoming, Alaska, Montana, and Idaho (WWAMI) programs. Mr. Steininger answered there was no plan to reduce funding for the scholarship programs, but it did utilize the fund source that paid for the programs. Representative LeBon thought it was hard to reconcile that the use of funds would not have a long-term impact on the programs in some way. Mr. Steininger explained that for several years the Higher Education Fund had been on a trajectory of appropriating slightly more than its earnings. The balance was declining over a long period of time. He stated that the proposed use [on line 20] did not undermine the programs. He noted it was not a principal and income type of fund. Representative LeBon suspected the administration took the position that the scenario should be a one-time only event. Mr. Steininger answered the increment was a one-time implementation cost. 1:57:35 PM Representative Wool asked if there were other places where the proposed budget utilized funds for something outside their original intent. He referenced past testimony from the Alaska Mental Health Trust Authority (AMHTA) about the use of its funds. He characterized the use of funds for something other than their intended purpose as breaking the rules. Mr. Steininger would note the fund sources throughout the presentation. He pointed to an increment on page 1, line 8 for the Alaska Vocational Technical Center (AVTEC) backfill and noted the funding source was Alaska Housing Capital Corporation (AHCC) receipts. He explained the AHCC was effectively a savings account with no designation of its purpose. He stated that the administration utilized some of the fund sources in the supplemental to avoid the CBR headroom issue. Representative Wool recalled seeing the previous day that the Power Cost Equalization (PCE) Fund had been used for something outside its intended purpose. He observed that the issue appeared to be happening in multiple places. Representative Josephson thought he heard Mr. Steininger state that the Higher Education Fund was suffering anyway, therefore using a little more from the fund would not matter. He did not believe that was how Mr. Steininger meant it, but it was the way he had heard it. Mr. Steininger replied that it was not how he had meant the statement. He clarified that sometimes designated funds used for a specific purpose made it appear that the program was not a General Fund cost. In the case of the Higher Education Fund because the real value of the fund was declining over time, those uses needed to be considered as priorities against other General Fund spending. The scholarship programs mentioned by Representative LeBon were priorities that had been fully funded in the budget regardless of the declining real value of the fund. In the case of the Higher Education Fund, the question of the priority was whether the scholarship program was a greater priority than the health of the fund. He believed the scholarships were the priority and the fund was a mechanism that showed the expenditure as a designated general fund (DGF) cost rather than a General Fund cost. Co-Chair Merrick asked members to hold questions until the end. Vice-Chair Ortiz asked if the bar on eligibility had been raised for the scholarships or if there had been a decline in the number of awarded scholarships due to the decline in the balance of the Higher Education Fund. Mr. Steininger would follow up on the question. 2:02:28 PM Mr. Steininger moved to an appropriation on line 21 for the Department of Military and Veterans Affairs (DMVA) for security upgrades at the Vessel Readiness Center. Line 22 included an appropriation to the Vessel Readiness Center for water systems sustainment upgrades. Line 23 contained an increment for the Kotzebue Readiness Center HVAC system. Line 24 included an appropriation for roof, envelope, and fall protection for DMVA facilities statewide. Line 25 included an appropriation to the Department of Natural Resources for the Parks Land and Water Conservation Fund federal grant program. He noted the program had been included in the FY 21 capital budget, but it had not been appropriated. The item leveraged substantial federal funds but required state match. Line 26 was an appropriation for the Geological Materials Center multispectral scanning equipment. He remarked that the increment had been proposed in FY 21, but not appropriated. Mr. Steininger advanced to line 27 on slide 3. The appropriation for the Department of Transportation and Public Facilities was for the decommissioning and remediation of Class V injection wells. The increment was $1.7 million funded with Alaska Housing Finance Corporation (AHFC) dividends. Line 28 was public building fund deferred maintenance renovation and repair. The increment was annual deferred maintenance costs of just under $6 million for public buildings that was not appropriated in the capital budget the previous year. Line 29 included an appropriation for court security improvements throughout the state to be paid with AHFC dividends. Line 30 included an appropriation to address deferred maintenance improvements for court facilities throughout the state to be paid from the Alaska Capital Income Fund (the fund source traditionally used for deferred maintenance). Mr. Steininger moved to an increment for the operations of the Alaska Psychiatric Institute (API) on line 34. The governor's budget recommended paying the $6 million increment with Alaska Mental Health Trust Authority (AMHTA) reserves. Line 38 was a capital project for the Department of Revenue utilizing $10 million in program receipts collected by the Child Support Services Division and $15.5 million in federal receipts to replace the division's aging case management system. He noted the operating budget included some reductions the division would be able to take by moving off of the mainframe system. He remarked that there was a significant cost to the initial upgrade; however, there were ongoing operating savings and the system needed to be replaced. 2:05:35 PM Mr. Steininger began addressing items in the regular supplemental bill. He described the items as less urgent, or the administration had not been aware of them in December. Line 42 was related to the transition to biweekly payroll. He explained the transition had increased the cost of state employees' salaries by less than half a percent. In order to accommodate some of the increases in agency budgets, the administration was reducing the rate charged by the Division of Personnel and Labor Relations that applied across all payroll throughout the state. He elaborated that the transition to biweekly generated efficiencies and savings within payroll processing and human relations (HR) work. The HR work would be centralized in the Division of Personnel and all of the savings that offset the salary cost for agencies would be borne within the division. He relayed that the savings would take time to implement; therefore, in order to make certain the immediate cost impact did not come at a cost to programmatic delivery, the rate was reduced immediately. He noted it required some backfill of General Fund cost within the division to ensure its mission was completed. The change would reduce agencies' rates by $2 million, but the savings could not be implemented immediately. As a result, the budget included $1.65 million in General Fund costs within the division. The change ensured agencies were not harmed by the policy decision to move to biweekly payroll. 2:07:50 PM Mr. Steininger moved to a $411,700 UGF to offset revenue deficits in professional licensing programs on line 43. He expounded that during COVID, fee increases to professional licensing were suspended, which had caused some of the licensing boards to go into a deficit in license collections. The increment aimed to offset impacts to the licensing boards. Representative Josephson asked why the item would not be payable with federal sources. Mr. Steininger answered that the CARES Act COVID Relief Funds (CRF) could not be used for revenue replacement. The new federal stimulus package included a stipulation specifying the funding could not be used for an intentional decrease in a tax or fee or to avoid a tax increase. He explained that the increment pertained to a policy decision not to increase or change fees for professional licensing; therefore, the federal funds could not be used to cover the expense. Mr. Steininger moved to line 44. He explained that the Department of Environmental Conservation (DEC) had implemented some energy savings efficiency projects. He elaborated there was a state program allowing the borrowing of funds for energy efficiency upgrades on state facilities if the cost of debt was entirely covered by the energy cost savings. The department had taken advantage of the program; however, there had been delays in implementing the retrofits primarily due to COVID. Therefore, the department was unable to fully pay down the debt in the first year; there was a $70,000 difference between the energy savings and the cost of the debt. Mr. Steininger addressed appropriations for DEC on lines 45 and 46 pertaining to environmental health and water quality. He detailed there were unanticipated legal expenditures as a result of enforcement cases the department was required to pay to the Department of Law (DOL). He explained that the cost was for services for DEC; therefore, the supplemental increment was in the DEC budget and not the DOL budget. Line 47 included a $590,000 appropriation to the Office of the Governor for the Division of Elections reflecting the match portion of the COVID relief funding from the CARES Act to the Election Fund. Line 48 included an appropriation just under $3 million for subsidized adoptions and guardianships. He detailed the funding had a $275,000 General Fund match. The item reflected an increase in the number of children being adopted or in permanent guardianships. 2:11:17 PM Mr. Steininger advanced to a $1.2 million increment on line 49 for the Adult Public Assistance program to adjust for a calculation for the maintenance of effort to support the Medicaid program. The increment was required in order for the state to continue collecting federal funding for the Medicaid program. Line 50 included $1.2 million in federal receipts for increased federal participation in some of the maintenance costs at Army Guard facilities. Line 51 was $130,000 for risk management of physical and digital risks within the Department of Revenue. Line 52 reflected an adjustment to the estimate for investment management fees at the Alaska Permanent Fund Corporation (APFC) under DOR. He detailed that $50 million was necessary due to higher returns than anticipated when the corporation had budgeted for its management fees. Mr. Steininger moved to capital items within the regular supplemental bill beginning on line 56. Line 56 included an appropriation of $200,000 for the Alaska Energy Authority (AEA) Electrical Emergencies Program. Line 57 included a $330,000 appropriation for the Mount Edgecumbe high school master plan update from the school fund. He detailed that the school fund was a dedicated fund that could only be used for school facility related purposes. Line 58 included an increment for the Department of Education and Early Development to create a new database to track school facility conditions. Lines 59 and 60 within DEC were both related to increases in the match required for increased awards through the Village Safe Water Programs (for expansions and upgrades and first time service projects). The increments only included the General Fund portion because the department had existing authority to collect the increased awards. 2:13:52 PM Mr. Steininger moved to an appropriation on line 61 to enhance capacity at the Geological Material Center paid for by a third party that would utilize the capacity to store its own samples. Line 62 included $49,000 for Exxon Valdez Oil Spill Outreach through the Exxon Valdez Oil Spill Trustee Council. Line 63 was $750,000 for new subdivision development to bolster land sales by the Department of Natural Resources. Mr. Steininger moved to the operating language section in the fast track supplemental bill beginning on line 69. The increment on line 69 included $4 million related to outside counsel and other activities necessary to support statehood defense related to Alaska's statehood rights for natural resources. 2:15:05 PM Representative Josephson observed the document contained AHFC as a fund source for numerous items. He asked how AHFC may feel about the proposed use of funds. He remarked he was seeing many unusual fund sources listed in the document. Mr. Steininger answered that the fund source was the AHFC dividend paid annually to the state. He explained that typically the AHFC dividend was appropriated for capital projects. He detailed that by appropriating the dividend for capital projects, AHFC was able to hold onto the cash for continued investment and to distribute the funding when projects needed the funding. He relayed that AHFC strongly preferred for the funds to be used for capital spending. He explained that the previous year when only part of the capital budget was funded, AHFC dividends had not been fully expended. He reported that dividends that were not fully expended on capital projects were deposited into the General Fund per the appropriation language. He noted when the funds were deposited into the General Fund, they generally were swept into the CBR. He reiterated that AHFC preferred the dividends to be used for capital projects, which enabled the corporation to continue to manage the funds and theoretically should increase dividends in future years. Representative Josephson asked for verification there was nothing about the fund sources that were akin to the discussion of the AMHTA or AIDEA fund sources. He asked if the proposed use of the AHFC dividends was customary. Mr. Steininger answered in the affirmative. He stated it was customary to utilize the corporation's dividend, not other funds held by the corporation. 2:17:41 PM Mr. Steininger informed committee members that the increment on line 69 also used the existing balance of the Investment Loss Trust Fund. He remarked that the account collected money over time and had a small balance. Mr. Steininger moved to a $1.2 billion increment on line 70 to complete the FY 21 statutory PFD paid in July 2020. Line 74 included $2,300 for a grant to the Blood Bank of Alaska. Line 75 was a reappropriation of a prior capital project to be used for tax expertise and economic impact analysis by the Department of Revenue. He explained that as tax proposals were made, the department needed to bring in expertise to analyze the proposals within Alaska's fiscal picture. Line 79 was a technical item related to the Division of Risk Management and the Catastrophic Reserve Account [lapse balance appropriation]. He explained that the specific budget method had been used in the past [Note: see description on page 6 of the spreadsheet for more detail] and it appeared to be an omission from the operating budgets. He elaborated that as the administration was looking at Catastrophe Reserve Fund bill currently before the legislature, it realized the appropriation was necessary to affect the current statute. Mr. Steininger moved to an appropriation for the smoothing of chargeback rates on line 80. He noted the rates had been discussed by the Office of Management and Budget in a recent House Finance Committee meeting. The increment would stabilize the rate charges year over year. Line 81 was language for the Department of Health and Social Services Medicaid Services to allow money saved in the Medicaid program to roll into FY 22. The increment would allow the program additional time to negotiate with stakeholders on the Medicaid budget. The item used funds offset by the increase in federal participation in the Medicaid program to carry into the following fiscal year. He noted that since the item had been proposed, the increased federal participation had been extended through the end of the current calendar year and savings would continue into the next year. Line 82 reflected an amendment to the Commercial Vessel Passenger Tax appropriation. He explained the appropriation was responsible for sending head tax dollars out to the first ports of call where cruise ships docked. He expounded that when reviewing the budget from the previous year, the administration had found a typo in the year referenced, which would have double spent collections from two years back. The item corrected the error and adjusted the estimate from ~$21.3 million to zero to reflect the amount collected in the past year. 2:21:48 PM Mr. Steininger highlighted that line 83 was an estimated deposit into the Disaster Relief Fund. He detailed there were appropriations for COVID disaster relief to the Department of Health and Social Services totaling $90 million between two appropriations. The administration did not believe the entire amount was needed for COVID relief and was proposing to deposit $30 million of the total into the Disaster Relief Fund. The funds would accommodate known costs related to prior disasters in recent years, not necessarily related to COVID. The action would bring the fund back to a healthy balance. Mr. Steininger moved to a fund transfer of $12.75 million in prior capital projects that had been completed under budget. The remaining funds would be deposited into the Capital Income Fund. The money would be redeployed for deferred maintenance in the capital budget. Line 88 included a small reappropriation of unexpended balances on capital projects from cruise ship head tax. The money would go back into the [Commercial Passenger Vessel Tax] account. Line 89 included repeals of other Department of Transportation and Public Facilities capital projects associated with the deposit into the Capital Income Fund, in addition to some repeals of existing projects that were appropriated from the Capital Income Fund. He noted the money would lapse back into the fund. Mr. Steininger reviewed an item related to a settlement against the state from a Disability Law Center judgement on line 93. The increment was $7.35 million in general funds and $4.5 million in federal matching funds to programs created for FY 21 under the settlement. 2:24:03 PM Mr. Steininger highlighted five other judgements, settlements, or claims totaling $366,000 UGF on line 94. Line 98 reflected an amendment to the Natural Petroleum Reserve-Alaska (NPRA) Impact Grant Program. The increment of $17.9 million would be adjusted to the amount actually received for the program by the Department of Commerce, Community and Economic Development. Line 99 was a technical item to reassign old appropriations initially for the Department of Administration to the Department of Military and Veterans Affairs as a result of the transfer of the Alaska Land Mobile Radio System (ALMR) program. Page 8 of the spreadsheet showed a summary line with the cost of total supplemental items. Vice-Chair Ortiz looked at lines 82 and 88 related to the Commercial Passenger Vessel Tax. He asked for verification the increments would reinstate funds to the Commercial Passenger Vessel Fund. Mr. Steininger answered that the smaller increment of $8,600 would lapse back into the Commercial Passenger Vessel Fund. The $21.3 million was to adjust the projected expenditures from the previous year's budget to the actual distribution. He noted there had been a very minimal amount collected the previous year. Vice-Chair Ortiz looked at line 82 and asked if expenditures from the fund had been projected at $21.2 million, but the expenditures had not actually occurred. Mr. Steininger agreed. He explained that the state had been projected to receive enough head tax revenue to pay out the distribution and the number had not been adjusted at the end of session the previous year. Representative Johnson asked a question about lines 80 and 81 on page 7. Mr. Steininger answered there were not amounts associated with items on lines 80 and 81 because they were estimated amounts and not additive spending. He elaborated that line 81 related to existing appropriations for general funds to Medicaid Services. The administration was looking to use the existing $35 million appropriation and extend the lapse date. Line 80 allowed existing unexpended appropriations in FY 21 to lapse into an appropriation for rate smoothing. He clarified that numbers were not included for lines 80 and 81 to avoid duplicate counting. Representative Johnson looked at lines 45 and 46. She asked if legal expenditures related to a municipal government or private individual. Mr. Steininger deferred to the Department of Law or the Department of Environmental Conservation for details on the case. Representative Johnson wanted to ensure the state was spending funds on legal efforts in the right place. 2:29:18 PM Co-Chair Merrick asked Mr. Steininger to review governor amendments. Mr. Steininger referenced a one-page document titled "FY2021 Supplemental Governor Amended," dated February 16, 2021 (copy on file). Lines 1, 3, 4, and 5 were all related to the Technical Vocational Education Program (TVEP) distribution. He noted the previous spreadsheet discussed showed reductions to the TVEP distribution. Subsequent to the release, the department had looked at revenues coming in for the program. He explained that incoming revenues had been fairly volatile given COVID and the employment situation in the state. He explained that revenues had been adjusted up, but there was still a net reduction in collections to the fund. Co-Chair Merrick directed members to the appropriate location in their budget binders. Mr. Steininger highlighted a fund source change on line 2 in the Department of Environmental Conservation. He explained that shellfish testing had been funded using cruise ship head tax dollars; however, the Department of Law (DOL) believed the fund use may conflict with the commerce clause in the U.S. Constitution. As a result, the administration was replacing the funds with UGF. There was a similar budget item in the DEC FY 22 operating budget. Vice-Chair Ortiz asked how long cruise ship passenger vessel taxes had been used to fund the shellfish testing program. He wondered why the concern had only recently been raised by DOL if the fund use had been occurring for a number of years. Mr. Steininger answered that it had been used for several years and he knew it had been a concern; therefore, the administration was proposing to fix the issue. He did not know why the adjustment had not been made in prior years. 2:32:00 PM Mr. Steininger noted that lines 3 through 5 were related to the TVEP distribution. Line 6 was a technical adjustment. He elaborated that prior OMB reports reflected some UGF costs associated with one of the General Fund appropriations to the Department of Health and Social Services for COVID relief. Subsequent to the reports, the administration realized the costs should be applied to federal funds through the CARES Act. Lines 7 and 8 were repeals of capital projects completed under budget. He explained that line 7 reappropriated the funds back to the General Fund. He noted that the amounts could be deposited into another fund like the Capital Income Fund. Line 8 reappropriated funds back into the Capital Income Fund. He noted the funding came from a prior project from the fund; therefore, the reappropriated funding could be used for deferred maintenance needs in the future. Representative Wool asked about the TVEP funding change. He asked if it was because the Unemployment Insurance Fund contained less funding than anticipated due to COVID and unemployment claims. Mr. Steininger answered that the TVEP Fund was funded through payroll taxes. He explained that due to the pandemic's impact on the employment situation over the past year, the tax had varied significantly from initial estimates. He detailed that the administration had put together the negative adjustments in December. Subsequently, the department had observed revenues were increasing more than projected, which resulted in the adjustments reflected in the spreadsheet. Representative Josephson returned to the spreadsheet related to the supplemental bills. He referenced page 7, line 94 related to judgements, settlements, and claims. He pointed to an increment of $197,000 on the Recall Dunleavy. He asked if the expense was borne by the Division of Elections. He asked for detail. Mr. Steininger answered that cost would be a General Fund appropriation to the Department of Law to pay the settlement. He noted the item did not run through the Division of Elections. Representative Josephson asked why the increment description included "DOE." Mr. Steininger answered that the information provided in the description reflected parties included in the case name. Representative Josephson asked if the money was designed to make DOL whole for defending the Recall Dunleavy lawsuit. Mr. Steininger clarified that the increment would pay the prevailing party from the settlement or judgement. 2:35:44 PM Representative Josephson thought the decision was a policy call. He asked for verification that the cost could have been paid by fundraising or the state. Mr. Steininger answered that the item was a judgement or settlement against the state and the amount was an obligation owed by the state. Representative Edgmon asked about page 7, line 83 [related to the Disaster Relief Fund]. He asked if the item was a lookback in FY 21. He referenced Senate Bill 241 and the Disaster Declaration Fund where the legislature had authorized a $10 million limit. He referenced SB 56 and HB 76 that included $10 million to extend the disaster declaration and would be before the committee for consideration soon. He asked how the $30 million on line 83 interplayed with the other aforementioned items. Mr. Steininger thought it may help to provide a bit more about the Disaster Relief Fund. He clarified that the $30 million [on line 83] would not be utilized for COVID related disaster spending. The purpose of the increment was to return the fund balance to a sufficient level in order to respond to other disasters occurring in the intervening time period. He reported there were still costs associated with the Anchorage earthquake from several years back. Additionally, there were costs associated with more recent earthquakes, fires, and a variety of other small disasters. He relayed that as of a couple of weeks earlier the balance of the fund was ~$2.7 million, which was not considered to be a comfortable balance. The $30 million would ensure needs were met for existing disaster spending through the following fiscal year. He noted that the $5 million deposit made the previous year associated with the pandemic and the $10 million cap set under SB 241 would not be impacted by the deposit. Representative Edgmon asked for verification that the spending of the $30 million would be governed by disaster declarations issued by the administration. Mr. Steininger replied in the affirmative. Co-Chair Merrick thanked Mr. Steininger for his presentation. HB 68 was HEARD and HELD in committee for further consideration. HB 84 was HEARD and HELD in committee for further consideration. 2:39:41 PM AT EASE 2:44:47 PM RECONVENED