HOUSE BILL NO. 281 "An Act making appropriations for the operating and loan program expenses of state government and for certain programs; capitalizing funds; amending appropriations; making reappropriations; 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. 282 "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; making capital appropriations and supplemental appropriations; and providing for an effective date." 1:36:09 PM ^OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT 1:36:33 PM MICAELA FOWLER, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, provided a PowerPoint presentation titled "Department of Commerce, Community and Economic Development: House Finance FY2023 Overview," dated February 24, 2022 (copy on file). She reviewed the Department of Commerce, Community and Economic Development (DCCED) mission to promote a healthy economy, strong communities, and protect consumers in Alaska (on slide 2). She addressed the DCCED structure on slide 3. The department had six core and seven corporate entities. She stated the department was very diverse and busy. Additionally, DCCED housed the Alaska Railroad Corporation, which was exempt from the Executive Budget Act and would not be included in the presentation. Representative Wool asked why Ms. Fowler's name appeared twice on the organizational chart. He asked if she was moving into the deputy commissioner position. Ms. Fowler replied that the deputy commissioner position became vacant in July of 2021, and she had been in acting status for the position. She was still the administrative services director. 1:38:58 PM Ms. Fowler briefly reviewed the FY 23 governor amended budget on slide 4. She relayed that the department's FY 23 budget looked substantially similar to the previous year. The most dramatic difference was the significant increase in federal authority in the last couple of years. She highlighted that DCCED had been the passthrough agency for considerable funds including Coronavirus Aid, Relief, and Economic Security (CARES) Act and American Rescue Plan Act (ARPA) funds to local governments. The department had also established several grant programs that were provided for by the legislature through the appropriations process. She noted the presentation included a slide to provide updates on some of the items. Ms. Fowler addressed a DCCED budget lookback on slide 5. She drew attention to a small increase in the department's FY 20 management plan budget in designated general funds (DGF) where the Alaska Oil and Gas Conservation Commission (AOGCC) was transferred from the Department of Administration (DOA). She highlighted substantial decreases in the department's undesignated general fund (UGF) allocation over the years. In FY 15 the department had $40 million in UGF and was down to slightly under $10 million in FY 23. Some of the difference was due to the reduction in staff and activity. Additionally, the department had previously housed a tourism program, which had been moved to a grant operated by the Alaska Travel Industry Association (ATIA). 1:41:07 PM Ms. Fowler turned to slide 6 and noted that the department's new Commissioner Julie Sande had started on the first day of session. She discussed changes in the FY 23 budget for the commissioner's office. The one remaining position from the economic development component was transferred into the commissioner's office. She detailed that the previous year, the budget had transferred two positions from economic development to the Office of the Governor as the governor's office was taking on more of the state's economic development activities. The administration also recognized there was value in the advocacy for economic development coming out of the governor's office. She explained that the change the previous year had left one remaining position in the component. She noted the position had been naturally absorbed by the commissioner's office in order to have direction from the commissioner on economic activities and to assist where the need was greatest. She elaborated that economic development worked closely with the Office of the Governor. The change in the budget completed the transition by moving the position and associated funding to the commissioner's office component. She noted there was technically a decrement in the economic development component. There was not a separate slide included in the presentation because the change eliminated the need for a separate economic development component. 1:43:22 PM Ms. Fowler stated that divisions addressed on slides 7 through 9 did not have any changes in the FY 23 budget. The only exception was the unallocated rate adjustment included on slide 7 reflected the Office of Management and Budget's (OMB) new process of allocating rates across departments. The item would be included in every department's budget. She turned to slide 8 and noted there were not changes in the budgets for the AOGCC or the Alcohol and Marijuana Control Office (AMCO). The majority of agencies within DCCED were funded through fees, taxes, or other non-UGF fund sources. She highlighted flat budgets for FY 23 for the Alaska Gasline Development Corporation (AGDC), Alaska Industrial Development and Export Authority (AIDEA), and the Regulatory Commission of Alaska (RCA). Ms. Fowler moved to slide 10 and addressed the Division of Community and Regional Affairs. She detailed that the division had received numerous multiyear programs, especially related to COVID-19 relief for small businesses in the last several years. She relayed that the increased volume in grants had required an increase in grant support for the division. The department had funding available for a grants administrator 2 position; therefore, there was no increase in funding or authority necessary. The position would be added to support ongoing grant activities. Ms. Fowler pointed out that the reversal of the FY 22 grant to Alaska Legal Services from the Civil Legal Services Fund appeared in the department's budget annually. She elaborated it included backing out the calculation from the past year and replacing it with a calculation from the Civil Legal Services Fund for the immediately preceding fiscal year. The third operating budget change shown on slide 10 was a grant from the Civil Legal Services Fund with a portion of court filing fees. Additionally, there was a $400,000 grant to Alaska Legal Services funded with UGF. She noted that because the item had been included in the budget the previous year it was not included on slide 10. 1:46:30 PM Ms. Fowler turned to slide 11 pertaining to the Division of Corporations, Business and Professional Licensing (CBPL). She relayed that the department had been spending significantly more time speaking about CBPL recently. She highlighted some of the struggles the division had in the past 1.5 years related to the pandemic and professional licensing. She reported the division had a 50 percent staff turnover in the past year and its professional licensing vacancy rate had been up to 32 percent. The absence of experienced licensing examiners and nationwide recruitment challenges had been felt acutely in Alaska. Ms. Fowler understood that many committee members had heard frustration and concern directly from constituents about the need to get licensed in order for people to get to work. The department was working to address the issues with continuous recruitment in Anchorage and Juneau. Additionally, DCCED had been streamlining communications through a communications intake center to ensure licensing examiners could devote their time to processing and issuing license applications. The department continued to work hard to identify other ways to improve the situation. She stated there was no option off the table when it came to better serving the public and ensuring staff felt supported. She asked legislators to let the department know if they had any suggestions. 1:48:48 PM Ms. Fowler continued to discuss CBPL on slide 12 and reported there were numerous changes in the division's operating budget. The first change was revenue replacement for professional licensing fees in order to hold the fees stable throughout FY 23. The change assisted with the economic recovery from COVID-19 and recognized financial struggles felt by the private sector. Additionally, it provided the department with an opportunity to assess the fee setting process and determine what could be improved and how to stabilize fees for licensees. She relayed that professional fee setting changed based on the costs for each professional licensing program. The department did everything it could to avoid large increases, but sometimes they occurred when a program had an exceptional investigative cost. For example, for a program like the Direct Entry Midwives with relatively few licensees, a high-cost investigation resulted in dramatic cost increases for licensees. Representative Rasmussen asked about the qualifications of the executive administrator for the real estate commission. She looked at a line item request for the certified appraisers. She wondered how the person was competent in the "appraisal world" because the real estate commission and board of appraisers were very different. Ms. Fowler agreed the real estate appraisers and the real estate commission were very different. The intent was to have some increase in training and oversight on the complex federal regulations that sometimes crossed over. She explained the change was intended to rectify the fact that the two programs had been staffed by one person with no coverage or cross training in the event of a vacancy. She explained there was a pretty dramatic impact to licensees if a vacancy occurred because the programs were not simple, and it was not possible "to pull somebody off of the street and have them instantly understand these licensing programs and be able to be an effective administrator." She offered to follow up with the position description. Representative Rasmussen agreed it was an important position. She knew that if the state lost compliance after a certain period of time, specifically with the board of appraisers, it could risk the state's federal funding from the Federal Housing Authority (FHA) and Veterans Administration (VA). She was not sure that the commission and board would be best served with one person. She was interested in having more conversations with the department to discuss how to best serve the people. She had heard a general theme from many different types of licensees that the amount of time it took for license applications to be approved was a barrier. She believed the process needed to be expedited due to the shortage of workers. She suggested the idea of a temporary license followed up by a board review. She would appreciate more clarification on the position. 1:53:45 PM Representative Wool stated the number of professions requiring licensing kept increasing nationally. He had heard from some people who thought there were too many license requirements. He recalled a barbers and hairdressers license required for a hair procedure that some had "chuckled at." He asked if new professions had been added to the list. He asked if the department had to just license who it was told by the legislature. Ms. Fowler answered there were 22 programs licensed through CBPL and 21 boards. She elaborated that the programs and boards may oversee a multitude of license types. She confirmed they were established by the legislature in statute. Representative Wool referenced licensing fees and investigation fees and Ms. Fowler's example of the Direct Entry Midwives that had few licensees and high investigative costs resulting in a high license fee. He had heard of a similar type of burden for veterinarians especially related to violations of the Prescription Drug Monitoring Program (PDMP). He asked if CBPL would ever put forth the concept of bringing all investigative fees under one cost and dividing it so that one board did not get hit with high costs due to low membership. 1:56:59 PM Ms. Fowler answered that the discussions had been ongoing. Prior legislators had considered bills to make the change mentioned by Representative Wool, but the bills had not passed the legislature to date. She explained there were many dynamics that occurred when all of the license types were pooled together. There were winners and losers to every proposal in terms of allocating investigative costs. She stated there had been dynamic and engaging conversations on the topic that had taken place on and off the record. The department was always willing to engage in the conversations. The department had shared some of its fee setting tools with LFD in the past in order for LFD to run different scenarios showing the impact. Representative LeBon asked how important the $1.5 million in revenue replacement was to the division's day-to-day operations related to licensing activities. He asked if the funds would merely make the department more comfortable or if they were fairly important for the agency's activities. Ms. Fowler turned to slide 13 and answered that the $1.5 million had been included in the governor's original request. The amount was reduced by $400,000 in the governor's amended budget because the department had completed the fee assessment. She explained the purpose was not to provide additional resources to the department for processing applications more quickly. She detailed that the department was very focused on recruitment and streamlining efforts, in addition to what the department could do administratively to speed up some of the processes. The $1.1 million in the FY 23 budget would stop any fee increases on individual licensees in FY 23. She elaborated that the funds would give DCCED the opportunity to not increase fees while evaluating what it could do better and what tools were needed to better serve the public and provide licenses more quickly. Representative LeBon stated his understanding that the funding would help the department carry out its mission of renewing and providing licensing as quickly as possible, while also offering relief to Alaska businesses and individuals. Ms. Fowler agreed. Representative Josephson looked at slide 12 and asked if the $1.1 million in revenue replacement funding was intended to go through the governor's budget or the governor's office. 2:01:08 PM Ms. Fowler clarified that the funds would go through CBPL within the DCCED budget, not the governor's office. Ms. Fowler turned to insurance operations on slide 14. She detailed that the Division of Insurance was responsible for licensing and compliance of insurers and insurance products in Alaska. The division had lapsed $88.6 million in FY 21 through its fees and insurance premium taxes. She reported the division's operating costs at $8.9 million. She relayed the division was a strong generator of UGF funding. The department was requesting $1 million in authority as a multiyear increment in the supplemental budget. She explained the division had two actuarial positions at a range 25 with a starting salary of about $103,000. She elaborated the division had consistently had recruitment challenges in filling the positions. Ms. Fowler expounded that the actuaries within the division reviewed the filings received from insurance companies for all types of insurance. The positions were crucial to ensuring the state was appropriately regulating the insurance industry. She explained that because the positions had been vacant, the division had been using contractual actuarial services, which were much more expensive than performing the work in-house. The department was exploring what options existed to have better luck in filling the positions, including evaluating the pay and how additional flexibility could be added for the positions. The department was requesting additional authority to complete the needed actuarial work. She pointed out that the 1332 waiver would be up for review the following year. She informed the committee the actuarial support was particularly important to ensure the department could evaluate the best path forward regarding the 1332 waiver. Representative Johnson asked about the actuarial support position. She asked for verification it would be a contract with an outside firm. Ms. Fowler replied affirmatively. Representative Johnson asked if the state had contracts with other actuarial firms. She thought the actuarial work could be consolidated. 2:05:23 PM Ms. Fowler clarified that the Division of Insurance always had some contracted actuarial support in addition to the two positions. To her knowledge, the Department of Health and Social Services (DHSS) and DOA both had contracts with actuarial firms. She did not know whether the Department of Revenue had actuarial contracts. Representative Johnson asked if the budget funded two vacant [actuarial] positions in addition to $1 million for an outside contract. Ms. Fowler agreed. She detailed that when the positions were filled, the department hoped to reduce the use of contracted actuarial services. She clarified that all of the funds were generated through the Division of Insurance and would lapse to UGF if they were not utilized. Ms. Fowler continued to discuss budget changes for the Division of Insurance on slide 14. The department was deleting a secretary position that had been vacant for over a year. The job duties had been absorbed by other positions where they were more appropriately located or were no longer necessary due to information technology improvements. Additionally, DCCED was moving toward more professional class employees with fewer secretary positions. She noted the federal receipt language for the Reinsurance Program was included in the budget annually. Ms. Fowler discussed the Alaska Energy Authority (AEA) budget on slide 15. She highlighted that the reversal of the Power Cost Equalization (PCE) funding and language to add PCE payments back in showed up in the department's budget on an annual basis. She explained there was no change to the way PCE was funded or how the funds were being used. The funding waterfall was followed in the FY 23 budget. She clarified there was a net zero change to PCE. 2:08:18 PM Ms. Fowler turned to the Alaska Seafood Marketing Institute (ASMI) change on slide 16. The ASMI budget included a request to extend $7 million in trade promotion funding in alignment with federal funding timelines. She noted the increment had been included as an FY 22 appropriation only. She clarified there was no request for an increased appropriation. Representative LeBon stated that a couple of days earlier the committee had talked a bit about the $90 million in grants to tourism and other businesses to offset revenue loss. He asked for a status update on the disbursement of the funding and how much funding remained. Ms. Fowler turned to slide 17 showing ARPA projects allocated to DCCED. She explained that the Tourism and Other Business program had been operated as a net loss program with all other sources of relief funding deleted from an application. She detailed that about half of the funding had been allocated in grants to businesses throughout Alaska in round one. The department understood the need was greater than $90 million, but the program had been restricted in a way that prevented the funds from being fully allocated. The department was working hard on a round two program and would announce the program dates the following day. Similar to the round one program, there would be a 30-day application window. She clarified it was not a first come, first served program. She shared that the previous week, Commissioner Sande had announced at the Southeast Conference that the round two program would be based on gross revenues rather than net revenues in order to diminish some of the impact of different accounting practices on a business's ability to qualify. The goal was to provide an easier method for businesses to demonstrate the impact of COVID-19 and their losses. Representative Josephson looked at slide 17 and asked about grants to local governments with significant revenue loss. He stated it had been a major focus by the House Finance Committee the previous year. He thought people in Southeast and the Denali Borough were desperate for revenue. He asked why none of the funds had been expended. Ms. Fowler answered that the application period for the local government program had been in November 2021. She explained that the funds had been fully allocated and if she had pulled the data one week later it would not show that none of the spending had been obligated. She would provide the committee with a list of the 44 communities that had applied for and qualified for the grant funding. She clarified that the grant funding had been fully allocated but did not yet show up as obligated on the slide. 2:13:11 PM Ms. Fowler highlighted that the application period for round two of the grants to nonprofits program had closed on February 17. The review process was underway and DCCED anticipated making final awards by the end of March. The department was currently soliciting applications for round two of the grants to electric utilities program. She noted that DCCED had not received as many applications for the program as it had anticipated. Representative Rasmussen asked for a list of the nonprofits and local governments. She stated it would be helpful during the committee's budget deliberation process to know where the extra assistance was coming from the department. Ms. Fowler replied that she would provide the information. Representative Josephson looked at the last line on slide 17. He observed that most of the funds were restricted. He asked if it was because they were an RPL or direct grants from the governor. 2:14:59 PM Ms. Fowler answered that when the legislature had passed the budget, DCCED did not know what funding would go directly from the federal government to different types of local governments. She explained that a considerable amount of the funding ended up going directly from the federal government to communities rather than through the department; therefore, the department restricted funding the communities received not through the state's process. Co-Chair Foster thanked Ms. Fowler for the presentation. 2:15:52 PM AT EASE 2:16:44 PM RECONVENED ^OVERVIEW: DEPARTMENT OF MILITARY and VETERANS AFFAIRS 2:17:19 PM CRAIG CHRISTENSON, DEPUTY COMMISSIONER, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, provided a PowerPoint presentation titled "FY2023 Operating Budget Overview," dated February 24, 2022 (copy on file). He began with an organizational chart on slide 3. He highlighted that Commissioner Torrence Saxe was also the adjutant general of the National Guard. He directed attention to the left side of the organizational chart outlined in a dotted black box showing the organized militia. He explained that the adjutant general operated as the commander of the Alaska organized militia. Commissioner Saxe's roll as the commissioner of the Department of Military and Veterans Affairs (DMVA) applied to the other boxes on slide 3 outside of the dotted black box. Mr. Christenson continued to review slide 3. The Alaska Aerospace Corporation fell administratively under DMVA, but not operationally. He clarified that the corporation did not take any general funds and was funded entirely within its organization. Other areas within the department included Alaska Public Safety Communication Services, Veterans Affairs, Alaska Military Youth Academy, Administrative Services, and Homeland Security and Emergency Management. He pointed out that Air Guard Facilities Maintenance and the Army Guard Facilities Maintenance were state employees in a state division with the sole purpose of supporting the Army and Air National Guard. The employees provided maintenance and construction of new facilities and other related work. He explained that although the Air and Army National Guard were not utilizing general funds, the guard had contracted with the state for facilities maintenance. He relayed that several of the proposals his colleague would review referenced back to the topic. 2:19:46 PM BOB ERNISSE, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, addressed slide 4 showing a high level budget comparison between the FY 19 authorized and FY 23 governor's request. He reported the department's overall UGF budget had remained flat or decreased, with one notable exception. He highlighted the UGF increase from the addition of the Alaska Land Mobile Radio System (ALMR) and the State of Alaska Telecommunication System (SATS) transferred to DMVA from the Department of Administration (DOA) in FY 21. The department's budget returned to historical levels in FY 23 due to the transfer of the Alaska Public Safety Communications Services (formerly known as ALMR and SATS) back to the Department of Public Safety (DPS). He would review the topic in further detail. Mr. Ernisse moved to slide 5 showing an operating budget change summary pertaining to the Alaska Public Safety Communications Services (APSCS). The administration found the system better aligned with DPS's mission to ensure public safety. He relayed that APSCS was already collocated within DPS. The transfer was a net zero budget impact. He added that 24 positions would be transferred to DPS. 2:21:21 PM Mr. Ernisse turned to slide 6 and discussed the proposal to provide funding for the Alaska State Defense Force (ASDF). He stated that the funding would help increase community emergency capacity and resiliency, while helping to engage remote communities utilizing the volunteer force. The department was requesting one full-time administrative assistant II position to help manage the ASDF budget and would assist in state active duty activations for ASDF and the National Guard. Co-Chair Foster asked if the proposed position was in Bethel. He recalled there had been a proposal to put "some folks" in Bethel several years earlier. He asked if it was the same thing. Mr. Ernisse answered that a proposal several years back had put some non-permanent positions in a couple of different locations around the state. The current proposal was similar in its request for funding for ASDF; however, the non-permanent positions had been aimed at helping with recruitment in those areas, whereas the current proposal was for administrative work associated with the funding. Mr. Ernisse turned to slide 7 showing a reduction of $36,000 in general funds from the commissioner's office budget. The reductions were in nonmandatory travel associated with meetings. The department had learned over the past several years that every meeting did not need to be held in person. The commissioner's office would utilize Microsoft Teams or Zoom for those meetings in the future. Mr. Ernisse moved to slide 8 and explained the department was requesting a funding swap of $176,000 general funds for $176,000 in federal receipts associated with the Alaska Military Youth Academy (AMYA). He detailed that through the Master Cooperative Agreement with the National Guard, the department had found it was able to request additional reimbursement for utility costs. The department was requesting to pay split the costs between federal authority and general funds at 75/25 respectively (instead of paying for the costs with general funds only). 2:23:51 PM Representative LeBon believed the program was located at Joint Base Elmendorf-Richardson (JBER). He asked if the shared funding opportunity was long-term. Mr. Ernisse confirmed it would be a long-term funding swap. Mr. Ernisse moved to slide 9 and discussed the swap of $263,000 in general funds for $263,000 in interagency receipts associated with AMYA. He explained that DMVA received a United States Department of Agriculture (USDA) grant through the Department of Education and Early Development (DEED) for reimbursement of costs associated with the dining staff operations. The proposal would align personal services expenditures with the amount billed to DEED for the grant. 2:25:10 PM Mr. Ernisse turned to a request for additional authority to cover the new United States Property and Fiscal Office (USPFO) building on JBER (on slide 10). He explained that all costs associated with the building were 100 percent federally reimbursed. The additional authority would be used to cover operations and maintenance costs such as utilities, snowplows, lawn care, work orders, and other related items. Mr. Ernisse addressed a request for $500,000 in federal authority to fulfill furniture requirements associated with building maintenance and lifecycle requirements throughout Army National Guard buildings (on slide 11). He explained that the state procurement process provided a more economical way to provide furniture for the buildings. The request was 100 percent federally funded. He highlighted that the $500,000 represented roughly 5 percent of the National Guard's furniture inventory. Mr. Ernisse discussed the request for a maintenance generalist position within the Army Guard Facility Maintenance component on slide 12. The position would provide maintenance repairs and new installations at DMVA facilities located on JBER and was 100 percent federally funded. For example, the position would work on buildings like the new USPFO discussed on a previous slide. Mr. Ernisse advanced to a request on slide 13 for a building maintenance specialist within the Army Guard Facilities Maintenance. The position would oversee project management including oversight and construction, maintenance, repairs, modifications, and demolition projects for state and federally supported facilities. The position would be 100 percent federally funded. Slide 14 included a request for two environmental program specialists due to a new need to manage various water resource programs. The positions would also be responsible for environmental training plans and the management of initial, interim, and long-term spills of hazardous waste [by the Alaska Army National Guard or their facilities]. Mr. Ernisse highlighted a request for a planner 3 position within the Army Guard Facilities Maintenance component on slide 15. The position was needed for the management of facilities within the facilities maintenance component and would help alleviate some of the supervisory needs within the division. 2:27:58 PM Mr. Ernisse reviewed a request of $21,600 general funds on slide 16. The request would allow the Division of Homeland Security and Emergency Management to deploy operational and response staff to a potential disaster incident in order to assess the situation. He noted that if the event was later declared a state or federal disaster, the travel expenses would be reimbursed, and the funding would not be used. Slide 17 showed a technical change decreasing unused excess authority in the Alaska Aerospace Corporation budget. Slide 18 was a technical change decreasing excess authority for the Alaska Aerospace Corporation's Facilities Maintenance Office. Co-Chair Foster stated that some of his communities had been interested in some of the old national guard buildings that were no longer in use or were utilized for storage. He thought it sounded like a combination of needing to work with the federal government and the state office handling public facilities. He wondered if the department had any comments or thoughts on the topic. He elaborated that sometimes communities wanted to be able to use the facilities for youth activities or as a community building. Mr. Christensen answered that the divesture program for armories had been ongoing for a number of years. He reported that 37 armories had been divested. There were an additional 29 with real property and 9 land only properties that were still in the process of divestment. He explained that each of the armories could be very different depending on if the building was built, funded, and owned by a federal or state source and if the building was located on federal or state land. The department had a program and employee responsible for digging into each individual armory. He relayed that the goal in the divestment process was for the buildings to go back to the community. He elaborated that who the building was offered to and how it was offered differed based on the specifics associated with the specific building. The department had spoken with Co- Chair Foster's staff recently on the topic. He offered to follow up with further detail on any specific buildings committee members may be interested in. 2:31:23 PM Co-Chair Foster appreciated the department's assistance. He thought there had been good progress with 37 armories divested thus far. He looked at the request on slide 14 for environmental program specialists related to hazardous waste work. He remarked that St. Lawrence Island had some concerns about hazardous waste, which may be more of a federal issue. He asked if the positions may be affiliated with the effort to do anything on the island. Mr. Christensen responded that the answer was yes if the St. Lawrence Island environmental concerns were associated with one of the armories the department was divesting. He stated that the positions or existing similar positions would be engaged in the work. He clarified that if the environmental issue was separate from the National Guard or National Guard armory, it would not be covered by the positions. Representative Wool asked if there had been talk the previous year about repurposing some of the armories for Space Force. Mr. Christensen replied that he did not recollect the discussion and he did not believe any of the current buildings would be purposed for Space Force. Representative Wool asked if the Alaska Aerospace Corporation components on slides 17 and 18 were for the rocket launch facility in Kodiak. He asked if the facility was under DMVA. Mr. Christensen replied affirmatively. He explained that the Alaska Aerospace Corporation administratively fell under DMVA. He clarified the corporation did not fall operationally under DMVA; it was a separate quasi- corporation. The entity did have state employees, but the corporation reimbursed the state for the funding. The corporation did not use any state general funds. He elaborated that the launch complex was located on Kodiak and it provided both commercial and Department of Defense launch services. Representative Wool asked if the Alaska Aerospace Corporation was housed under DMVA because of the defense link with certain launches. Mr. Christensen agreed. Representative LeBon thanked the department for pursuing funding partnerships with federal agencies like the USDA and others to help its budget. Co-Chair Foster thanked the presenters. 2:35:44 PM AT EASE 2:37:47 PM RECONVENED ^OVERVIEW: DEPARTMENT OF FISH and GAME 2:38:26 PM DOUG VINCENT-LANG, COMMISSIONER, DEPARTMENT OF FISH AND GAME, provided a PowerPoint presentation titled "Alaska Department of Fish and Game: FY2023 Budget Overview," dated February 24, 2022 (copy on file). He began with a review of the past year on slide 2. He relayed the Department of Fish and Game (DFG) continued to provide a return on investment of over $11 billion on a general fund investment of about $70 million. He stated that nearly all commercial fisheries were conducted, allowing commercial fishermen to fish their permits and thereby make a living and contribute to the state and local economies through collected fish taxes. He shared that some commercial fisheries were closed due to stock conservation concerns, but none closed due to COVID- 19. He read the remaining bullet points on slide 2: • Sport and personal use fisheries operated, allowing anglers an opportunity to fill their freezers, feed their families, and get outside. • Subsistence fisheries and hunts occurred, allowing subsistence harvesters opportunities to feed their communities and pass on traditions. • Hunts occurred throughout Alaska giving Alaskans opportunities to hunt, fill their freezers and pass on traditions. • Charter fishing and guided hunting operated, providing needed recreational opportunities and economic boosts to the state and local economies. • Area offices remained open to serve the public. Commissioner Vincent-Lang provided a brief overview of the department's FY 23 budget on slide 3: • The Department will be able to continue to provide an excellent return on investment as we have in the past under the Governor's proposed budget. • The department does not anticipate any reduction in services as a result of the proposed budget. • The department was able to use alternative funding sources and cost efficiencies to reduce our General Fund needs. • The proposed budget includes $33 million to new fisheries, wildlife, and resource projects. Commissioner Vincent-Lang turned to a chart showing a DFG operating budget comparison on slide 4. He highlighted that the department's budget had crept up after FY 21 and was about $20 million higher than in FY 19. He noted a bit of that amount was comprised of undesignated general funds (UGF), but DFG had successfully found federal funding to increase revenue and address budget shortfalls or UGF reductions. 2:40:23 PM Commissioner Vincent-Lang turned to slide 5 and discussed DFG's fund source breakdown. The department's budget was primarily comprised of federal receipts and "other" funds including the Fish and Game Fund, Exxon Valdez Oil Spill interagency receipts, capital improvement projects, and statutory designated program receipts. The department received slightly less than 25 percent of its funding from UGF and designated general funds (DGF). Commissioner Vincent-Lang moved to FY 23 budget highlights on slide 6. The department would take a reduction in Southeast Alaska administrative services. He detailed the position had been funded to deal with publications. The department had 14 or 15 publications specialists. He explained the UGF portion of the position would be reduced, but the position would be maintained. The department hoped to find an alternative fund source hopefully through the Pacific Salmon Treaty to pay for the federal reporting requirements. The second item on slide 6 was the transfer of authority from Sport Fisheries for agency mission alignment. He expounded that the Pacific Salmon Treaty currently funded two major components including a juvenile salmon assessment program and adult salmon assessment program. The department decided to combine the two programs under the Division of Commercial Fisheries in order to optimize the use of personnel and other things moving forward. By doing so, the department was able to put a new program through the Pacific Salmon Treaty in the water on the Alsek River without any increase in the number of people. Commissioner Vincent-Lang addressed the third budget change under the Division of Commercial Fisheries on slide 6. The budget proposed the reversal of a one-time $800,000 increment of UGF for Commercial Fisheries Entry Commission (CFEC) receipts. The last item on slide 6 fell under the Division of Sport Fish and showed the transfer authority from Sport Fisheries to the Division of Commercial Fisheries for agency mission alignment (the reverse of the increment previously discussed). He underscored that the change would not impact sport fishing. He clarified it was a research program and the same information went into all fisheries including sport, commercial, and subsistence. 2:42:49 PM Commissioner Vincent-Lang turned to slide 8 and addressed a budget highlight within the Habitat Section. The department had realized it could charge certain permitting fees to the federal government through highway projects and other things. He reported DFG had reduced the Habitat Section budget by $25,000 UGF and would renegotiate with the Department of Transportation and Public Facilities to increase RSA (reimbursable services agreement) fees that could be passed on to the federal government for permits. He reviewed two highlights within the Subsistence Section. The department had located additional federal funding and would replace state funding to continue important subsistence research across the state. The department had also found $550,000 in federal funding for subsistence research in Interior Alaska, primarily in the Yukon Kuskokwim region and had submitted an associated budget amendment. Co-Chair Foster referred to the topic of subsistence. He asked what DFG was doing with regard to help reverse the depleted chum and chinook stock on the Yukon Kuskokwim. He referenced the subsistence research funds of $550,000 and asked if there was any possibility regarding hatcheries or other ideas to try to reverse the decline. Commissioner Vincent-Lang answered that the department had been surprised by the failure of the chum run in the Yukon Kuskokwim River in the past year. He reported that all indications had pointed toward positive chum numbers for subsistence fishing and potentially commercial opportunities. Due to the low numbers, DFG had closed the Yukon and Kuskokwim River drainages and had gone down to the near shore marine waters to ensure escapement numbers were met. He relayed that king salmon had been at a lower level for some time. He explained that DFG was trying to piece together what could have caused the failure. He stated there could be pieces in fresh water; however, all indications pointed toward a shift in the ocean. The department did not know what that shift was, but crab had decreased in the Bristol Bay region as well. He explained that crab and many of the salmon species, especially chum, were inhabiting the same waters. He stated it could be due to resource competition and salmon and crab may be the losers in the "warm blob" that occurred in the region. He detailed that cod and sablefish could be out-competing them and eating juveniles. Commissioner Vincent-Lang relayed that the department had used some funds out of the salmon treaty to begin piecing together involvement in some of the International Year of the Salmon research projects. The department was trying to understand what was happening in the ocean in relation to how chemistry and zooplankton conditions may be changing and how it was impacting salmon productivity. The department had also secured approximately $1 million through Congress for research on the Yukon River. He elaborated that DFG was looking at ichthyophonus studies for king salmon in the Yukon River, as well as some additional radio telemetry studies. The department was discovering fish passing at the pilot station sonar site, but the fish were not showing up at the Canadian border where there were passage requirements into Canada. He explained the work would all be aimed towards understanding where the fish were going and would hopefully lead to new sonar site on the river. 2:47:03 PM Commissioner Vincent-Lang addressed Co-Chair Foster's question about the rehabilitation of the salmon runs. He explained it was a very complex question, especially pertaining to the Yukon. He detailed there were three fish runs including a summer chum run, a fall chum run, and a king run. He elaborated that the fall chum and king runs were covered by the Pacific Salmon Treaty. The department had passage obligations with Canada and whatever the state did with the two runs required discussion and approval from Canada. He noted that the summer chum run was Alaska based and did not have the same constraints. With part of some new federal money, DFG had started the evaluation of what it could do for the rehabilitation of the salmon runs in terms of hatchery production. The first step was to complete the comprehensive salmon plan that had been on the books for about four or five years sitting on the sidelines. Commissioner Vincent-Lang shared that the department had also engaged the Yukon workgroup under the Pacific Salmon Treaty to determine what it could do or could not do in terms of enhancement or rehabilitation of the runs. The department had recently begun discussions on potentially partnering with Canada to get some additional king salmon production on the Canadian side of the border, which would benefit all users going up the river. He explained that additional production in the Tanana would only benefit the lower and middle river. He remarked on the complexity of the situation. Co-Chair Foster stated his understanding of the complexity of the situation and the need to work with Canada on the issue. He asked if the department would use the $550,000 in federal funds [on slide 8] to begin evaluating the possibility of using hatcheries. Alternatively, he wondered if the study would be generalized or more specific in nature. Commissioner Vincent-Lang answered that the $550,000 would be used to update the subsistence use surveys throughout the Yukon River drainage. The department was using a different pot of money from Congress to look at evaluations of rehabilitation or enhancement runs. 2:49:38 PM Representative Wool referenced Commissioner Vincent-Lang's mention of the warm water blob in addition to numerous other possible causes for diminishing fish runs in the Yukon River. He asked where rising ocean temperature factored in. He stated certain species were migrating further north to find colder water. He considered the predator/prey equation. He wondered how much of the issue pertained to ocean temperature. Commissioner Vincent-Lang replied that a couple of things happened when the ocean temperature rose. He detailed that the zooplankton composition changed and became less nutritious to salmon. Additionally, the energetic needs of salmon increased as water warmed. The combination of the two factors led to a lower survival rate, returning to the river systems because the ocean was not hospitable, and returning smaller at age. All of the factors were being witnessed. He reported that species competing with salmon in the ocean were somewhat winning the battle. He elaborated that sablefish were more successful in the conditions. He believed the same thing had happened with crab. He remarked that there had been declines in chum salmon in the past. He relayed there had been a chum salmon collapse in the Yukon almost 15 years back. He highlighted that in the next several years there were high escapements; therefore, if ocean conditions changed, DFG was optimistic the situation would turn around. He noted there was information being collected currently in the Bering Sea and North Gulf indicating that the temperature regime was shifting back. 2:51:56 PM Commissioner Vincent-Lang reviewed slide 9 and discussed legislative priorities. He began with the department's priority of the Sport Fish Hatchery Facility Account surcharge (HB 80). He relayed that 15 years back, the department had built two sport fish hatcheries with bonds, which were repaid with surcharges on sportfishing licenses. He explained that the surcharge had gone away when the bonds were paid off. The department was proposing a smaller surcharge on sport fishing licenses to pay for the maintenance associated with the two hatcheries located in Fairbanks and Anchorage. Additionally, about $500,000 of the funding had previously gone to Southeast (because it did not receive any benefits from the two hatcheries) to pay for Crystal Lake operations and Juneau stocking programs. He explained that without a surcharge, the items were in jeopardy. The state would have to pay for the two hatcheries one way or another and he did not want to take funds from research and management programs across the state. He preferred the surcharge. He reported that sportfish and angler groups across the state were generally in support of the proposal. Commissioner Vincent-Lang highlighted the department's second legislative priority shown at the bottom of slide 9. The department supported the passage of HB 79, a saltwater sportfishing operator/guide licensing bill. He remarked that both bills (HB 80 and HB 79) had passed the House and were sitting in the Senate. He highlighted the importance of the program [under HB 79] because DFG had obligations under the Halibut Act and Pacific Salmon Treaty to report on halibut and king salmon harvest numbers. The department was currently doing the work with [federal] Dingle-Johnson dollars and was looking for additional federal funding. He highlighted support from the saltwater charter industry and was trying to get the legislation through the Senate. Vice-Chair Ortiz stated that the job of managing fisheries resources was difficult. He believed one way to enhance the management was trying to achieve increasingly accurate data collection. He asked about how the department currently tried to discern the resource take in the sportfishing industry. He stated his understanding of the attempt to capture information through creel census and a voluntary end of the year report by license owners. He asked if his understanding was accurate. Commissioner Vincent-Lang answered there were two ways the department estimated sport harvest. The first was the charter sector through the logbook program. The program was being converted to an electronic format in order to receive information in a more timely and efficient manner. The second method used unguided anglers. He noted the second method was harder to capture. He explained that the department conducted creel surveys on the dock; the method did not get every angler, but it reached enough to be able to extrapolate the total harvest. He noted that the department needed to be on the dock to estimate the composition of the catches. He elaborated that in Southeast, DFG needed to know how much of the catches were from local hatchery stocks versus catches covered under the treaty. He stated that hatchery stocks were add-ons under the treaty. The department did a creel survey to estimate the numbers and fish sampling to estimate the genetic composition. He relayed the department was beginning to experiment with some new technology and was beta testing an iPhone app that would include a reporting requirement. He detailed the app would allow users to report a harvest. 2:56:28 PM Vice-Chair Ortiz asked where the effort stood. He wondered if it would be in the interest of better management to have a system where a sportfish license required license holders to record their catch on the day of the catch. Commissioner Vincent-Lang answered it was the direction the department was moving. He noted the department did not want to move too fast. He highlighted there were groups in other states experimenting that had much better cell coverage than Alaska. He explained the DFG app would allow a user to record at the time of catch and the information would upload once the user was in cell range. He offered to share the beta app link with committee members. Vice-Chair Ortiz asked if a move towards that type of system would be cost burdensome on users. He wondered if the software would be part of the license acquisition process. He asked if it would greatly increase license costs for instate anglers. Commissioner Vincent-Lang answered that the app would be free to users. 2:58:04 PM Commissioner Vincent-Lang turned to slide 10 and discussed issues/challenges facing the department. The first item on the list was the reduced marine survivals of salmon. He stated the situation was a "huge unknown." He detailed that the department had a pretty good understanding of what was happening across freshwater throughout the state as it was relatively much easier to sample fish in freshwater than it was out in the ocean. The department had come to the realization it would not be able to do the work on its own; it did not have the capacity or ship capacity. The department was partnering with different groups to try to get a handle on what was happening in the ocean. Commissioner Vincent-Lang shared that he currently had two or three staff on a National Oceanic and Atmospheric Administration (NOAA) boat in the Gulf of Alaska participating in the International Year of the Salmon research. Additionally, two Alaskans would be going out on a Russian vessel to do research in the western gulf. The department was also finding non-UGF money sources through the Pacific Salmon Treaty and the North Pacific Research Board. He explained that if the state did not have an understanding about what was happening in the ocean, it would be very restricted in how to better understand what was happening with the salmon. Commissioner Vincent-Lang shared that DFG had started to research in the near-shore marine environment to determine what was happening with chum salmon, especially north of the Yukon. The department had a couple of proposals to extend the research into the southern Bering Sea and the north Gulf of Alaska to gain a better understanding. The second issue listed on slide 10 was increasing federal intrusion into state management authority. He understood the state would have differences with the federal government; however, when the federal government stepped in and managed a river, there were numerous state users who were displaced for a variety of economic and social reasons. He stated it cut off the users' access to the resource. He stressed the need to find a middle ground. He underscored that if there was enough resource, it was necessary to find a way to get people with customary and traditional practices living in urban areas out to rural areas to fish and hunt. Commissioner Vincent-Lang addressed the third bullet point on slide 10: COVID-19 and its impacts, e.g., lost license revenue to Fish and Game Fund. He detailed that the Division of Sportfish had taken a hit because of non- resident license sales during the pandemic. He reported that DFG had adjusted the sportfish budget to address the issue and was more highly dependent on Dingle-Johnson dollars. Additionally, the department had transferred some remaining revenue left in the surcharge bill after bonds were paid off. He believed the division was making its way out of the impact. Commissioner Vincent-Lang relayed the department was seeing impacts associated with implementation of the Endangered Species Act and the Marine Mammal Protection Act. He stated the impacts across the state were huge. He used the killing of a polar bear as an example. He stated that the take of a polar bear was not what most people would think. He stated, "it was the fact that a polar bear might be on the landscape and through a computer model you might fly over it and that results in a take." He stated the department was trying to bring some reality in order to have conservation of iconic species and to protect and rebuild their stocks without unnecessarily impacting the state's economic stream. He relayed that urban wildlife management issues were becoming increasingly complex. He noted the problem of wildlife coming into urban areas. He referenced an issue in Haines where 60 bears had been shot a couple of years back. He stated the department needed to do the right thing instead of having people take issues into their own hands. Commissioner Vincent-Lang addressed the last bullet point on slide 10: Hatchery-wild salmon stock interactions. He explained there was currently a large debate about whether hatchery stock was impacting salmon productivity in the ocean. The department had several studies underway looking at whether wild stocks were being impacted and whether or not there was food competition. He relayed that the studies should be finished up within the next year or two. The department expected a return of about 70 million sockeye to Bristol Bay in the coming season. He highlighted that 1 percent survived in the ocean, meaning 7 billion sockeye were put out into the ocean. He noted the number of hatchery fish production was nowhere near that number. He concluded there was a complex issue in interaction that needed better understanding. 3:03:12 PM Commissioner Vincent-Lang addressed slide 11 related to un- reimbursed fiscal impacts due to COVID-19 in FY 21. The Fish and Game Fund had lost about $2.7 million in revenue from sportfish licenses and stamps. Additionally, there had been a loss of about $1 million from commercial crew member licenses. He believed the sportfish licenses would bump back up, especially with the cruise industry returning. He stated that hopefully the commercial crew member licenses would bounce back up as well. Representative Edgmon looked at slide 10. He noted that Commissioner Vincent-Lang and one other commissioner were the remaining Tier I commissioners. He remarked there was a lot of coming and going of staff. He highlighted how fortunate the committee was to have Commissioner Vincent- Lang sitting alone at the table presenting. He could not think of another agency that had the commissioner come forward to present their budget because they did not have the background Commissioner Vincent-Lang had. He commended the commissioner for his breadth of understanding on wildlife management in addition to fisheries. He wondered why the loss of senior staff was not listed as an issue on slide 10. He stated it had always been an issue with the department. He wondered if the problem was mitigated and no longer a benchmark. Commissioner Vincent-Lang agreed. He replied there were two issues facing the agency: 1) maintaining an interest in fishing and hunting and 2) recruitment and retention of staff. He remarked that the state did a lot of recruiting people to keep them interested in hunting and fishing. He confirmed that retention and recruitment of staff was becoming an increasing challenge. He shared that the governor's cabinet had recently discussed what could be done to address recruitment and retention issues. He stated the issue was impacting each of the departments in a different way. He communicated that DFG had lost three area biologists in the Cordova office because they could not afford housing. The department was looking at different ways to keep offices especially rural offices open throughout the state. He underscored that the rural offices were critical to maintaining interaction between people and users. The department was looking at how to keep employees out in the rural areas including the idea of building houses and giving housing allowances. He pointed out that the federal government was doing those things. He assured the committee that the issue was on his mind. He was thinking about different ways to address the problem in order to have the capable workforce the department needed. 3:06:40 PM Representative Edgmon understood the issue of recruitment and retention was multifaceted. He was concerned that 16 years after the Defined Benefit plan was annulled in 2006, the state was starting to see the downstream impacts. He recognized that housing and other issues contributed to the situation. He referenced the Pitman-Robertson funds and asked about the ability to secure increased federal funds with the supplanting of increased UGF. Commissioner Vincent-Lang answered that with the Biden administration there were many people interested in buying guns and ammunition. The department had just received its recent apportionment of Pittman-Robertson funds, which had increased by almost $18 million. He believed the legislature would see a supplemental request to deal with the issue. He remarked that the Division of Wildlife Director Eddie Grasser was very successful at raising money through license tags and a variety of other things. The department was able to match the federal funding for a single year, but in the future, how the department matched the funds would be a challenge. Representative Edgmon asked for verification there would be an opportunity in the current budget to get some of the federal funding. Commissioner Vincent-Lang answered that the challenge with Pittman-Robertson funds was the concern about building up the department's operating budget based on periodic events and increases due to people buying guns out of fear that guns would be restricted. He elaborated that after about four or five years the department had seen it was not happening; therefore, the legislature had granted DFG the ability to move money out of capital into the core operating budget. The department was reluctant to increase the operational side with a one-time funding source because it did not know whether the [federal] funding would increase or decrease over time. He stated it would be looked at as a capital piece for the upcoming year. He reported that currently, with the Fish and Game Fund on the wildlife side, the department was blessed to have sufficient matching funds for a single year. He added that over time, the department would look at how to build the program into the operating budget if it was sustainable over time. 3:10:02 PM Representative Thompson asked about the issue of bycatch with salmon and halibut. Commissioner Vincent-Lang explained that bycatch was a complex issue. He believed there was a lot of confusion over what bycatch was and was not. He explained that bycatch occurred in the ocean and included prohibited species or fish that were illegal to retain. He clarified that bycatch was not the intercept of salmon in a mixed stock fishery, as was taking place along the Alaska Peninsula. The department was trying to figure out what was going on in the Bering Sea because there had been a crash in the crab and chum salmon fisheries. Commissioner Vincent-Lang considered whether bycatch was causing the declines or if it was only one piece of the puzzle. The department had started looking at the stock composition of the bycatch in terms of salmon and was trying to determine how much of the issue was related to the missing fish in the Yukon River. He stated it was a piece of the puzzle, but based on the initial evidence, it was not the major contributor that caused the collapse. The department was looking at what could be done to reduce bycatch because no one wanted to throw fish over the side. He relayed that the governor had created a bycatch taskforce and he believed the governor would announce the addition of two new inter-river users to the taskforce. The taskforce would consider what could be done to address bycatch and how it impacted local users. Commissioner Vincent-Lang thanked the committee for its support, and he looked forward to working with members. Co-Chair Foster thanked the commissioner for the presentation. HB 281 was HEARD and HELD in committee for further consideration. HB 282 was HEARD and HELD in committee for further consideration. Co-Chair Foster reviewed the schedule for the following day.