HOUSE FINANCE COMMITTEE January 28, 2026 1:32 p.m. 1:32:27 PM CALL TO ORDER Co-Chair Josephson called the House Finance Committee meeting to order at 1:32 p.m. MEMBERS PRESENT Representative Neal Foster, Co-Chair Representative Andy Josephson, Co-Chair Representative Calvin Schrage, Co-Chair Representative Jamie Allard Representative Jeremy Bynum Representative Alyse Galvin Representative Sara Hannan Representative Elexie Moore Representative Will Stapp Representative Frank Tomaszewski MEMBERS ABSENT Representative Nellie Unangiq Jimmie ALSO PRESENT Cathy Munoz, Commissioner, Department of Labor and Workforce Development; Dan DeBartolo, Administrative Service Director, Department of Labor and Workforce Development; Karinne Wiebold, Economist, Department of Labor and Workforce Development; Lennon Weller, Economist and Actuary, Department of Labor and Workforce Development. SUMMARY FY 27 GOVERNOR'S BUDGET OVERVIEW: DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT PRESENTATION: STATEWIDE 2026 JOBS FORECAST and UNEMPLOYMENT FINANCING METRICS BY THE DEPARTMENT OF LABOR and WORKFORCE DEVELOPMENT Co-Chair Josephson reviewed the meeting agenda. ^FY 27 GOVERNOR'S BUDGET OVERVIEW: DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT 1:34:15 PM CATHY MUNOZ, COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, introduced herself and colleagues. She provided a PowerPoint presentation titled "FY2027 Department Budget Overview: House Finance Committee," dated January 28, 2026 (copy on file). She began on slide 2 and relayed that the department had seven divisions. There were 14 job centers under the Division of Employment and Training Services located around the state. She noted that a satellite job center was recently opened in Kotzebue. There were nine vocational rehabilitation client offices under the Division of Vocational Rehabilitation. The department administered federal and state training funding with nine regional non-state Technical Vocational Education Program (TVEP) recipients. She explained that TVEP was funded through a share of the employment security tax. The funds passed through the department and the Department of Labor and Workforce Development (DLWD) had oversight over the grants. The department managed grants for 37 State Training and Employment Program (STEP) regional training provider grantees around the state. She noted that STEP was also funded with a portion of the Employment Security Tax. The department administered funds for nine construction academies around the state. Additionally, the Alaska Vocational Technical Center (AVTEC) housed under DLWD was located in Seward. 1:37:25 PM Commissioner Munoz turned to slide 3 and addressed FY 25 accomplishments. The department expanded the industrial electricity and plumbing programs at AVTEC and started a new industrial machine and maintenance program. She reported strong enrollment above pre-pandemic levels for all of the department's programs and waiting lists for the most popular programs, especially in industrial electricity, plumbing, and welding areas. She detailed that Dr. Cory Artiz was in his first year as the AVTEC director. She shared that in the past year AVTEC was named one of the top vocational technical schools in the country by USA Today. She highlighted success in the Occupational Safety and Health (AKOSH) Diversionary program, which was the first of its kind in the nation. The program allowed the department to work through AKOSH with businesses that had received first time safety violations or first time violations in the previous five years to make safety improvements to their business and receive a full waiver of any financial penalties. The department believed it resulted in safer workplaces in a more collaborative manner. Commissioner Munoz continued reviewing accomplishments on slide 3. The department successfully launched the Office of Citizenship Assistance (OCA). She thanked Co-Chair Josephson, Co-Chair Foster, and Representative Galvin for attending the launch. The first year had been very successful and the office served over 250 legal immigrants with employment and job training services. Additionally, the office connected legal immigrants with digital literacy training and English conversational language training. The office could also do credential translation, which helped when individuals were coming from another jurisdiction and they needed help translating their credentials. The department had been working with the federal Refugee Support Services to assume the duties of the refugee agency, which had previously been handled by Catholic Community Services. The services would be provided by OCA going forward. Commissioner Munoz continued to review accomplishments on slide 3. The department was pleased with the number of changes at Mechanical Inspection in the Certificate of Fitness (COF) program, which certified electricians and plumbers. A number of changes had been implemented including allowing for comparable military credit toward licensure. The department had increased reciprocity to 30 states, allowing it to accept licensure from states with similar licensure to Alaska. The department had also implemented provisional licensing, which allowed it to accept an electrician or plumbing license from another jurisdiction provisionally for up to one year. The number of electrical journeymen issued certificates of fitness increased substantially to 423 or a 133 percent increase over the previous year. The department had issued 435 electrical trainee licenses, reflecting a big jump over the previous year. 1:42:05 PM Commissioner Munoz continued to review accomplishments on slide 3. She highlighted the Workers' Compensation Division and relayed there was great collaboration between the Medical Services Review Committee and medical providers to work to bring the cost of medical services down by publishing an updated medical services list annually for reimbursement purposes. Premium costs for employers had decreased by approximately 38 percent since 2018. There were safer workplaces overall and a reduction in the cost of medical services by establishing an agreement about published services and what the division would reimburse for the services. She shared that the department implemented SB 206 (a bill sponsored by Senator Elvi Gray- Jackson), which allowed it to work proactively to get individuals who had been injured - who may not be able to return to their previous line of work, but may be able to do lighter related work - to get back to work more quickly. She noted that the longer an individual was separated from work, the more likely they would never return to the workplace. The reemployment program called Stay at Work had been successful in getting people back to work sooner. Commissioner Munoz shared that moving forward, the department was focused on a training proposal introduced by the governor in HB 267 and SB 217. She detailed that it would be a major boost for short term trainings and industry recognized training opportunities around the state, supporting the regional training network and individual training support through job centers. The 2018 gasline workforce plan was being updated to adapt it to the current project. The department hoped to get the report to the legislature by mid to late March at the latest. 1:45:06 PM Representative Galvin thanked the commissioner for being present and appreciated hearing the good news. She asked her staff to look at key performance indicators on the Office of Management and Budget (OMB) website. She referenced the AVTEC program and understood the goal was for at least 60 percent of students to complete the program and the current rate was about 90 percent. Similarly, around 90 percent of the graduates were employed in their field of training. She asked how many students were reflected in the 90 percent. Commissioner Munoz answered that the longer programs were between six to nine months with an enrollment of about 120 students. Additionally, there were short term training opportunities offered through partnerships with employers. The maritime program had a partnership with Trident Seafoods where training was provided on campus during the offseason that allowed students to work and return to AVTEC over a period of time. She estimated that in total there were close to 1,000 students. She offered to follow up with a precise number. Representative Galvin was happy with the number provided by Commissioner Munoz. Representative Tomaszewski observed that the federal funding received by the department in the amount of ~$98 million was about 51 percent of DLWD's total budget. He asked if federal funds were increasing or decreasing. He looked at slide 2 and reviewed the number of job centers, TVEP recipients, STEP grantees, and construction academies. He asked if there was an accessible list with more detailed information located somewhere. Commissioner Munoz asked if Representative Tomaszewski was looking for a list of the grant recipients or a list of the trainers around the state. Representative Tomaszewski replied that he was interested in both. Commissioner Munoz replied that both were available. There was a public eligible training provider list located on the DLWD website that included all of the short term training programs around the state connected to specific schools and training centers. Additionally, she would follow up with a list of STEP and TVEP recipients. Representative Tomaszewski asked about the federal funding. DAN DEBARTOLO, ADMINISTRATIVE SERVICE DIRECTOR, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, responded that the department's federal funding was up 4 percent overall. He clarified the department did not necessarily realize the full amount of federal funding it was authorized for. He offered to provide a breakdown showing the actuals spent as opposed to budget authority. Representative Tomaszewski referenced the mention of Trident Seafood. He asked if the department received private donations to help with training. He asked how it worked for a private company to donate to the training and helping to facilitate the advancement of more construction and maritime positions. 1:50:15 PM Commissioner Munoz replied that Trident paid for the program and sent a certain number of students annually as part of a multiyear program. Additionally, the department received tax deductible donations from businesses for its training programs, which were used in a variety of ways. Representative Stapp referenced the AKLNG [gasline project] and remarked that workforce development was a big challenge. He was a bit disappointed that he did not see any movement in the proposal regarding gearing up for workforce development needed to fulfill jobs associated with the project that he hoped would begin shortly. He specifically mentioned STEP to the Fairbanks Pipeline Training Center (FPTC). He did not see the center listed as a STEP grant recipient. He remarked that if the state was serious about the project, it should be the number one priority to devote resources to the training center because most of the workforce for the pipeline would come from there. He asked for the commissioner's thoughts. Commissioner Munoz answered that FPTC was a wonderful facility that provided fantastic short-term training in welding and other. The center was added to the TVEP program the prior year. There was limited STEP grant funding of about $6.5 million. The department had a proposal for the legislature to consider that would significantly increase the funding. The department hoped the money would go to support programs like the FPTC and to provide individual training support through the job centers. Representative Stapp stated that the center used to be a hefty recipient of STEP grants. He saw the proposed funding change for STEP grants, but he was concerned the legislature had no say over the grant participants. He stressed that if AKLNG was on the horizon, the state was facing a very serious workforce challenge that would require targeting the vast majority of the state's resources into pipeline training trade jobs. Otherwise, he believed the state would miss out on capitalizing on a great opportunity. Commissioner Munoz believed FPTC received over $1.5 million through TVEP and its previous STEP grant was $400,000. The center's training funding increased by over $1.2 million in one year. She relayed that the department had limited funds and was trying to ensure programs and individuals throughout the state were benefitting from the funding. The department had a major proposal before the legislature that she would love to talk to legislators about. The proposal would help and subsidize programs like the pipeline training center. Additionally, the late U.S. Senator Ted Stevens included a $20 million appropriation many years back for FPTC that was contingent on a final investment decision. She elaborated that it was close to the point where the U.S. Secretary of Labor could release the funds once the final green light on the project was given. She stated that the funds would go directly to FPTC. 1:55:24 PM Co-Chair Josephson stated it was fantastic news he had not been aware of. He referenced a gasline caucus meeting he attended the previous summer where the commissioner and her team had presented. He remarked that the state wanted to do all it could for current Alaska residents, but he recalled hearing there would be around 10,000 workers needed for the entire pipeline project. He noted that the state did not have that capacity. He believed it was a fact there would be many people moving to the state [to do the work]. Commissioner Munoz replied that the department's primary focus was on getting Alaskans trained and employed with the economic opportunities on the horizon. The department recognized it would be necessary to import some labor for the work. The department was looking at its policies to ensure there were no barriers in its certification process. Particularly related to electricians and plumbers because DLWD had purview over certification of those professions. The department had done a number of things to encourage easier certification for qualified workers to work in Alaska. Representative Hannan referenced Commissioner Munoz's mention of industrial electricians and plumbers. She asked for verification that AVTEC still produced residential plumber and electrician certifications. Commissioner Munoz answered that a plumbing pathway for certification was 4,000 hours for residential and 8,000 hours for commercial. She noted it was a four-year apprenticeship whether a person was going for 4,000 or 8,000 hours and the training provided by AVTEC was equal to one year of an apprenticeship. Representative Hannan remarked that her nephew is an AVTEC alumni and was busy every day working. Commissioner Munoz replied that the department was very proud of the work taking place at AVTEC. She encouraged members to visit the program. She detailed that the teachers were experts in their fields, typically coming in toward the end of their careers and wanting to give back. 1:58:17 PM Representative Galvin stated her understanding the governor was requesting to move the STEP program from the numbers section to the language section [of the budget], which would allow for additional funding without legislative action. She believed the request would result in a net increment of just over $800,000. She noted that the governor was also requesting $1.4 million to maintain worker's compensation operations. She asked if the change was because DLWD was looking for more flexibility in how the dollars were spent or if the department needed to move funding more quickly. She asked about the intent behind the proposal. Commissioner Munoz responded that the department received quarterly estimations on what its tax revenue would be coming in through the employment security tax program. Due to fluctuations in the economy, the unemployment rate, and growth in wages, the amount could grow more than anticipated in a year. She explained that when it happened, the department wanted the flexibility to be able to get the surplus money out to training providers in order for more Alaskans to benefit from the money. Representative Galvin asked if the department had been unable to cover its needs in the recent past. She asked if it was the reason for the proposed change. She asked if the department wanted the flexibility to use potential surplus funds immediately when they became available. Commissioner Munoz answered affirmatively. She explained that there were many more applications for competitive grants and requests for individual training support through DLWD's job centers than funding available. 2:00:48 PM Representative Bynum expressed appreciation to the department for its work and wanted to see more of it. He noted he would save some of his questions about pipeline development, the K-12 system, and training opportunities for the subcommittee process. He referenced Commissioner Munoz's mention of people being able to donate and receive tax donations. He asked if the department had looked into a way to leverage the new program the governor had opted the state into through the scholarship granting organizations for this particular purpose. Commissioner Munoz replied that she was most familiar with the current educational tax credit program and AVTEC had been the beneficiary of the opportunities. She noted that the university also received educational tax credit donations. She would have to follow up on the question. Representative Bynum thought it was a tremendous opportunity for the state. He noted that it was new, so he did not expect the department to already have something lined up. He noted that the Alaska Industrial Development and Export Authority (AIDEA) had recently entered into an agreement in his district. He detailed that AIDEA was working in the Ketchikan shipyard, a state-owned facility. He explained that work development and creating jobs had been a priority for the facility and recently the operator JAG Marine Group had come in and was making tremendous opportunities for growth in jobs. He noted that a growth in jobs meant there was a need employees. He elaborated that AIDEA recently entered into an agreement with JAG Marine Group and Generation Southeast Vocational Center located in Juneau and Prince of Wales to create a pipeline of skilled work. He asked if the department was working to align with trades to have partnerships. 2:03:40 PM Commissioner Munoz highlighted the maritime partnership between AVTEC and the University of Alaska Southeast, which was named a maritime center of training excellence by the U.S. Department of Transportation. There were great opportunities for Alaskans to get excellent maritime training through the university and AVTEC in state. Additionally, she had recently been on Prince of Wales Island with the AVTEC director, and they were working with the local director on articulation agreements that would allow individuals who had completed a program at Prince of Wales to articulate into AVTEC to enable quicker educational advancement. Representative Bynum lauded all of the people involved including AIDEA. He remarked that AIDEA executive director Randy Ruaro was doing a phenomenal job ensuring those things were thriving in his community. He understood there were opportunities statewide. He was excited about the working partnerships. He appreciated the work by the department to make sure the positive opportunities continued. Commissioner Munoz replied that as a fellow Southeast resident, the department was very pleased that the shipyard was running with a new operator. 2:05:25 PM Mr. DeBartolo addressed slide 4 showing the department's organization and mission delivery. The department had six major divisions. He noted that the commissioner had mentioned seven divisions earlier because sometimes the Alaska Workforce Investment Board (AWIB) was thought of as a division, but it was technically part of the commissioner's office and Administrative Services Division. The slide depicted the department's FY 27 budget as a function of its mission to provide all Alaskans safe and legal working conditions and to advance opportunities for employment. He detailed that 10 percent of the DLWD budget went to leadership and support including the commissioner's office, the Administrative Services Division, fiscal functions, human resources, and the Labor Market Information Unit responsible for research analysis. Next, 15 percent of the budget went to the protection of workers including workers' safety, licensing, and compensation functions. Mr. DeBartolo continued reviewing slide 4. He detailed that 18 percent of the DLWD budget went to income replacement including unemployment insurance and disability determinations. The largest portion of the department's budget - 57 percent - went to workforce development including vocational rehabilitation services, job centers, technical vocational education programs in Seward, and training grants to individuals and organizations throughout the state. 2:07:44 PM Mr. DeBartolo turned to slide 5 titled FY 2026 - Current Year Implementation Status." He highlighted AVTEC and the expansion of the industrial electricity program and plumbing program. He relayed that the prior year, the legislature granted DLWD a supplemental in the amount of $660,000 and an increment of $182,000. The department had requested an accelerated timeline to expand its industrial electricity lab from 15 seats to 30 seats. He noted that ordering and installing the equipment and expanding the space would take time. The department appreciated the funding and he confirmed that all of the purchases had been made. He briefly pointed to several photos on slide 6. The upper lefthand corner showed the target building for the expanded industrial electricity program. The photo on the right showed current remodeling efforts; it was not yet ready for the labs due to some delays, but things were moving forward. The center photo showed the temporary home for the industrial electricity lab. The program was currently using the additional heavy diesel space in Seward. Eventually the program would move into the new building currently under progress. There was high demand, particularly for the industrial electricity program. The department was proud of the direction of the work. Mr. DeBartolo returned to slide 5 and highlighted item 3 pertaining to AWIB. He relayed that Catholic Community Services had administered refugee support services funds for quite some time and the current federal administration communicated that it wanted the services to be a state responsibility. The state was still allowed to parter with CCS, but the funds had to go through a state entity. The previous year, DLWD requested $3,100,000 in additional federal authority. The funding had not yet come through, partially due to machinations at the federal level with budgeting. When the funding came in, the department would be required to do an annual report and work with its partners on helping refugees benefiting from the funds. Mr. DeBartolo continued reviewing slide 5. The department was asked to mention some of the items that were not funded the previous year. He highlighted the Alaska Safety Advisory Program, formerly called the Alaska Safety Advisory Council (ASAC). He relayed that Labor Standards and Safety used to help ASAC put on the Governor's Health and Safety Conference. He elaborated that volunteer private sector partners and individuals helped do some of the roles associated with ASAC. Through the governor's Executive Order (EO) 135, the duties were put into Labor Standards and Safety. The department requested $290,000 to support two positions to run the new functions under the EO and the Governor's Health and Safety Conference, but the items were not funded. Consequently, the division was collecting fees from vendors to run the conference. He noted that the department could not let the money go unspent. The division currently lacked the capacity to do the other functions under the EO. 2:12:12 PM Co-Chair Josephson asked if the request was repeated in the FY 27 budget. Mr. DeBartolo replied that the department did not request the funding in the FY 27 budget. He continued to review slide 5. He looked at item 5 pertaining to mechanical inspection. He detailed that at the end of May 2024, SB 204 was rolled up with a number of other bills after the conference committee had completed its work on the budget; therefore, a fiscal note was not attached to pay for a portion of the mechanical inspection support for the Certificate of Fitness (COF) program. The department requested $58,000 in FY 26 for the item, but it was not approved. The program was moving forward, but as the department modernized its systems, the gaps in funding and reduction in collection of fees was making it harder to pay for maintenance of the systems. He noted it was a concern going forward. Commissioner Munoz clarified that the referenced legislation took the training certificate from two years to six years. She explained that occasionally, more often than the department liked, an individual came to the department with their training hours ready to sit for the journeymen test, but it could not take the hours that occurred on a lapsed certificate of fitness. The department determined that a solution would be to take the certificate from two years to six years in order to avoid the situation. However, making the change resulted in lost revenue because the certificates were not occurring every two years. Representative Hannan asked how it had impacted keeping mechanical inspectors certified to work without the $58,000. She asked if the number of certificates being given had slowed down, if people were still pending, or if the department had been able to cover it with money from somewhere else. Commissioner Munoz replied that they were extremely busy. She relayed that COF were way up and the department issued over 400 journeymen certificates and over 400 trainee certificates in the previous year. She stated it was a busy shop that was running on a shoestring. 2:15:06 PM Representative Hannan stated that most of the state's professional licensure programs eventually paid for themselves by design. She highlighted the Board of Nursing as an example. She asked if the $59,000 gap was permanent. Alternatively, she asked if the fees would eventually increase so a six-year certificate would pay for the balance. Commissioner Munoz replied that the goal would be to increase by a nominal amount at the journeymen level. She thought it could be used to cover the particular gap. Mr. DeBartolo reviewed item 6 on slide 5 pertaining to workers' compensation. The Stay at Work (SAW) program passed in May of 2024 and the fiscal note that would have funded the position to get people back to work coming off of injuries was not funded. The department requested the funding in the FY 26 budget, but it was not approved. He relayed that Workers' Compensation was operating at a 30 percent vacancy rate. The division was covering the work as well as it could, but it was a difficult situation. 2:16:40 PM Mr. DeBartolo advanced to slide 7 titled "FY 2027 Fund Source Allocation by RDU." He highlighted that the department's total reliance on unrestricted general funds (UGF) was fairly low compared to other departments (reflected by the blue portion of the six pie charts on the slide). He stated that the department was fourth overall. He noted that he would cover a one-time request for FY 27 on an upcoming slide that raised the percentage for Workers' Compensation. He provided a breakdown of the department's budget by fund source: federal funding accounted for 50.5 percent, designated general funds (DGF) accounted for 27.5 percent, UGF accounted for 13 percent, and "other" accounted for 9 percent. Mr. DeBartolo turned to slide 8 titled "FY2025-2027 Operating Budget Comparison." The major change between FY 25 authorized and FY 27 governor was largely the one-time UGF request. Most of the increases were due to contractual salary increases, health benefit changes, and the change to the TVEP program (which increased DGF). He moved to slide 9 and reviewed the department's operating budget request. He noted that the statewide items associated with the information technology (IT) classification and the transferring of positions out of the Department of Administration (DOA) were not represented on the slide because the slide only reflected DLWD items. The first and second items on the slide were related to the STEP appropriation to the language section of the budget. He explained that having the appropriation in the language section would allow the department to provide funding to training providers needing funds late in the fiscal year. Mr. DeBartolo explained that STEP was a competitive grant program and the department did not get to direct the funding anywhere it wanted. He stated that applicants were not all awarded funds. He elaborated that language would allow DLWD to go to the Office of Management and Budget (OMB) or Lennon Weller, the department's actuary would inform the department that it had approximately $900,000 or $1.1 million additional STEP funds. The department could ask OMB for the adjustment in language and OMB could grant the authority in order for DLWD to get the funds on the street as soon as possible. He noted that the method had worked well for TVEP. He clarified that the AWIB competitive grants went to organizations and the Workforce Services grants went to individuals. Mr. DeBartolo addressed item 2 on slide 9 for Workers' Compensation. He relayed that the component was the department's largest request for the FY 27 budget. The department requested $1.4 million to shore up the Workers' Safety and Compensation Administration Account (WSCAA). Typically, Workers' Compensation was 99 percent funded by WSCAA from funds generated by employer workers' compensation insurance premiums. The department received 2.7 percent of the premiums redirected into the budget to run Workers' Compensation. He explained that Alaska had become safer as a state and premiums had dropped, which resulted in a drop in the percentage. He elaborated that at the same time, the department had contractually obligated salary increases. There had been a salary study for hearing officers that drove up personal services cost substantially, but revenue had been dropping. The department was requesting the $1.4 million UGF increment to cover operations in order to avoid a 30 percent vacancy rate in the coming year. 2:21:18 PM Representative Galvin referenced the item description for the Workers' Compensation component to maintain operations. She found it hard to connect maintaining operations with a one-time increment. She understood that insurance premiums had dropped because of improved safety. She did not understand how the funds could be one-time-only unless the maintenance pertained to one-time projects. She asked for additional detail. Mr. DeBartolo replied there were several options. He explained that the one-time increment would give DLWD time to workshop its options. Alternatively, the department could request an ongoing UGF increment, but that was challenging in the current [financial] environment. The department had chosen not to request an ongoing increment in hopes it could find the best path forward. Representative Galvin was interested in more details on how the WSCAA was spent previously and how the $1.4 million would be spent in the coming year. She referenced Mr. DeBartolo's mention of a 30 percent vacancy rate, and she imagined the department had previously been able to cover the cost. Mr. DeBartolo replied that in 2021 WSCAA had a balance of ~$2.2 million that was typically returned to the account via the reverse sweep process. Once the funds were swept, the account no longer had a buffer. He explained that the department looked at the likely FY 27 costs and asked for a portion of the amount to cover operations through the year instead of asking for the entire $2.2 million. Commissioner Munoz was interested in more detail on how the $1.4 million would be spent. She wanted to support the department's work and thought the information would help committee members when making budget decisions. Co-Chair Josephson believed the $1.4 million was used to maintain the [Workers' Compensation] division. Commissioner Munoz responded affirmatively. Co-Chair Josephson stated his understanding that the funding was used to keep the lights on, employees paid, and the commission functioning. Mr. DeBartolo confirmed that the funding would cover basic operations including payroll. The department would love to get positions filled and to pay individuals for hearings and related support. Commissioner Munoz offered to follow up with a budget breakdown for the Workers' Compensation Division and how the funds would be used specifically. She reiterated Mr. DeBartolo's statement that the WCSAA was swept several years back, and the funding was not returned, which created a hole in the division's budget. The department had been able to float the gap for a year, but it could not do it for the coming year. The money was needed to pay for the division services. Co-Chair Josephson explained that for decades after the Constitutional Budget Reserve (CBR) was created there was a reverse sweep vote [by the legislature] and at 12:01 a.m. on July 1 the money went back [from the CBR into the original accounts]. He detailed that about four or five years ago the process broke down. He added that he had a bill designed to increase the compensation premium to increase DGF. 2:26:44 PM Representative Stapp asked about moving the STEP grant appropriation to the language section of the budget. He asked if it was due to the multiyear nature of the grant money. Commissioner Munoz replied that was because of the fluctuation in revenue received by the department based on tax revenue. She explained that the department may project a certain amount but when the quarter was accounted for it may receive additional revenue due to changes in the economy, unemployment, wages, etcetera. Representative Stapp asked how STEP grant awardees were selected. Commissioner Munoz replied that AWIB reviewed applications in a competitive grant process. The maximum amount awarded was $400,000 in the current framework. She believed there were 27 grantees in the current year. Co-Chair Josephson asked for verification that it was not fixed in statute like TVEP. Commissioner Munoz agreed. Representative Hannan asked how many positions a 30 percent vacancy represented within Workers' Compensation. Mr. DeBartolo replied that it was currently 13 positions. Representative Hannan asked for verification that 13 positions were vacant. Mr. DeBartolo replied affirmatively. Representative Hannan recalled that in 2021 several funds that had never been considered sweepable in the past were suddenly swept and by 2022 there were some new OMB and legislative agreements that the funds were not sweepable. She asked if the WSCAA fund was now on the list of funds that were not considered sweepable because the funds were collected from payers. She asked for verification that WSCAA was not UGF and was made up of workers' compensation. Mr. DeBartolo replied it was considered a DGF fund. The department received the funds and was allowed to spend them up to its allocation. However, the determination about whether a fund was sweepable occurred between the Department of Law and OMB. He explained that the fund had been determined to be sweepable. 2:29:48 PM Co-Chair Josephson shared that he had been involved in legislation pertaining to the reverse sweep that did not pass and his office had studied the issue. He stated his understanding there were individuals paying a premium tax into WSCAA. He noted that the funds originated from a business. He asked if the dollars were going into the CBR annually. Mr. DeBartolo confirmed that if there was a sweepable balance in WSCAA at the end of a fiscal year, the funds would be swept. The largest amount occurred five years back. More recently, there had not been sweepable amounts and the department had to cover Workers' Compensation operations with whatever it could scrape together in the past year. Co-Chair Josephson had always thought it was a lawsuit waiting to happen because he wondered why private businesses were paying for the CBR. He asked about the nexus and stated, "I don't get it." Representative Hannan recalled that prior to 2021, the WSCAA fund was so healthy the legislature discussed increasing benefits to people receiving workers' compensation because Alaska was far behind and the rates had not increased in a number of years. She remarked that if the fund was swept, there was no room for increasing benefits to people. She asked for verification that the $2.1 million DGF swept in 2021 that came from Alaskan businesses to be held for Alaskan employees injured on the job had gone into the CBR as if it was UGF due to "the politics of this weird business." Commissioner Munoz responded affirmatively. Co-Chair Josephson clarified that the funds were not payments to injured workers but were used to operate the division. Mr. DeBartolo confirmed that it was operational funding for work done in Workers' Compensation. Co-Chair Josephson stated, "Same, same." He remarked that it still did not justify the sweep. Commissioner Munoz agreed that the money that flowed into WSCAA was from a fee into on Workers' Compensation policies. The fee went into WSCAA, which funded the division to pay benefits and maintain a worker's compensation system. 2:32:57 PM Mr. DeBartolo concluded the presentation on slide 10 titled "FY2027 Estimated TVEP Distribution." He explained that when TVEP was reauthorized, it was in statute that the recipients listed on the slide received the percentages listed on the slide. There was no discretion for the department other than looking at the amounts available. The department held $250,000 in reserve in case there were fluctuations in the available funds at the time of distribution. The remainder of the funds went towards program administration and recipients. He clarified that STEP funds were competitively granted through AWIB or individuals in DETS [Division of Employment and Training Services]. Commissioner Munoz returned to an earlier question by Representative Stapp and relayed that the Fairbanks Pipeline Training Center received $1.7 million in new revenue through the program. Co-Chair Josephson thanked the presenters. 2:34:38 PM AT EASE 2:37:36 PM RECONVENED ^PRESENTATION: STATEWIDE 2026 JOBS FORECAST and UNEMPLOYMENT FINANCING METRICS BY THE DEPARTMENT OF LABOR and WORKFORCE DEVELOPMENT 2:37:52 PM KARINNE WIEBOLD, ECONOMIST, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, introduced herself. LENNON WELLER, ECONOMIST AND ACUTARY, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, highlighted that DLWD produced an annual actuarial publication that went into depth on metrics dealing with the financing of the unemployment insurance (UI) system, which was available on the department's website. He introduced a PowerPoint presentation titled "Unemployment Insurance Overview and Jobs Forecast," dated January 28, 2026 (copy on file). He began on slide 2 showing a chart of the Unemployment Insurance Trust Fund balance in blue, benefit costs in red, and net UI tax contributions (from employers and employees) in green from FY 02 to FY 25. He detailed that benefit costs and contributions tended to run counter to one another. He elaborated that benefit costs rose under periods of heightened unemployment. The system was designed to recoup the costs with increased tax rates and net contributions should respond in kind. He highlighted that in the past several years post-COVID-19 the closing balance of the fund was becoming a growing concern. The fund bottomed out at just under $300 million in early to mid- 2021. Since that time, the fund gained almost $500 million; the current balance was $819.5 million. Co-Chair Josephson asked if Mr. Weller's concern was that the funding was unused. Mr. Weller responded that primarily there was a disconnect between the benefits being paid out and the current financing structure and its ability to respond to the varying level of benefit costs. Mr. Weller turned to slide 3 titled "Average Benefit Cost Rate and UI Trust Fund Reserve Ratio." The slide showed the balance of the fund and benefit cost as a percentage of wages covered, which he believed was a better way to view the information compared to slide 2. From a financial perspective, as wages changed in the economy, it was desirable to keep a certain percentage of that in reserves. He stated that while the fund balance and benefit costs fluctuate, the linkage [between the two] had broken somewhat. He highlighted that the most severe economic recession since statehood occurred in the 1980s and benefit costs had reached nearly 4 percent in the late 1980s. He noted that the benefit costs during COVID-19 barely exceeded 2 percent. He pointed out the precipitous decline in benefit cost rate (benefits paid as a percentage of wages in the economy) in the 2000s, with the exception of the COVID-19 period. The increase in benefit schedules was another reason for blips upward in benefit costs. The long term trend was a decline in benefit costs. There was a growing UI trust fund balance since the early 2010s irrespective of the benefit costs falling. He elaborated that the pandemic brought the reserve down, but the reserve ratio never dropped below about 2.5 percent, which was still quite significant. 2:44:35 PM Representative Hannan asked if the benefit costs were set in statute or tied to the earnings of the job a person had lost. Mr. Weller answered that it was technically both. He elaborated that a schedule set in statute looked at wages and a corresponding benefit amount related to the specific wage level. The schedule started at a $56.00 benefit at $2,500 in base period wages (roughly an annualized period of wages). He detailed that every $250 in wages increased the benefit amount by $2.00 up to a weekly maximum of $370, not accounting for any dependent allowances. The $370 maximum was reached at a base period wage of $41,750. Representative Hannan remarked that the state had increased its minimum wage, so in theory the benefit should increase; however, if a maximum was set in statute it did not matter if a person's earnings rose. She asked if there was a presumption that people losing their jobs were not attempting to claim their benefits in Alaska and instead they were leaving the state because for $370/week they could not afford to stay in Alaska. She asked if the presumption was too speculative. Mr. Weller replied that it would be understandable to recognize that the longer a benefit schedule had a fixed amount while wage rates were simultaneously increasing the more severe the repercussions would be. He would not speculate what specifically may result from the interaction. The data showed a continued decline in claims loads, which in part indicated that the benefit schedule was not sufficient and had been eroded in real terms. He highlighted that the last time it was adjusted was 2009. Representative Hannan summarized that the maximum benefit was set at $370 in 2009 and it remained at that level in 2026. 2:48:20 PM Representative Tomaszewski suggested that the UI percentage could be shown as another line on the graph [on slide 3] to show for example that if the state was fully employed there were more people contributing into the system. He referenced the UI rate deducted from state employees' paychecks. He wondered if the rate had increased. He observed that between 2011 and 2019 the fund balance was steadily increasing, followed by a significant decrease during the pandemic and a dramatic increase after that. He asked if the dramatic increase was a result of more people working and fewer people collecting benefits or if the UI rate had been adjusted. Mr. Weller replied it was a combination of several things. He noted that the increase had been seen in previous periods, but it was at a different magnitude post-COVID. The goal was to have a pre-recessionary target for the fund between 3 and 3.3 percent of wages. When it was within the range, there were no solvency adjustments applied to tax rates. When the number was above 3.3 percent, the department started implementing credits to bring the entire tax schedule down. When the number was below 3 percent, the department started adding on surcharges. With respect to the base rate, the department looked at the most three recent years of state fiscal costs for the system against a staggered three of the most recent four years of wages covered. Mr. Weller clarified that it resulted in an average benefit cost rate over a three-year period, which became the base of which rates charged to employers and employees. He elaborated that 73 percent of the benefit cost rate was applied to employers and the remaining 27 percent was applied to employees. The resulting rate was based on what 73 percent of the cost rate was and wherever the fund balance fell. He noted there was one large caveat. There were statutory minimum tax rates: 1 percent for employers and 0.5 percent for employees. Once the fund balance had recovered post-COVID with a 3 to 3.3 percent reserve ratio and benefits continued to fall (especially as a percentage of wages covered), the 1 percent minimum floor was hit. He explained that the system had lost its ability to adjust to costs and where the balance was and to allow tax rates to be reflective of the specific cost. 2:52:42 PM Representative Tomaszewski thought it looked like the employer tax rate was increased in 2021/2022 and dropped back down. He observed that the employee tax rate had remained steady. He remarked that there had been accelerated growth in 2021/2022. He considered the department's ability to make adjustments by 3.5 percent. He asked if there was a chart or graph showing the information. Mr. Weller clarified that the solvency adjustment was in statute. The department was required to go by an explicit calculation and to determine the solvency adjustment if necessary. The department did not have the discretion to make it a specific value. He explained that it was based on where the value of the fund was relative to the desired outcome. The difference, by statute, was applied to the final rate. He could follow up with more specifics if needed. He noted that the presentation would address the average tax rates and a rundown of the latest 2026 tax calculations. Representative Tomaszewski imagined Mr. Weller had future projections for the fund balance if no levers were changed. He asked if the department would come forward with specific rate adjustment recommendations for the legislature to consider. Mr. Weller believed there were a couple of proposals to try to rebalance the UI financing system. He did not personally have a specific proposal. Representative Tomaszewski asked about future growth projections. Mr. Weller responded that he produced internal projections continuously on the direction of the fund and expected benefit costs and tax rates. Co-Chair Josephson referenced Mr. Weller's testimony that for the past 17 years the highest weekly benefit payment in Alaska was $370. He asked for verification that the benefit exceeded $1,000/week in Washington state. Mr. Weller believed it was around $1,300 a week in Washington. He noted that every state had its own way of adjusting its benefit schedules or calculating the benefit amount. Co-Chair Josephson asked if Washington state was one of the highest. Mr. Weller replied that he believed it was one of the highest. He noted there were a handful of states that indexed their maximum benefit amount. He highlighted Hawaii as another state with a fairly significant maximum benefit. Alaska's benefit amount ranked somewhere towards the bottom. Co-Chair Josephson asked if part of the reason Alaska's benefit was so low was due to its hybrid system that involved retraining and pivoting to different career paths. Alternatively, he wondered if other states did the same. Mr. Weller responded that while the unemployment system was a joint federal/state system, it had led to a 50 state experiment where nearly every state chose its own method of how to finance the program and the type of benefits to provide. He noted that most states had seasonal disqualifiers but may provide a higher weekly benefit amount. He stated there were all sorts of things to tradeoff, but they were all legislative policy calls. 2:58:29 PM Mr. Weller turned to slide 4 titled "Average Employer Tax Rate and Uniform Employee Tax Rate." He stated that there were 21 tax classes, 20 of which were experience rated. Rates varied from 1 to 20 with 1 being the low experience and 20 being the highest rate class. The average rate classes were 10 and 11 reflected as the blue portion of the bars on the graph. The average rate had been brought down to 1 in the past several years; in 2026, all 20 classes were at the 1 percent minimum. He noted that the uniform tax on employees was not subject to experience rating, they all just received the same rate. The rate very infrequently came off of the minimum .5 percent, partially a result of the share. He elaborated that 27 percent of the cost rate ended up being under .5 percent. He pointed out that for at least the past three years, employers and employees were paying the statutory minimum. Mr. Weller moved to slide 5 titled "Average Weekly Benefit/Average Weekly Wage." He explained there was a long-term downward trend in the average weekly benefit/average weekly wage ratio, with the exception of labor market shocks and/or in combination with a benefit increase. The ratio reflected the replacement rate, which was currently just over 22 percent. He detailed that the state was currently replacing on average 22 cents on the dollar in lost wages. He highlighted that increases in the ratio on the graph reflected a combination of a labor market contraction, but the largest increase was in 2009 when the new benefit amount was changed. Since that time, there was a consistent downward trend in the ratio. He considered what it meant for the program in terms of individuals filing. 3:01:21 PM Mr. Weller moved to slide 6 titled "Recipiency Rate." He noted that the graphs on slides 5 and 6 used data from the [federal] Employment and Training Administration (ETA) because it was comparable across all 50 states. He explained that the recipiency rate reflected the regular benefit claimants collecting as a percentage of the total estimated unemployed in a given period. The data showed a long-term downward trend in the number of employed individuals filing for and collecting benefits. The rate was at a historic low of about 22 percent. Representative Galvin referenced the $370 maximum benefit amount [in Alaska]. She highlighted maximum benefits provided in other states including Washington at $844, Oregon at $673, Hawaii at $639, and Wisconsin at $370. She remarked that many were twice the amount received in Alaska. She noted that Mr. Weller had mentioned the rate had not been changed since 2009. She asked if it was strictly a policy call for the legislature. She wondered if there was some other mathematical formula that Mr. Weller may advise the committee to consider. Mr. Weller replied there were suggested replacement rate metrics that were nationally recognized. He stated that 50 percent was a rate that was spoken about frequently. He reiterated his earlier statement that every state had its own method of calculating the replacement rate. There was an infinite number of ways to go about determining the rate on an average basis, at the top of the schedule, and at the bottom of the schedule. He stated that 50 percent tended to be the general recommended replacement rate to enable a person to meet basic needs in order to get from one job to another, but to avoid creating a disincentive for a person to return to work. He noted there were more robust methods to determine what the ideal number may be, but it was a policy call. Representative Galvin asked how long a person on unemployment received the weekly benefit. Mr. Weller replied that the information was not included in the presentation. He relayed that the minimum duration was 16 [weeks] and the maximum duration was 26 [weeks]. He explained it was dependent on the person's pattern of employment. The more consistent long-term duration of employment led to a longer qualifying duration. The more sporadic the employment, the shorter the qualifying duration. Representative Galvin referenced the solvency of the fund and ensuring the state was dispersing an adequate amount. She stated her understanding that the things to consider were the maximum benefit and the length of time. She asked if there was any other consideration the legislature may need to look at. She asked what the fund balance should be in order to get through a recession or pandemic. Mr. Weller answered it was necessary to balance the state's ability to absorb the costs with the desired benefit payment. The state could finance any program it wanted, but it had to be willing to accept the accompanying tax rates. There were many different levers and ways to rebalance the system. He reiterated it would be up to the legislature to decide. Co-Chair Josephson asked for confirmation that the timeframe provided by Mr. Weller was 16 to 26 weeks. Mr. Weller answered affirmatively. The minimum number of weeks a person could qualify for was 16 and the maximum number was 26 on a regular benefit claim. 3:07:39 PM Co-Chair Josephson asked about a situation where an employee was only employed for two months. Mr. Weller answered that a person would not qualify for unemployment if they were only employed for a couple of weeks in a year. He elaborated that an individual was required to have at least $2,500 in wages in a year and at least $250 outside of their highest quarter of earnings. He explained that a person had to have wages in two quarters and a minimum amount of wages to earn in order to qualify. At those levels, a person would likely qualify for the 16- week minimum. He noted that a person could opt to apply for benefits for any number of weeks within that time period. The shorter a person's duration of work and the lower the wage would result in a shorter duration of benefits. The more consistent a person's wage was over time, the longer their eligible duration of benefits. Representative Bynum asked if the department tracked whether a person who collected unemployment benefits became reemployed or left the state once their benefits ceased. Mr. Weller replied affirmatively. He relayed that the department tracked when an individual returned to work via payroll records to determine the reemployment rate. The department did not necessarily know why a person may stop filing [for benefits]. He shared that the department also tried to look at reemployment services aiming to place individuals in more lucrative and stable employment. The department did not necessarily know when a person ceased filing for benefits. He explained that the subsequent quarterly wage records were needed in order to know. He added that it was for Alaska only. There were a fairly significant number of interstate claims by individuals who earned wages in the state and subsequently left and filed from outside the state. There was much less information on those individuals once they left the state. He noted that if they returned, the department could compare the individuals over time. The department periodically conducted more longitudinal analysis on repeat filers. 3:11:56 PM Representative Bynum thought it would be interesting to see the data from the perspective given the seasonal nature of many industries in Alaska where someone was employed for stretches of time and unemployed for periods of time due to the nature of the business. He stated it would be nice to know whether a person was staying in Alaska or leaving the state and coming back, following the cyclical nature of the business. Mr. Weller moved to slide 7 and addressed UI tax rate calculations for 2026. He highlighted that benefit costs were just under $41 million in FY 25. He stated that the most important elements looked at the average benefit cost rate shown on line 8, which was just under half a percent. He noted that the average benefit cost rate was split 73/27 employer/employee. The UI trust fund balance as of the end of September was used at tax calculation time by statute (shown on line 9). The reserve ratio was approximately 4.7 percent, which was significantly above the high water mark of 3.3 percent. He explained that it resulted in the need to apply the statutory maximum of 4/10. He pointed to the last two lines on the slide [lines 13 and 14] and stated that if the statutory minimum rates were ignored, the calculation using a solvency adjustment resulted in a negative tax rate for employers in 2026. He noted that under the scenario, employees would pay .12 percent. He explained that the financing system had lost its flexibility at these levels of benefit payout. 3:15:11 PM Ms. Wiebold reviewed slide 8 showing the statewide outlook for jobs in 2026 by industry. The first column on the slide showed the average annual employment in 2024, the second column showed the same information for 2025, the third column reflected the change between the two years, the fourth column showed the percent change, and the fifth column showed the division's forecast for 2026. The jobs forecast projected the oil and gas industry would be up by 1,000 jobs, construction would be up 700 jobs, and healthcare continued robust growth and was expected to be up 1,100 jobs. She noted that federal government jobs were expected to be down 400 jobs. She noted that she had written the forecast several weeks back and since that time additional information had come for 2025 showing that job losses were much steeper [than the 400 shown on the slide]. Co-Chair Schrage asked if the information was for 2026 and did not look forward. Ms. Wiebold replied that it was for 2026 and looked forward because it had been compiled in 2025. Representative Hannan asked Ms. Wiebold to repeat her last point related to a decline. Ms. Wiebold replied that after losing what the division believed to be 300 federal jobs in 2025, it projected the loss of an additional 400 jobs in 2026. When the division had compiled the forecast, it had been working with limited preliminary data. Based on additional information received by the division, she projected that federal job losses in 2026 would be much steeper. 3:17:27 PM Ms. Wiebold noted that 3,900 jobs were added in 2025 and 3,000 were added in 2026, reflecting a slowing in job growth. She moved to a chart on slide 9 showing that Alaska's job growth rate topped and then matched the U.S. The slide showed a decade of U.S. average annual job growth compared to Alaska. Alaska was represented by the dark purple line and the U.S. was shown as a dotted blue line. The slide showed that Alaska had underperformed the nation until fairly recently. She detailed that recently when Alaska's job growth slightly outperformed the nation it was more reflective of the national rate slowing than of anything Alaska was doing in particular. In 2025, the preliminary numbers showed Alaska and the U.S. growing at about 1.2 percent. The division was forecasting slower growth of .8 percent for Alaska in the coming year; the U.S. was also looking at slowing. Co-Chair Josephson asked if Ms. Wiebold worked with Dan Robinson. Ms. Wiebold responded affirmatively. Representative Galvin looked at slide 8 and referenced the oil and gas jobs rate. She asked how the specific job growth would contribute to the state's economy. She understood it would not necessarily contribute to UGF revenue because the state did not have an income tax. She wondered what the state may be losing with respect to the substantial decline in federal jobs. Ms. Wiebold answered that in some ways the answer was straightforward. The average wage was roughly $175,000 for oil and gas jobs and the department was forecasting the jobs to increase by 1,000. She noted that the oil and gas industry was heavily reliant on non-resident workers. She estimated that about one-third of the increased jobs would go to non-resident workers. She highlighted an article that she and her colleagues had written during the past summer looking at federal employment across Alaska. She relayed that federal employment wages varied significantly. She detailed that some of the highest paid workers were located at the U.S. borders outside of Skagway and Haines and some of the lowest paid positions were in rural post offices. There were about 15,500 federal employees in Alaska and the loss of 1,000 to 1,500 of the positions over the next two years reflected considerable losses. The state's relationship with the federal government extended past civilian employment. There was a strong military presence in Alaska with between 20,000 and 21,000 active duty troops. There were about 59,000 veterans living in Alaska, which reflected the highest percentage of veterans in the country. She added that the U.S. Department of Defense (DOD) also supported the largest group of civilian employees in Alaska at around 6,000 individuals. Additionally, there were numerous grant contracts through DOD and the university. 3:21:34 PM Representative Galvin asked if the department had data showing how many of the oil and gas jobs were filled with Alaskans versus out of state workers. Ms. Wiebold highlighted that the residency of Alaska workers report was coming out the following week, which was in depth and would answer the question. She stated that the ballpark was about 30 to 35 percent. Co-Chair Josephson asked if Ms. Wiebold had stated something about Skagway border customs workers. Ms. Wiebold replied that the border agents posted in Skagway and Haines were the highest paid federal workers in Alaska. Co-Chair Josephson was surprised to hear the information. Ms. Wiebold added that the highest concentration of federal workers was located in the Hoonah-Angoon Census Area. She asked members if they could guess why. 3:23:01 PM Representative Hannan replied, "U.S. Forest Service." Ms. Wiebold confirmed that it was due to Glacier Bay National Park. She elaborated that there were very few private employers located in the particular census area. She brought some copies of the department's federal jobs, forecast, and November fishing edition. Representative Hannan asked if it was still true that the Hoonah census area had the highest percentage of PhDs in the state. Ms. Wiebold responded that she did not know. Representative Hannan elaborated that it was because Glacier Bay National Park had a high number of PhDs who came to work and decided to stay. Representative Galvin asked about gender and wages. She asked if there was recent data around how much women made compared to men for the same job. Ms. Wiebold answered that she was responsible for writing the specific reports, which were fairly labor intensive. She typically wrote the reports several years apart in order to have an opportunity to hopefully see a period of change. The last report was several years old. She shared that she wanted to do a retrospective soon to see how the pandemic impacted men and women differently. The most recent analysis, apart from a small one on women in the construction industry, looked at how men and women went through the state recession differently. She relayed that the biggest improvement in the gender gap wage disparity occurred at the end of the recession; however, the recession disproportionately impacted high income men. She elaborated that oil and gas and construction jobs were taken out of the equation and men earned less money. She explained that women were not earning a whole lot more, but comparatively it looked good. She stated those were the types of things that were important to take into consideration when looking at what was taking place, what the drivers were, and whether or not the numbers were reflective of what economists hoped they were, which was some change in the overall conditions. 3:26:15 PM Representative Galvin asked when to expect the next more comprehensive study. Ms. Wiebold replied that there was not a set date yet, but she would provide links to the most recent studies. Co-Chair Josephson thanked the presenters. He reviewed the schedule for the following day. ADJOURNMENT 3:27:18 PM The meeting was adjourned at 3:27 p.m.