CS FOR HOUSE BILL NO. 39(FIN) am(brf sup maj fld)(efd fld) "An Act making appropriations for the operating and loan program expenses of state government and for certain programs; capitalizing funds; repealing appropriations; amending appropriations; making reappropriations; and making supplemental appropriations." 1:33:46 PM Senator Merrick MOVED to ADOPT proposed committee substitute for CSHB 39 (FIN), Work Draft 33-GH1347\R (Marx, 4/17/23). Co-Chair Stedman OBJECTED for discussion. 1:34:23 PM PETE ECKLUND, STAFF, SENATOR BERT STEDMAN, discussed the proposed CS. He read from a document called Report A (copy on file) and highlighted Column 4, "SCS 1". He noted that Report A showed Unrestricted General Funds (UGF) for a total of $4.257 billion including numbers and language for agency operations, and another $401 million of statewide items for a total of $4.65 billion UGF. He referenced Report B (copy on file), which showed all funds for numbers and language. He highlighted that Column 4 showed "SCS 1" and indicated that there was just over $9.8 billion in agency operations, and another $584 million in statewide operations for a total of $10.44 billion in all funds. Mr. Ecklund addressed a document entitled Report C (copy on file) which showed supplemental items. The UGF and operating budget supplementals combined for a total of $102.79 million. He noted that there would also be supplemental items in the capital budget. Mr. Ecklund noted that there would be many additional reports available on the LFD website after the committee meeting. Mr. Ecklund referenced a document that outlined the changes from the governor's introduced operating budget to Version R of HB 39, entitled "OPERATING BUDGET DIFFERENCES BETWEEN THE GOVERNOR'S ORIGINAL OPERATING BUDGET AND THIS COMMITTEE SUBSTITUTE" (copy on file). 1:37:12 PM AT EASE 1:37:50 PM RECONVENED Mr. Ecklund addressed changes to the bill outined in the document: OPERATING BUDGET DIFFERENCES BETWEEN THE GOVERNOR'S ORIGINAL OPERATING BUDGET AND THIS COMMITTEE SUBSTITUTE SB40 (VERSION A) TO SENATE CS FOR HB39 (VERSION R) SUPPLEMENTAL NUMBERS SECTION 1. Sections 7-12 incorporated all of the Governor's numbers section supplemental requests except for the following. • Replaced $44.9 of UGF with Higher Ed money for the WWAMI program (Washington, Wyoming, Alaska, Montana, Idaho) • Replaced $904.2 GF/Program Receipts in the Department of Public Safety's numbers section with a language section that appropriates funding for criminal justice information system updates and improvements for FY23 and FY24. • $117.0 UGF was added to the legislature's budget to fund a housing stipend increase, from $30 to $37.50 per day, for out-of-town legislative staff. • $200.0 UGF for an Alaska Family Justice Center Model Study in the FY23 budget was removed and replaced with a multi-year language section (Sec 20(b)) for FY23 and FY24, to allow for the completion of this project. Mr. Ecklund shared that there had been quite a few supplemental language sections and noted that the executive branch had recently reviewed the supplmentals. He explained that all the supplmentals were incorporated into the CS with the exception of a Clean Air Fund appropriation that he would address later. He continued to address the document: The Senate CS incorporates a number of SUPPLEMENTAL APPROPRIATIONS in the following language sections. 2. Sec 13 extends the lapse date for the Alaska Housing Finance Corporation's federal receipts for various housing programs. This is a Governor's request. 3. Sec 16 extends the lapse date for DCCED's reinsurance appropriation. A total of $55 million of UGF was appropriated in FY18 and this language extends the appropriation through FY28. This was requested by the Governor. 4. Sec. 15 is a NEW SECTION that appropriates the balance of the Abandoned Motor Vehicle Fund on June 30, 2023 to DOA to reimburse municipalities for the cost of removing abandoned vehicles for FY23 and FY24. 5. Sec. 17. Department of Education and Early Development. There are several supplemental language sections for the Department of Education and Early Development. o The following were requested by the Governor o Sec 17(d) extends the lapse date for federal receipts in the Department of Education and Early Development to June 30, 2025. o Sec 17(e) allows DEED to accept any available FY23 federal funds and pass that funding through to other educational entities. o The following were added or revised in the Senate CS: o Sec 17(f) corrects the Governor's lapse extension language for the proceeds from the sale of state-owned Mt. Edgecumbe High School land. The proceeds from the sale will be available for Mt. Edgecumbe High School's maintenance and operations for FY23-FY25. 1:41:48 PM AT EASE 1:48:57 PM RECONVENED Co-Chair Stedman relayed that there had been a printing malfunction and members were missing part of the written explanation. He asked Mr. Ecklund to highlight larger issues on each page and pause for discussion. Mr. Ecklund continued to address the summary of differences on the top of page 2: o The following were added or revised in the Senate CS: o Sec 17(f) corrects the Governor's lapse extension language for the proceeds from the sale of state-owned Mt. Edgecumbe High School land. The proceeds from the sale will be available for Mt. Edgecumbe High School's maintenance and operations for FY23-FY25. Co-Chair Stedman asked Mr. Ecklund to address item 9. Mr. Ecklund spoke to item 9: 9. Sec. 21. SUPPLEMENTAL FUND CAPITALIZATION o Sec. 21a appropriates up to $10 million of SDPR to the Alaska Gasline Development Corporation. This subsection clarifies the FY23 effective date that was requested by the Governor. 1:50:49 PM Mr. Ecklund addressed page 3 of the summary of changes document: 10. Sec. 22. Extends the lapse date for the Redistricting Board operations through the end of FY24. This was a legislative addition. 11. Sec. 23 adds SUPPLEMENTAL SALARY AND BENEFIT ADJUSTMENTS language to ensure that salary adjustments resulting from bargaining unit agreements that are included in the supplemental numbers section are funded. This is a Governor's request. 12. Sec. 24. Approves the Governor's requested SUPPLEMENTAL RATIFICATIONS OF OVEREXPENDITURES for several departments. Mr. Ecklund discussed FY 24 Language Changes as listed on the document: FY24 LANGUAGE CHANGES 13. Sec. 27 is a legislative addition of up to $75.0 UGF to the Alaska Court System's Commission on Judicial Conduct for special council costs related to unanticipated investigations. This language was recommended by the subcommittee. 14. DELETED SECTION: The AIDEA Dividend section appropriating $17,904,000 from AIDEA to the general fund was deleted. The Senate Finance Committee will work with AIDEA to determine an appropriate amount for the AIDEA Dividend. 15. Sec. 29. ALASKA PERMANENT FUND. The legislature made the following changes from the Governor's requested Permanent Fund language. o To align with statute, subsection c appropriates the entire Percent of Market Value draw, totaling $3,526,087,852, to the general fund. (The Governor's language had appropriated funding from the Earnings Reserve Account as follows: • $2.47 billion to the dividend fund to pay a full statutory dividend, and • The remaining balance, estimated to be $1.055 billion, was appropriated to the general fund.) o The Senate CS deletes the appropriation to the dividend fund to pay for a dividend. The permanent fund dividend discussion will need to be decided by the full Finance Committee. o The Senate CS revises the Permanent Fund inflation proofing appropriation (subsection e) by capping the amount appropriated for inflation proofing at $1.413 billion. The Governor's language was an open-ended appropriation. 16. Sec. 30 incorporated the Governor's amendment to appropriate funding from the ALASKA TECHNICAL AND VOCATIONAL EDUCATION PROGRAM ACCOUNT to various departments as prescribed by statute. Because the amount available varies annually, the Governor submitted an amendment replacing the funding in the numbers section of the budget with this language. 1:54:17 PM Mr. Ecklund continued to address the document: 17. Sec. 31 and Sec 55. As occurred in last year's operating budget bill, the legislature added a section to clarify that funding included in the budget for BONUSES FOR CERTAIN EMPLOYEES OF THE EXECUTIVE BRANCH is contingent upon o the state and the applicable bargaining unit of the employee entering into a letter of agreement for the bonus AND o the Department of Administration providing a copy of the letter of agreement to the legislative finance division in electronic form not later than 30 days after the department enters into the letter of agreement. 18. Sec 32(g). DEPARTMENT OF ADMINISTRATION. The Senate CS amended the open-ended appropriation to the Department of Administration for actuarial costs associated with bills by adding a requirement that the appropriation is valid only for actuarial costs of bills in the finance committee of each house. 19. Sec 33g corrects the fiscal years in the language for the Division of Insurance's reinsurance program by replacing "June 30, 2023 and June 30, 2024," with "June 30, 2024 and June 30, 2025." 1:55:43 PM Senator Merrick asked about Section 29 subsection e, which capped the amount of inflation-proofing of the Permanent Fund at $1.413 billion. She asked about the source of the number. Mr. Ecklund relayed that in the original bill the estimate for inflation-proofing was $1.4 billion, which he thought used Callan's projected inflation rate of 2 percent or 2.25 percent. He referenced presentations by both LFD and the Alaska Permanent Fund Corporation (APFC) that mentioned the danger of the Earnings Reserve Account (ERA) becoming low, and explained that the CS proposed to cap the amount appropriated for inflation-proofing. Co-Chair Stedman recalled that inflation-proofing could be as high as $4.2 billion. He relayed that the committee had thought that it would be nice to have some inflation- proofing. 1:57:25 PM Mr. Ecklund item 20 on the document: 20. DELETED SUBSECTION. The Senate Finance CS deleted an open-ended federal appropriation to the Alaska Broadband Office. 21. Sec. 35(f). The Senate Finance CS incorporates the Governor's amendment for $17.8 million, of which $8.9 million is UGF, to the Department of Health, to redetermine Medicaid eligibility for enrolled Alaskans. This appropriation is valid for FY24 and FY25. 1:57:59 PM Mr. Ecklund addressed page 5 of the document: 22. DEPARTMENT OF LAW • Sec 37(a) appropriates $5 million UGF to the for litigation relating to STATEHOOD DEFENSE for FY24- FY26. • Subsection 37(b) adds intent that the funding is not used for any action that may erode existing federal or state subsistence rights. This section is intended to replace a $10 million capital appropriation that was requested by the Governor. 23. Sec 40(b) revises the Governor's Alaska Marine Highway System backstop language to mirror last year's language. If federal receipts received by the AMHS fall short of the amount appropriated in the numbers section, o The Governor's backstop language appropriates Alaska Marine Highway System funds for any federal revenue shortfall. This could lead to an inadequate AMHS Fund balance. o Instead, the Senate CS backstop language appropriates up to $20 million of UGF to cover any federal revenue shortfall. 1:59:19 PM Mr. Ecklund continued to address page 5 of the document: 24. Sec 41(b) through (e) adds Fuel Trigger language. At the Spring Forecast for FY24, this language estimate is $1 million. Mr. Ecklund shared an aside that the committee was expecting the Office of Management and Budget (OMB) to provide some additional language to replace the current language in the bill. Mr. Ecklund continued to address the document: 25. Sec 43g incorporates the Governor's Debt Service amendment. This amendment replaces 2012A and 2013B bonds with 2023A bonds for a net savings of $603.0. 26. Sec 44(e) was added to prevent the Alaska Gasline Development Corporation (AGDC) from being able to receive and expend federal or statutory designated program receipts through the Legislative Budget and Audit's RPL process. 27. Like the Governor's request, Sec. 45(s) fully pays off any remaining Oil and Gas Tax Credits. However, due to the price of oil, the estimate has been revised from $42.7 million to $55.7 million. 28. Sec 45(t) incorporates a Governor's amendment adding a total of $1.2 million to the election fund. $1 million is federal receipts and $200.0 of general funds. 29. DELETED SUBSECTIONS FROM FUND CAPITALIZATION. The Senate Finance CS deleted the following two subsections relating to the Alaska Gasline Development Corporation. o Open-ended statutory designated program receipts received by AGDC in FY23, and o Open-ended federal authority for funding received by AGDC in FY23. 30. Subsection 45(u) is a NEW SUBSECTION adding $30 million of general funds to the Community Assistance Fund. This maintains the current level of funding for communities in FY25. Without this addition, the FY25 distribution to communities would be reduced from $30 million to $20 million. 31. Sec 46(o) incorporates the Governor's $7.5 million UGF appropriation to the Renewable Energy Grant Fund. 32. Sec. 46(p) is a legal services change. Legal Services moved the appropriation of $100,000 of general fund program receipts to the Abandoned Motor Vehicle Fund from the Fund Capitalization section to the Fund Transfers section. This change was made to clarify that expenditures from the fund require further appropriation. 33. Sec. 48(a) (9) and (10) adds two bargaining units, the Teachers' Association of Mt. Edgecumbe and the Inlandboatmen's Union of the Pacific, Alaska Region, to the SALARY AND BENEFIT ADJUSTMENTS language. It also deleted the Governor's blanket approval language for monetary terms of letters of agreement. 34. Sec 52 repeals a $1.65 million appropriation for the WWAMI program (Washington, Wyoming, Alaska, Montana, and Idaho). Between the other funding appropriated in FY23 and FY24, the WWAMI program's funding is sufficient to fund all existing, and the proposed expanded number of program recipients. 2:03:02 PM Co-Chair Stedman WITHDREW his OBJECTION. There being NO further OBJECTION, it was so ordered. The CS for CSHB 39(FIN) was ADOPTED. CSHB 39(FIN) was HEARD and HELD in committee for further consideration. Co-Chair Stedman set the bill aside for further review. He asked members to review the document and set an amendment deadline of 2 o'clock p.m. for Friday, April 21. He asked the committee staff to work with Mr. Ecklund. He mentioned subcommittee issues and reminded members to keep a close eye on budget growth during the current time of fiscal constraints.