HOUSE BILL NO. 177 "An Act relating to an increase of an appropriation due to additional federal or other program receipts; and providing for an effective date." 9:35:06 AM REPRESENTATIVE CHRIS TUCK, BILL SPONSOR, introduced the bill pertaining to revised program appropriations. He stated that the bill attempted to assert the constitutional powers of the legislature by better defining and limiting the revised program legislative (RPL) process. He noted that the term was actually an accounting code and should really be referred to as revised program receipts. He explained that the process involved authorizing the Legislative Budget and Audit (LB&A) Committee to have receipt authority through an RPL process that the governor presented to the committee for additional approval. He clarified that once the legislature set up a program and passed a budget or appropriations to fund the program, the legislature, as the appropriating body, gave LB&A the authority to receive any additional funding coming in on behalf of the full legislature. The bill sought to establish sidebars to ensure the process was better understood and to avoid legal problems when money was received. 9:37:39 AM Representative LeBon recalled a situation two years back where LB&A had accepted federal money and the full legislature had to convene in Juneau to approve action taken. He asked for a summary of what had taken place and how it likely influenced hearing the bill currently. Representative Tuck replied that historically, the most money the LB&A had received was approximately $120 million until Medicaid expansion, which had increased the largest amount received to $500 million. Over the past few years, $5 billion had come from LB&A. He reported there had been three problems associated with American Recovery and Reinvestment Act (ARRA) funding received. First, the legislature had not set up a program. For example, the small business relief program had not been established by the legislature; the governor had established the program through the executive branch. He explained there had been no appropriations money from the legislature for the program; the governor had appropriated the money. Second, for the community relief program, community assistance had been vetoed by the governor from the budget. Subsequently, the governor had put the money in through the RPL process. Third, there had been items in the capital budget that had not yet passed the legislature that the governor ran through the RPL process. He highlighted a fourth problem where funds that went out through the community relief program were contrary to federal guidance. For example, funds could not be used for revenue replacement. He explained that because of the situation, the state was currently in a federal audit and the state may need to pay the monies back. Representative LeBon asked how the bill rectified the issues highlighted by Representative Tuck. Representative Tuck answered that the legislature had a constitutional obligation when delegating authority and powers to a committee and it was necessary for the legislature to be careful with the responsibility. Additionally, there were constitutional powers between the executive and legislative branches. The bill attempted to eliminate ambiguity on the legislature's authority, what was granted to LB&A, and what was allowed for the governor. He read from the sectional analysis (copy on file): Section 1: Page 1 lines 5-9 amend AS 37.07.080(h) to clarify that the RPL process is only available for additional funds for existing programs or projects that have already been funded by the Legislature. Page 1 lines 10-11 amend AS 37.07.080(h)(1) with conforming language. Page 1 line 12-page 2 line 11 amend AS 37.07.080(h)(2) to replace the current 45-day timeline for any RPL with a stair-stepped timeline as follows: ? 45 days for RPLs up to $20 million; ? 90 days for RPLs up to $50 million; ? 180 days for RPLs up to $100 million; and ? 270 days for RPLs greater than $100 million. Page 2, lines 12-19 amend AS 37.07.080(h)(3) with conforming language. Section 2: Provides for an immediate effective date. 9:42:40 AM Representative Josephson thanked Representative Tuck for introducing the legislation and shared that he had a strong interest in the subject. He stated it was natural for any governor to want to protect their authority and power, and similarly for the judiciary and legislature to feel the same way. He understood that some balance needed to be struck. He talked about two hypothetical scenarios that caused him some concern. He elaborated that former Governor Bill Walker had expanded Medicaid and had found the ability to take the action unilaterally under Title 47. He detailed that a judge had ultimately agreed with the move, although the legislature had vigorously sued the governor. He thought in retrospect there was relative calm over the fact that Medicaid had been expanded. He noted that the action had taken place in the summer of 2015. He asked how it would have played out under the current bill. Representative Tuck answered that Medicaid expansion had involved between $200 million and $500 million. He explained there were statutes that instructed the governor to go after those type of funds. He detailed that under the bill, LB&A's role would be to determine where the funds were going and how they were used through the Department of Health and Social Services. He elaborated that funds could have been divided out into timeframes or applied. He clarified that if the funds had been a lump sum, the governor could not act unilaterally until after 270 days. He furthered that [under the proposed bill] if no action had been taken by the legislature, expansion would have gone into effect after 270 days. Representative Josephson asked whether RPLs must be adopted by the legislature if it was in session. He asked for any distinction between interim and session in the operation of RPLs. Representative Tuck replied that it did not matter if the legislature was in or out of session, LB&A could adopt RPLs around the full legislature. Representative Josephson asked for verification that if LB&A failed to adopt the RPLs, they would become law by operation "after the clock ticks through." 9:46:21 AM Representative Tuck made a distinction. He explained that if the legislature did not establish law by setting up a program through law and if it did not appropriate the money, the governor could not act unilaterally on an RPL. He elaborated that two things could happen when an RPL was presented to LB&A. The committee could adopt the RPL immediately to get the money distributed as necessary or it could reject the RPL and the RPL would automatically go into effect 45 days later. Representative Josephson continued with the Medicaid expansion example. He stated that the amount would be well in excess of $100 million; therefore, the 270-day rule would apply. He reasoned that the legislature would always be in session for at least 90 days, meaning the governor could not expand during interim. He explained that if the governor had issued the RPL at adjournment in late May, it would always spill into the next year. He stated his understanding that Representative Tuck was saying that notwithstanding the legislature's reconvening the next year, the RPL clock would still tick, and the legislature would have had to pass a law to stop expansion. Representative Tuck answered that Representative Josephson's understanding was correct related to the specific case. He considered Medicaid expansion and small business relief separately because the actions were different. He explained that with Medicaid expansion, because statute specified the governor shall go for the funds, the only way the legislature could have prevented expansion was to change the statute. Representative Josephson highlighted the [federal] Coronavirus Aid, Relief, and Economic Security (CARES) Act that passed at the onset of the pandemic. He stated his understanding that under the bill, the relief would not have been deliverable until the legislature returned. He recalled that RPLs had been issued in April/May of 2020 and the legislature left on March 28 on a long recess or quasi- adjournment. He asked for verification that if the legislature had not adopted the RPLs, the governor could not have distributed pandemic relief and there would have been tremendous political pressure for the legislature to meet to direct the RPLs to be delivered. Representative Tuck replied that technically the legislature had recessed; therefore, when the governor had presented the RPLs they had been inappropriate and illegal for the four reasons he had previously listed. He elaborated that 48 hours after the RPLs had passed, a court case had been filed. He had been surprised the lawsuit had come from outside a government entity. He had thought a community would have filed a suit because it saw the community assistance program as unfair. He considered that perhaps a community would have filed a lawsuit, but someone else beat them to it. Representative Tuck explained that the legislature did not appropriate the money, a program had not been set up, and the governor had unilaterally exercised authorities outside the legislature. He emphasized it was clear the legislature was the purse strings to the state budget. Additionally, the legislature was responsible for setting programs through legislation. He characterized the governor as the arms and legs responsible for carrying out programs once they were established by the legislature. He stated that in the specific case, the governor had acted on his own and everything had been done outside the legislature. He elaborated that the legislature had reconvened for the purpose of ratifying action taken by LB&A, not to take appropriations or set programs. He stated it was still questionable whether it was a legal activity. He argued that it was not legal, because an RPL could not be amended. He explained that the legislature would have had to adopt or ratify what LB&A had done or the RPLs would have gone into effect automatically [later on]. He stated that a true appropriations bill could be amended by any legislator, but an RPL was not a true appropriations bill. 9:52:34 AM Representative Johnson surmised there was not a final judgement on whether the action had been illegal. She asked about the origin of the RPL process. She observed that even if the legislature was in session for 90 days, 270 days basically took away the governor's ability to even contemplate the interim. She considered whether the governor and legislature needed to be nimble or not during the interim. She wondered if it was the reason the RPL had been implemented in the first place. Representative Tuck answered that the RPL process had been in statute for a long time. He spoke to the original intent of the process. He explained that the legislature established programs and funded them through an appropriations budget. When additional money came in [for a program], the legislature was technically constitutionally required to come back into session to appropriate the money; however, the legislature had given powers to LB&A. He stated that at one time the powers had been challenged by the courts; therefore, LB&A had limited powers. He stated there was clear distinction on the issue from previous court cases. He explained that the RPL process had gone beyond the previous court cases in the past several years. Representative Johnson stated she would have to look into the reason the RPL process had been established. She reasoned it must have come from a need. She considered there must have been a reason to give the governor the option [to use the RPL process] during the interim. She wanted to understand the impetus for the process to avoid reversing something that had been put in place for a specific reason. Representative Tuck answered that the need was efficiency. The need had been to prevent the full legislature from coming back if they were just bringing in more money to the state. He elaborated that it mostly pertained to federal receipts. He reminded the committee that the federal budgeting cycle was different than Alaska's state cycle. He expounded that once the legislature suspected money may be coming in for something like education, the legislature would set up a program for schools and appropriate the money. Representative Tuck noted there were several factors in the legislature's ability to accept RPLs including whether there was a program and whether the money was appropriated. Additionally, there was language in the operating budget that allowed the legislature to do so as well. If the criteria were met, LB&A could receive money on behalf of the full legislature. He clarified that the intent of the process was not to set up programs. He explained that it was not possible to use an appropriation to set up a program; it was necessary to have separate legislation. He stated that over the past several years, the situation had turned into a mess. He argued that if the legislature had properly appropriated the CARES funding, the money would have gone out much quicker under the small business relief. He stated that the legislature had approved the RPLs on April 11 [2020] and they had not been released until the end of August, which far exceeded the 45-day limit. Co-Chair Merrick set an amendment deadline for March 5 at noon. HB 177 was HEARD and HELD in committee for further consideration. Co-Chair Merrick reviewed the schedule for the following meeting.