HOUSE BILL NO. 322 "An Act relating to the Alaska marine highway system vessel replacement fund; and providing for an effective date." 1:30:42 PM Co-Chair Merrick invited the testifiers to the table. 1:30:56 PM KERRY CROCKER, STAFF, SPEAKER LOUISE STUTES, reviewed the purpose of the bill. He read a portion of the sponsor statement (copy on file): House Bill 322 would protect the Alaska Marine Highway System (AMHS) Fund and Vessel Replacement Fund from the constitutional sweep under Article IX, section 17(d) of the Alaska Constitution. Funds subject to the sweep must be both available for appropriation and reside in the General Fund. In Alaska Federation of Natives v. Dunleavythe 2021 case in which the Superior Court determined the Power Cost Equalization Endowment Fund is not sweepable under the State Constitutionthe court considered the state treasury to be distinct from the General Fund. Thus, by establishing the System Fund and Vessel Replacement Fund as a separate funds in the state treasury rather than in the General Fund, it is not subject to the sweep. On-going, crucial state services such as the Marine Highway System should not suffer the destabilizing effects that result from the sweep of funds. HB 322 will shield the AMHS System Fund and Vessel Replacement Fund from the sweep and reinforce the Legislature's authority to assess for itself the prudence of appropriations. Mr. Crocker continued to discuss the benefits of the legislation. He stated that AMHS warranted continued support from the state because it was an essential part of the transportation system. It benefited many communities throughout the state by enabling communities to maintain receipts, operated in a manner that enhanced performance, and allowed spending of the generated revenue. Co-Chair Merrick indicated Representative Thompson had joined the meeting online and Representative LeBon joined the meeting in room. Mr. Crocker stated that it was important to note that with the recent creation of the Alaska Marine Highway Operations Board (AMHOB), if the marine highway was allowed to maintain its receipts and was not sweepable, it would allow for a baseline of funding for the next 7 to 10 years. 1:33:57 PM Representative LeBon asked how the fund would be accessed for spending. Mr. Crocker replied that the fund had to be appropriated by the legislature in order to be spent. Representative LeBon asked if the commissioner would have direct authority to spend from the fund. Mr. Crocker deferred to Mr. Painter from the Legislative Finance Division. 1:34:52 PM ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION, responded that the commissioner currently did not have spending authority. He explained that the legislature would need to appropriate the funds to the Department of Transportation and Public Facilities (DOT) to allow for the funds to be spent. Representative LeBon shared his understanding that for the commissioner to be able to spend money from the fund, the legislature had to move money into the commissioner's control or authority. He asked whether the legislature would be expected to put "sidebars" on the ways in which the money could be spent. Mr. Painter relayed that Alaska's Constitution stated that no money may leave the treasury without an appropriation. The money first needed to have been appropriated to DOT, and then the reason for the appropriation could be specified. Representative LeBon asked if specific intent language would be needed. He questioned whether the commissioner would be permitted to spend the money however they saw fit if the money was moved from the AMHS capital improvement fund into DOT. Mr. Painter indicated that if the funding was appropriated to AMHS, it could only be spent on AMHS related matters. However, if funds were appropriated to the commissioner's office, the commissioner could do whatever they wanted with the funds. Appropriating the funds for the purpose of the marine highway would limit the use of the funds. 1:37:06 PM Representative Carpenter asked if there was anything preventing the legislature from creating a multi-year appropriation with the funds currently on hand. Mr. Painter responded no, and if a multi-year appropriation was created for the current fund, problems with the sweep would be avoided. Co-Chair Merrick indicated Representative Carpenter and Vice-Chair Ortiz had joined the meeting. Co-Chair Merrick invited Mr. Steininger with the Office of Management and Budget (OMB) to speak to the fiscal note. 1:37:54 PM AT EASE 1:38:27 PM RECONVENED Co-Chair Merrick indicated the committee would review the fiscal note at the bill's next hearing. HB 322 was HEARD and HELD in committee for further consideration. 1:38:49 PM AT EASE 1:39:51 PM RECONVENED Co-Chair Merrick invited Mr. Steininger with OMB to the table.