SENATE BILL NO. 54 "An Act making supplemental appropriations, reappropriations, and other appropriations; amending appropriations; capitalizing funds; and providing for an effective date." 9:04:06 AM NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, discussed the presentation, "State of Alaska; Office of Management and Budget; Supplemental Budget SB54; Senate Finance Committee; February 6, 2023" (copy on file). He looked at slide 2, "FY2023 Supplemental Budget Overview": • K-12 forward funding after supplementals given fall forecast is $29.2 million • Average price of oil of $82.39 needed February through June to balance FY2023 9:06:29 AM Co-Chair Stedman queried the aggregate budget of the presentation. Mr. Steininger replied that the annual operating capital budget combined was approximately $4.8 billion. He stated that the year prior had a larger capital budget that pushed the total near $5.5 billion. He stated that the $100 million was a fairly small portion of the budget. Co-Chair Stedman queried the aggregate of the federal funds. Mr. Steininger replied that, with federal funds included, the states annual budget was around $12 billion to $15 billion depending on the year. Mr. Steininger highlighted slide 3, "Fire Suppression Activity UGF FY2016-FY2023." He noted that the bright green bars represented the base budget appropriated at the beginning of the fiscal year for fire suppression. The yellow bar represented what was actually spent in that year. He stated that the blue bar showed the supplemental request and appropriation. He noted that actual spending on fire was a varied variable, and was fairly unpredictable. 9:10:55 AM Senator Wilson noted that the Department of Natural Resources (DNR) fire suppression activities had a lapse, and queried the differences as related to the actuals versus the baseline. Mr. Steininger replied that there were various aspects of fire suppression within the budget. He remarked that he would have to look at the reports to determine the origin of the lapse. Co-Chair Stedman remarked that there was a continual need for supplemental requests related to fire suppression, so he hoped to avoid that in the future. Mr. Steininger stated that in FY 20 there was an increase to the base budget to be approximately equal to the cost spent in FY 18. He remarked that the base budget effectively equaled a minimum cost over a ten-year lookback. He remarked that there was no proposal in the FY 24 budget to increase the baseline, but there was work with DNR to determine a more stable way to fund fire suppression without the dramatic supplemental requests. Co-Chair Stedman stressed that the high supplemental numbers understate the budget in the year. Senator Bishop wondered how much of the FY 23 was remaining for fire suppression. Mr. Steininger replied that he did not know, but explained that there was work with DNR to determine a billable estimate to the federal government. 9:15:10 AM Mr. Steininger displayed slide 4, "Department of Corrections Supplement History." He stated that the green bar represented a baseline for the Department of Corrections (DOC), and the blue represented supplementals in each of those years. He remarked that some years had supplementals in DOC based on overruns in inmate medical. He noted that there was work with the department to drive down the costs to ensure that there was an adequate budget. Co-Chair Olson wondered why there was such a large difference between the two years. Mr. Steininger replied that part of the unpredictability in DOC was due to the trial backlog from the pandemic. Co-Chair Olson felt that DOC was much more predictable than fire suppression. He wondered why there was not a larger baseline. Mr. Steininger understood, and stated that that there was less certainty in the DOC operations as a result of the supplemental requests. He stated that there was work toward resolution with the new DOC commissioner. 9:20:09 AM Co-Chair Stedman asked about the vacancies, and wondered what happened to those funds with the addition of the supplemental requests. Mr. Steininger replied that the vacant correctional officer positions resulted in other correctional officers working considerable overtime, which used the savings that resulted from vacant positions. Co-Chair Stedman asked for further explanation about the overtime and vacancy factor. He also asked why there was not an increase to the baseline. 9:21:20 AM TERI WEST, DIRECTOR, ADMIN SERVICES DEPARTMENT OF CORRECTIONS, JUNEAU (via teleconference), explained that there were contracted positions which used the savings. Co-Chair Hoffman queried the percentage of the $21 million was earmarked for overtime. Ms. West replied that it was approximately one-third. Co-Chair Hoffman wondered whether the department contracted for beds outside of Alaska. Ms. West replied that there were no current contracted beds. Co-Chair Hoffman recalled that, in the past, there were contracted beds for a considerably lower rate. He stated that the vast majority of inmates in the correctional facility were pre-trial. He wondered whether DOC could have a system to use contracted beds during a high capacity. He noted that the Bethel facility was about 200 percent capacity. Co-Chair Stedman requested the data on the question, and stated that the subcommittee would examine issue. 9:25:13 AM Senator Wilson remarked that there was always a lapse since FY 19 in medical costs. He wondered why there was a decrement budget in the current cycle. Mr. Steininger deferred to Ms. West. Ms. West replied that there were other contracted positions, and some unexpected situations to fulfill the tasks. She stressed that those issues were a large cost to DOC. Co-Chair Stedman requested that information in writing. Mr. Steininger looked at slide 5, "Department of Public Safety Supplemental": • FY2022 Ratification of Shortfall •Overall shortfall requiring ratification $3.3 million (pg. 160) •Does not include unpaid central services costs totaling $3 million Total FY2023 Supplemental $8,020.8 UGF and $904.2 General Fund Program Receipts •4 components of AST Detachments UGF supplemental need (pg. 43): •$678.1 for underfunded Soldotna dispatch services contract •$575.8 of FY2022 expenditures shifted to FY2023 •$2,672.3 for state equipment fleet increases •$4.1 million for other cost pressures most notably travel and equipment •Criminal Justice Information Systems $904.2 Program Receipt Authority for One-Time Public Safety Information System Updates (pg. 43) 9:30:09 AM Senator Bishop wondered whether the administration had worked to change the work week to 40 hours, and how that would affect the overtime rates. Mr. Steininger replied that the analysis had not been done in OMB, but replied that the Division of Personnel may have examined that issue. Co-Chair Stedman asked that further information be provided to the committee. Mr. Steininger addressed slide 6, "Supplemental Operating Budget Items": Administration Office of Administrative Hearings Program Receipt Authority for Municipal Case Referrals and Hearing Activity: $80.0 General Fund Program Receipts (GFPR) / $(80.0) Interagency (I/A) Receipts (pg. 1) FY2022 Lapsed Lease Payment: $443.9 UGF / $367.3 DGF / $939.6 Other / $1,750.8 Total (pg. 2) Division of Finance -Relocate Local Area Network Room in the Goldbelt Building: $100.0 UGF (pg. 4) Risk Management SB131 Workers' Comp Disability for Firefighters Fiscal Note: $224.5 I/AReceipts (pg. 12) Office of Public AdvocacyHB325 Domestic Violence/SexualOffenses/Consent: $2,285.2 UGF (pg. 13) Public Defender Agency HB325 Domestic Violence/SexualOffenses/Consent: $833.8 UGF (pg. 14) Commerce, Community, and Economic Development Alaska Energy Authority (AEA) -FY23 Exempt 5 percent COLA Increase HB226: $295.9 UGF (pg. 15) AEA -Executive Health Insurance, SBS, and Risk Management Rate Changes: $67.2 UGF (pg. 15) Extend State Match for the Alaska Reinsurance Program (FY2023-FY2028): Language (pg. 145) 9:34:41 AM Senator Wilson noted that the Office of Public Advocacy and the Public Defenders Agency had some shortages. He wondered whether the increase would fill that need, or whether there would be additional funds to assist the agencies with the backlogs. Mr. Steininger replied that the request would make the two agencies whole for the cost of HB 325. Senator Wilson wondered whether the administration would communicate whether it was a mandatory or budgetary need. Mr. Steininger replied that the goal for budgetary needs would be to address it in the amended budget. Co-Chair Olson wondered whether they were one-time increments. Mr. Steininger replied that they were ongoing costs. Co-Chair Olson felt that the previous years fiscal notes would cover the costs, so asked why there was a supplemental request. Mr. Steininger replied that another bill in the previous session was merged with HB 325 at the end of session. He stressed that OMB was attempting to adapt to those legislative changes. Co-Chair Stedman felt that there could have been better planning in the legislature as a result of merging those bills. He asked about the timing of the lapse. Mr. Steininger replied that the lapsed lease payments of $443,000 in GF were from the lack of entering the payments into the accounting system in FY 22. 9:40:34 AM Co-Chair Stedman remarked that there could be a conversation about whether the funds would be put into the SBR versus the CBR. Mr. Steininger pointed to slide 7, "Supplemental Operating Budget Items con't": Education Federal National Endowment for the Arts Awards Extension: $125.0 Federal (pg. 25) Costs for Administrative Hearings and Legal Services: $105.0 UGF (pg. 26) Washington, Wyoming, Alaska, Montana, Idaho (WWAMI) Contractual Increase: $44.9 UGF (pg. 27) Correction to Federal Relief Individuals with Disabilities Education Act: Language (pg. 146) Correction to Multi-year Federal Authority Appropriations: Language (pg. 146) Environmental Conservation Permitting and Testing in Drinking Water and Environmental Health Lab: $175.0 GFPR (pg. 28) Clean Air Protection Fund Capitalization: Language $2,800.0 UGF (pg. 156) Family and Community Services Pioneer Homes Increase Authority Due to Rate Change: $700.0 GFPR (pg. 29) Senator Wilson recalled that $1.6 million was given to expand the ten seats and contractual increases in the Washington, Wyoming, Alaska, Montana, and Idaho (WWAMI) program. He wondered whether all ten seats were filled, and whether there was an underestimated contractual costs. Mr. Steininger replied that the ten seats were not filled. He furthered that the appropriation was a multi-year appropriation. 9:45:34 AM Senator Wilson looked at the $200,000 for contractual increases, and wondered whether that money was for future contracts. Mr. Steininger stated that there was a portion for FY 23 contractual increases, but that amount was initially based on a presumption of 3 percent inflation, but the real number was 6.9 percent. Mr. Steininger discussed slide 8, "Supplemental Operating Budget Items con't": Fish and Game Increased Costs of Utilities -Anchorage and Fairbanks Hatcheries: $300.0 UGF (pg. 30) Increased Operational Expenditures -Southeast Region Fisheries Management: $142.0 UGF (pg. 31) Alleviate Shortfall in Southeast Region Deferred Maintenance Funding -Southeast Region Fisheries Management : $130.0 UGF (pg. 31) Increased Operational Expenditures -Central Fisheries Management: $75.0 UGF (pg. 32) Increased Operational Expenditures -AYK Region Fisheries Management: $164.0 UGF (pg. 33) Increased Operational Expenditures -Westward Region Fisheries Management: $137.0 UGF (pg. 34) Increased Operational Expenditures -Statewide Fisheries Management: $75.0 UGF (pg. 35) Labor and Workforce Development AVTEC Support for Existing Vocational Training Opportunities: $570.0 UGF / $(570.0) GFPR (pg. 36) Move Training Funding to Workforce Investment Board: Language (pg. 153 154) Capitalize Workers' Compensation Benefits Guaranty Fund to Pay Claims: Language $221.4 UGF (pg. 157) Senator Bishop looked at the $570,000 of UGF to replace program receipts, and stated that it was ongoing. He felt that an increase in tuition fees should be examined by the department. Co-Chair Hoffman looked at DFG, and queried the highest expenditures within the $500,000 request. Mr. Steininger replied that the largest cost was the cost of fuel. 9:50:14 AM Co-Chair Stedman stated that the legislature had included the fuel trigger, so he asked for more reasoning behind the request. Mr. Steininger stated that there was not specificity within the operating budget. Co-Chair Stedman asked that OMB work with the committee on the next fuel trigger to make it more precise to fit in with the stated goal to have the fuel trigger compensate for fuel and not pork up the budget unnecessarily. Co-Chair Hoffman asked whether Mr. Steininger had recommended vetoing the fuel trigger. Mr. Steininger replied that he could not speak to the deliberative process within the decisions made to veto. Co-Chair Hoffman asked whether Mr. Steininger had suggested the veto. Mr. Steininger replied that he could not speak to what happened behind closed doors with the governor. Co-Chair Stedman requested information on the hatcheries in Anchorage and Fairbanks and the fuel consumption. Mr. Steininger addressed slide 9, "Supplemental Operating Budget Items con't": Military and Veterans' Affairs Add Data Processing Manager 3 (Range 24): $66.7 UGF / $84.3 Interagency Receipts / $6.0 Capital Improvement Project (CIP) Receipts / $157.0 Total (pg. 37) Army Guard Operating Costs Shortfall on Joint Base Elmendorf Richardson: $1,000.0 Federal (pg. 38) Alaska Military Youth Academy Federally Allowable Benefit Costs: $1,900.0 Federal (pg. 39) Natural Resources Process Applications for Permits to Mine in Alaska and Hard Rock Exploration Support: $199.7 GFPR (pg. 40) Fire Activity Incident General Fund Authorization for Anticipated Costs: $50,000.0 UGF (pg. 41) Sustaining Access to Alaska State Parks and Recreational Facilities: $96.6 UGF (pg. 42) 9:55:53 AM Senator Kiehl asked about the result of possibly adding the middle managers in the defense force, and whether the federal government would pay for the cost. Mr. Steininger replied that the state defense force was entirely state funded, but deferred to Mr. Ernisse for more information. 9:56:55 AM BOB ERNISSE, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, ANCHORAGE (via teleconference), agreed with Mr. Steininger, and stated that the state defense force occupied a number of the current armories. Senator Kiehl noted the reopening of facilities, but stated that he read it was due to public outcry. Mr. Steininger stated that the list was from the department. Co-Chair Stedman asked for a list of the rankings. Senator Wilson felt that there were unsafe situations in managing some of the parks. Senator Bishop noted that the subcommittee process had resulted in multi-year funds, with a focus on the permitting issue because of the essential impact of mining. 10:00:43 AM Senator Wilson wondered whether there could be receipt authority for DNR to receive money from the community for upgrades or keeping the recreational sites open. Co-Chair Stedman stated that the subcommittee could examine that issue. Mr. Steininger addressed slide 10, "Supplemental Operating Budget Items con't": Revenue Tax Division -Juneau Cash Room: $148.9 UGF (pg. 46) Tax Revenue Management System (TRMS) Cloud Server Hosting: $186.8 UGF (pg. 46) Alaska Housing Finance Corporation (AHFC) Federal Stimulus for Housing: $127,000.0 COVID Federal (pg. 47) HB 226 5 percent Cost of Living Allowance Adjustment -AHFC Operations: $796.1 Federal / $117.3 CIP / $1,240.3 AHFC Receipts / $2,153.7 Total (pg. 47) HB 226 5 percent Cost of Living Allowance Adjustment -Alaska Corporation for Affordable Housing (AHFC subsidiary): $12.9 Federal (pg. 48) Transportation and Public Facilities Advanced Air Mobility (AAM) Infrastructure Study: $10.0 Int. Airport Fund / $90.0 Rural Airport Fund (pg. 49) Technical items -11 fund changes net to zero (first item is pg. 50) State Equipment Fleet Additional Authority for Fuel Increases: $2,000.0 Highways/Equipment Working Capital Fund (pg. 54) Co-Chair Stedman wondered why the Alaska Marine Highway System (AMHS) did not need more fuel. Mr. Steininger replied that AMHS had sufficient budget authority to pay for fuel. There was work with the department to determine budget adjustments based on the new federal funds. 10:05:08 AM Senator Kiehl wondered whether there was an operating cost to take in the marijuana tax payments. Mr. Steininger replied that there was not a request for new staff in the budget, and no specific operating task in the budget. Senator Kiehl wondered whether there was discussion of municipalities partnering with the state on tax collection. Mr. Steininger replied that the department had explored a number of different partners. He stated that many issues were the federal issues related to marijuana money, so it was not ideal to partner with any of those options. Senator Wilson wondered whether Anchorage and Juneau were the only cash rooms. Mr. Steininger agreed to provide that information. Senator Wilson asked about how much cash would be moved from Juneau to Anchorage, and whether Fairbanks might be better to provide that cash. Mr. Steininger replied that Fairbanks had been discussed, but ultimately it was decided that was not the best option. Senator Wilson asked about the general cash flow number of marijuana sales. Mr. Steininger agreed to provide that information. Co-Chair Olson asked about advanced air mobility and wondered how it advanced transportation in rural Alaska. Mr. Steininger deferred to the Department of Transportation and Public Facilities (DOT/PF). 10:10:14 AM Mr. Steininger highlighted slide 11, "Supplemental Operating Budget Items con't": Transportation and Public Facilities, con't Central Region Newtok/ Mertarvik Airports Contract : $290.0 UGF (pg. 55) Central Region City of Homer Natural Gas and Water Sewer Assessments: $180.0 UGF (pg. 55) Northern Region Winter Maintenance Service Contracts -Fairbanks: $200.0 UGF (pg. 57) Southcoast Region Rural Airport Contract Increases: $49.0 UGF (pg. 58) Maintenance Agreement Cost Increase at King Salmon Airport: $774.5 Federal (pg. 58) Anchorage International Airport Miscellaneous Cost Increases such as Materials, Shipping, Contracts, and Utility Costs: $8,523.6 International Airport Funds (pg. 60 66) Fairbanks International Airport Miscellaneous Cost Increases such as Increased Heating, Diesel, and Unleaded Fuel Expenses: $1,778.2 International Airport Funds (pg. 67 69) University of Alaska University of Alaska Compensation Increases Staff and Faculty: $6,460.9 UGF (pg. 70 87) Co-Chair Hoffman asked whether the ice road between Bethe. and Aniak was in need of additional funds. Mr. Steininger agreed to provide that information. Mr. Steininger pointed to slide 12, "Supplemental Operating Budget Items con't": Legislature FY2023 Health Insurance Rate Change: $787.7 UGF (first item is pg. 88) Increase program receipts to reflect Assembly Building revenue for FY2023: $67.8 GFPR (pg. 91) Attorney Salary Increase of 15 percent Consistent with Sec3 CH 50 SLA2022 (HB226): $75.0 UGF (pg. 95) Mr. Steininger discussed slide 13, "Supplemental Capital Budget Items Administration": Expand Federal Surplus Property Program Capacity by Adding Office Space and a Storage Mezzanine to the Federal Warehouse: $150.0 Surplus Property (pg. 102) Commerce Alaska Energy Authority -Defense Community Infrastructure Pilot Program: $12,752.5 Federal (pg. 104) Alaska Energy Authority -State Energy Program IIJA Formula: $2,865.9 Federal (pg. 106) Grants System Replacement: $800.0 UGF (pg. 109) Family and Community Services Reappropriate Alaska Pioneer Homes Payment Assistance to Pioneer Home deferred maintenance (pg. 149) Reappropriate Nome Youth Facility Deferred Maintenance to use on juvenile justice facilities (pg. 150) Co-Chair Stedman handed the gavel to Co-Chair Hoffman. 10:15:27 AM Mr. Steininger addressed slide 14, "Supplemental Capital Budget Items con't": Fish and Game Exxon Valdez Oil Spill (EVOS) Trustee Council EVOS Chugach Regional Ocean Monitoring Program: EVOS $5,766.3 (pg. 110) EVOS PWS Kelp Mariculture Development for Habitat Restoration and Local Economy: $2,761.5 EVOS (pg. 112) EVOS Social, cultural and economic assessment of kelp mariculture opportunities for coastal villages within the EVOS spill zone: $3,667.8 EVOS (pg. 114) EVOS Community Organized Restoration and Learning [CORaL] Network: $12,499.9 EVOS (pg. 116) EVOS PWSNatural History Symposium: $211.2 EVOS (pg. 118) EVOS Culture Camp Funding for the Chugach Region: $2,343.0 EVOS (pg. 120) EVOS General Restoration and Habitat Protection Project: $7,146.3 EVOS (pg. 122) EVOS Kenai Peninsula Stream Watch: $495.8 EVOS (pg. 124) EVOS Status and Trends of EVOS Injured Seabirds: $712.7 EVOS (pg. 126) Natural Resources Federal Emergency Management Agency Community Lidar Collection: $5,000.0 Federal (pg. 128) Mr. Steininger discussed slide 15, "Supplemental Capital Budget Items con't": Transportation and Public Facilities Chalkyitsik Airport Reconstruction: $6,109.4 Federal (pg. 133) Chignik Airport Snow Removal Equipment Building Rehabilitation: $1,081.8 Federal (pg. 134) Federal-Aid Aviation State Match: $1,738.8 General Fund Match (pg. 135) Little Diomede Helipad Rehabilitation and Lighting Replacement: $2,906.3 Federal (pg. 137) Marshall Airport Rehabilitation: $3,737.9 Federal (pg. 138) Wrangell Gate Replacement and Security Upgrades: $1,649.9 Federal (pg. 139) University of Alaska UAA Health Workforce Expansion and Diversity Funding -Phase 1: $4,000.0 Federal (pg. 140) University Receipt Authority for Capital Projects: $30,000.0 University Receipts (pg. 142) Federal Receipt Authority for Capital Projects: $30,000.0 Federal (pg. 143) Co-Chair Olson looked at the $30 million in capital projects and wondered whether the students would be paying for those costs through tuition. Mr. Steininger replied that the receipts could be paid through tuition, donations, or other receipts. He deferred to Ms. Kruckenberg. 10:17:42 AM ALESIA KRUCKENBERG, DIRECTOR OF STRATEGY PLANNING AND BUDGET, UNIVERSITY OF ALASKA, FAIRBANKS (via teleconference), replied in the negative. She explained that no tuition would be used in the request. She stated that the money could be from another state agency, donations, and other externally funded grand opportunities. Co-Chair Hoffman handed the gavel to Co-Chair Stedman. Co-Chair Olson recalled that there was a large university maintenance backlog, so he thought it would be better to use GF to fill the backlog. Ms. Kruckenberg replied that general funds were more reliable, but there was nothing lined up for funding. She stated that the request was about other funding sources. 10:20:12 AM Mr. Steininger displayed slide 16, "Supplemental Capital Budget Items con't": Technical Items Reappropriate Retirement Systems IT Modernization from the Office of the Governor to the Department of Administration (pg. 144) Reappropriate Health IT Management Solution from Office of the Governor to Department of Health (pg. 151) Reappropriate Substance Use Disorder Service Expansion from the Department of Health and Social Services to Department of Health (pg. 152) Repeal Permanent Fund Dividend Division Dividend Application Information System Software Conversion (pg. 155) Senator Wilson wondered whether there would be an amendment in the budget related to the issues in the Division of Public Assistance. Mr. Steininger replied that there was work to understand the budgetary need, but stated that there was not information on the potential need to address the Division of Public Assistance. Senator Wilson stressed that there would be a request, so that may be addressed later in the session. Co-Chair Hoffman stated that there was a lack of implementation of the SNAP program, which was causing hardship in his district. He requested a written report from the department on that problem. Co-Chair Stedman discussed the agenda for the following day. SB 54 was HEARD and HELD in committee for further consideration.