HOUSE BILL NO. 39 "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. 41 "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; and providing for an effective date." 1:39:11 PM Co-Chair Johnson MOVED to ADOPT Amendment L 7, 33- GH1347\I.1 (Marx, 3/29/23) (copy on file): Page 98, following line 29: Insert a new subsection to read: "(b) If, after the appropriation made in sec. 47 of this Act, the unrestricted state revenue available for appropriation in fiscal year 2024 is insufficient to cover the general fund appropriations that take effect in fiscal year 2024 that are made in this Act, as passed by the Thirty-Third Alaska State Legislature in the First Regular Session and enacted into law, and the general fund appropriations that take effect in fiscal year 2024 that are made in a version of CSHB 41(FIN), as passed by the Thirty-Third Alaska State Legislature in the First Regular Session and enacted into law, the amount necessary to balance revenue and general fund appropriations that take effect in fiscal year 2024 that are made in this Act, as passed by the Thirty-Third Alaska State Legislature in the First Regular Session and enacted into law, and the general fund appropriations that take effect in fiscal year 2024 that are made in a version of CSHB 41(FIN), as passed by the Thirty-Third Alaska State Legislature in the First Regular Session and enacted into law, is appropriated to the general fund from the budget reserve fund (art. IX, sec. 17, Constitution of the State of Alaska)." Reletter the following subsection accordingly. Page 98, line 30: Delete "The appropriation made in (a) of this section is" Insert "The appropriations made in (a) and (b) of this section are" Co-Chair Edgmon OBJECTED for discussion. Co-Chair Johnson explained that she brought the amendment forward to ensure the committee passed a structurally balanced budget. She read from prepared remarks: The budget originally proposed by the administration contained an over $400 million deficit to start with. Until the spring forecast last week, committee substitute (CS) 1 proposed by this committee was a balanced budget that contained a surplus. As a result of the new forecast, however, the new CS before you now contains a deficit of $401 million. I am proposing language Amendment 7, which is a draw from the Constitutional Budget Reserve (CBR) as a starting point from which to fill the deficit for this year's operating and mental health budgets. There's a lot of discussion yet to be had on the floor in this body and in the other body and in conference committee about how to fill that deficit this year and I look forward to the debate ahead. However, the legislature can not kick the can down the road any longer. A CBR draw is only a band aid and one that we need to stop reapplying. Our constituents deserve certainty and the PFD, the essential services they rely on, a strong capital budget, as well as the preservation of our savings. The only sustainable way to achieve that is a complete fiscal plan. That means continued downward pressure on government spending, new revenue sources, and major structural reform. This committee has done its best with the budget that we were given, and I thank each and every one of you for that and all of the work that has been done. With the budget that we've been given, we've done our best given the poor market conditions and the many competing needs of our residents; however, Alaskan's deserve a fiscal plan to end the cycle of uncertainty in our budgeting and in our economy. Co-Chair Johnson asked members to support the amendment. She noted her staff was available to answer any technical questions. 1:41:55 PM Representative Hannan looked at the amendment and wanted to ensure she understood the language and its implications. She noted that the amendment was for HB 39 and also referenced HB 41. She noted it did not reference any other bills including the capital budget. She asked how it would be incorporated or covered by a future CBR vote if a CBR draw was required. Co-Chair Johnson could not speak to the capital budget because it was not her area of expertise. She asked her staff to address the question. REMOND HENDERSON, STAFF, REPRESENTATIVE DELENA JOHNSON, confirmed that the CBR language only covered the operating budget and the supplementals contained within. The language also mentioned the mental health budget because it was covered by those two budgets. The amendment did not include the capital budget. He explained that any amendments or draw required for the capital budget was in the hands of the other body "at this point." 1:43:50 PM Representative Hannan asked how a CBR vote and draw worked if there were bills outside of the budget with substantive fiscal notes that were not incorporated into the operating budget at the time of its passage. Co-Chair Johnson deferred the question to Mr. Henderson. Mr. Henderson replied that the language would cover fiscal notes that attached funds to the operating budget. Co-Chair Johnson clarified that the budget did not reference additional fiscal notes that had not yet been passed and did not include money to cover specific fiscal notes. Representative Galvin asked for verification that the amendment language would be a normal piece to add to a bill when the legislature knew the budget was overdrawn. Mr. Henderson agreed. 1:45:34 PM AT EASE 1:48:19 PM RECONVENED Representative Josephson understood the language was fairly boiler plate. He shared that he had been in the majority in the past and recalled needing to borrow from other sources, which is what the amendment suggested may need to be done. However, he pointed out that the bill before the committee was the majority's budget as amended by the House Finance Committee. He highlighted that there had been a call by the majority for a fiscal policy and he looked forward to hearing a comprehensive fiscal policy. He remarked that it was almost April and fundamentally there were ways to balance the budget one was an amendment by Representative Hannan and committee members all knew the different valves that could be turned. He stated that "we're waiting to see if they will be turned and we're willing to be cooperative with that." He viewed the amendment as a failsafe or backstop and understood its purpose, but it was not advancing towards fiscal sustainability. He thought it was largely the requirement of both majorities to facilitate. Representative Ortiz remarked that the committee had the ability for the amendment process to take action, which would not have necessitated sending over an unbalanced budget to the other body, but it had not taken the opportunity. He appreciated Co-Chair Johnson's opening comments about the need to adopt a fiscal plan and how the legislature could not continue to rely on draws from savings. He also appreciated the comments made by Representative Cronk about the same need the previous day on the House floor. He underscored that there would never be a good time to make the tough decisions. He highlighted that the committee could have made the tough decisions with the amendment offered by Representative Hannan, but it had not. He would support the amendment and would not object to reporting the bill out. He stressed that the situation would not get any easier. He reminded everyone that the tough votes needed to be made. 1:51:32 PM AT EASE 1:53:14 PM RECONVENED Co-Chair Edgmon WITHDREW the OBJECTION Amendment L 7. Co-Chair Johnson explained that the committee had gotten slightly ahead of itself and needed to adopt the new CS prior to adopting the proposed amendment. Co-Chair Johnson MOVED to ADOPT the proposed committee substitute for HB 39, Work Draft 33-GH1347\I (Marx, 3/29/23). Representative Galvin OBJECTED for discussion. 1:54:32 PM AT EASE 1:55:06 PM RECONVENED Representative Galvin WITHDREW the OBJECTION. There being NO further OBJECTION, the CS was ADOPTED. Co-Chair Johnson MOVED to ADOPT Amendment L 7 (copy on file). [Note: see 1:39 p.m. for amendment details.] Co-Chair Edgmon OBJECTED for discussion. Co-Chair Johnson clarified that the new CS had been adopted and there was a motion to adopt Amendment L 7, which had been discussed earlier in the meeting. Representative Tomaszewski addressed previous comments stnd regarding a fiscal plan. He stated that the 31 or 32 legislatures could have adopted a fiscal plan. He highlighted that there were 19 new freshmen in the House in the current year and current legislators were dealing with a budget and process they had been given by previous legislators. He relayed that they were working very hard on developing fiscal plans and it was his hope and goal for legislators to do it together. He had been working with different caucuses to facilitate a plan. He pointed out that taxing the Permanent Fund Dividend (PFD) and the people was not a fiscal plan. He elaborated that it was unsustainable and was a regressive tax on Alaskans. He agreed that it would be part of a fiscal plan, but there were many other components. He hoped legislators could collaborate to make a fiscal plan happen. He remarked that the amendment was not perfect; however, the committee needed to send over means to pay the state's bills. He did not come to the legislature to spend the bank accounts down to zero, but it was the budget the committee had been given and they would have to deal with that. 1:58:52 PM Co-Chair Johnson noted there would be an opportunity to speak to the budget as a whole. Representative Cronk stated it was his first year on the committee. He emphasized that cutting the PFD was not a fiscal plan. He thought if the legislature kept doing so there would be no money left. He encouraged everyone to work together on a multifaceted fiscal plan that would not merely cut the PFD and create a tax. He elaborated that a plan would include things people liked and things people did not like. He stated the people of Alaska deserved to know that the legislature would address the important issues impacting the daily lives of rural and urban Alaskans. He stated once that was achieved the legislature could begin working on the efficiencies government needed. 2:00:28 PM Representative Josephson requested to have his previous comments on Amendment L 7 reflected in the record as linked to the CS. The OBJECTION was WITHDRAWN. There being NO further OBJECTION, Amendment L 7 was ADOPTED. 2:02:23 PM AT EASE 2:04:25 PM RECONVENED Co-Chair Edgmon explained that he would make a motion to report the bill from committee and would then object in order for members to make any closing remarks on the bill. Co-Chair Edgmon MOVED to REPORT CSHB 39(FIN) out of committee with individual recommendations and that authorization be given to the Legislative Finance Division and Legislative Legal Services to make any necessary and technical and/or conforming changes. Co-Chair Edgmon OBJECTED for discussion. Representative Josephson appreciated it was a heavy lift to ask a body with 17 new members to present a fiscal plan. He was proud to pass a comprehensive "four pillar" fiscal plan in 2017 and 2018, which included an income tax, reform to the PFD formula, a percent of market value (POMV) draw, and significant cuts. He stated that the other body had rejected it summarily without giving it serious attention. He shared the information for context and explained that he had been there and was still present advancing bold measures and wanted to be cooperative with people who want to do that in a balanced way. Representative Josephson noted that the bill did not include a full formula PFD and he respected the committee and its leadership for doing so. He agreed that the bill should not include a full formula dividend because the state could not afford one. He stated that the bill already went some way to recognize it had to be done, short of raising revenue. Representative Josephson thought the budget amendment process was incredibly fair and he thanked the chair for that; however, there were a number of investments the committee could have made that would have advanced a stable future for the state in terms of employment, diversity, and fiscal balance. He listed various areas such as daycare, childcare and helping youth grow strong to be productive. He viewed the budget as a respectable bill, but he believed more could have been done. He noted he was likely to make an amend recommendation [on the committee report]. 2:08:08 PM Representative Galvin thanked the chair and committee for their work on the amendment process. She stated it helped her to get a good picture of many other parts of the state and what other representatives were hearing from their constituents. She felt there had been a rush to get the amendments in and she felt it was difficult to account for public testimony in time for the deadline. She shared that the amendments had been received at 11:30 p.m. the night before discussing them in committee. She hoped the process could be worked through more comprehensively as the budget went to the floor. She stated that discussions on the items had been somewhat inconsistent in terms of being able to ask and answer questions. She believed the committee may have attained more consensus if there had been more opportunity to review the proposed amendments before voting on them. Representative Galvin found the rolling of the supplemental budget into the operating budget via an amendment without advance notice combined with the lack of opportunity for discussion to be something she had not seen before and a little frustrating. She remarked that the overarching need to improve recruitment and retention and enhance the social safety net (i.e., education, childcare, mental health, low cost housing, and healthcare services for all Alaskans) had become clear in discussion. She believed an irresponsibly large PFD made it difficult to meet the needs of Alaskans and make their lives bearable at present. Representative Galvin endorsed the co-chair's reaction to spending an embarrassing amount of time on something she believed was a small neighborhood issue related to a sign appropriation. She would have appreciated a discussion around a state problem of a lack of defense of public easements across private land. She found there had been too much time spent on the issue as opposed to other issues. She thanked the committee and leadership for "pulling us through" the overall process. 2:11:58 PM Co-Chair Edgmon thanked the administration for providing a budget that was by in large fair. He stated that through time immemorial there would always be members who felt the budget lacked increments or cuts. He remarked that in the end a balance was struck. He noted that the budget had to go through the other body and come back to the House for concurrence. He remarked on the process of incorporating the supplemental budget into the operating budget. He elaborated that some items had been taken out and fast tracked in a different measure. He thanked members of the education community in the audience at present. He continued that in terms of balance, the committee still had the Base Student Allocation (BSA) for consideration. Co-Chair Edgmon thanked staff doing a great job on their work. He appreciated the work done by Co-Chair Johnson as well. He was hopeful the committee could pass the budget out and get it to the House floor and the Senate. Representative Hannan thanked Co-Chair Johnson for the efforts to keep the committee moving forward on the budget. She stated it was her first year on the House Finance Committee. She highlighted that the budget was lower than the FY 15 budget and that the downward pressure on the budget had been taking place for almost a decade. She had a town hall meeting the previous evening and she had a couple of constituents who were deaf who had asked if there was talk of restoring services to deaf individuals that had been cut in 2016. She stated the topic had not even been on her radar because the programs had been cut in the first swath of downward pressure and the legislature had not even looked back to think about restoring services like sign language interpreter referrals across the state. She remarked that they had been forgetting how many services that had been lost along the way that Alaskans needed. She spoke to the need for a full fiscal plan and discussion on revenue. She shared that she had been an advocate for additional revenues and had sponsored an income tax bill that never received a hearing. She had also sponsored a small revenue bill on vape tobacco products that had made it through the legislature and had been vetoed [by the governor]. She supported a comprehensive fiscal plan to meet the needs for all Alaskans including services for deaf, blind, and physically disabled individuals. She stated that until those needs were included, the budget was not whole. She recognized the committee had a budget to send to the floor for the next fiscal year, which was a hurdle in itself. She thanked the committee leadership for moving the budget forward and she looked forward to continuing dialogues about the true fiscal needs of Alaska. 2:16:10 PM Co-Chair Johnson relayed that she would save her remarks on the budget for the end of the meeting. Co-Chair Edgmon WITHDREW the OBJECTION to the motion to report the bill from committee. There being NO further OBJECTION, it was so ordered. CSHB 39(FIN) was REPORTED out of committee with six "do pass" recommendations and four "amend" recommendations. 2:17:13 PM AT EASE 2:20:29 PM RECONVENED Co-Chair Johnson MOVED to ADOPT the proposed committee substitute for HB 41, Work Draft 33-GH1349\I (Marx, 3/29/23). Co-Chair Edgmon OBJECTED for discussion. Co-Chair Edgmon WITHDREW the OBJECTION. There being NO further OBJECTION, it was so ordered. Co-Chair Johnson MOVED to REPORT CSHB 41(FIN) out of committee with individual recommendations and that authorization be given to the Legislative Finance Division and Legislative Legal Services to make any necessary and technical and/or conforming changes. Co-Chair Edgmon OBJECTED for discussion. Co-Chair Johnson thanked members, staff, the Legislative Finance Division, Legislative Legal Services, the Office of Management and Budget, and the administration for their work on the budget process. She remarked that the minority and majority had worked together towards a common goal of doing the right thing for Alaska. 2:24:19 PM Co-Chair Edgmon WITHDREW the OBJECTION. There being NO further OBJECTION, it was so ordered. CSHB 41(FIN) was REPORTED out of committee with six "do pass" recommendations and four "amend" recommendations. 2:24:59 PM AT EASE 2:28:17 PM RECONVENED