HOUSE FINANCE COMMITTEE March 11, 2026 9:06 a.m. 9:06:06 AM CALL TO ORDER Co-Chair Josephson called the House Finance Committee meeting to order at 9:06 a.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 Nellie Unangiq Jimmie Representative Elexie Moore Representative Will Stapp Representative Frank Tomaszewski MEMBERS ABSENT None ALSO PRESENT Alexander Schroeder, Staff, Representative Andy Josephson. SUMMARY HB 263 APPROP: OPERATING BUDGET;AMEND;SUPP HB 263 was HEARD and HELD in committee for further consideration. HB 265 APPROP: MENTAL HEALTH BUDGET HB 265 was HEARD and HELD in committee for further consideration. Co-Chair Josephson reviewed the meeting agenda. He explained that the committee would consider committee substitutes (CS) for both HB 263 and HB 265. He relayed that committee packets included the new proposed CS for both HB 263 and HB 265, the inline comparison document for HB 263, the redline comparison document for HB 265, summary of changes documents, agency summary totals (all funds), agency summary totals (UGF only), transaction compare documents, and a numbers only transaction compare document (copy on file). HOUSE BILL NO. 263 "An Act making appropriations for the operating and loan program expenses of state government and for certain programs; capitalizing funds; amending appropriations; making supplemental appropriations; making appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." HOUSE BILL NO. 265 "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; and providing for an effective date." 9:08:18 AM Co-Chair Schrage MOVED to ADOPT the proposed committee substitute for HB 263, Work Draft 34-GH2498\H (Marx, 3/5/26). Co-Chair Josephson OBJECTED for the purpose of explanation. He asked his staff to describe the changes in the CS. 9:09:01 AM ALEXANDER SCHROEDER, STAFF, REPRESENTATIVE ANDY JOSEPHSON, reviewed the changes in the CS. He read from prepared remarks: Before we begin, I would like to clarify for the record what is House Committee Substitute 2 (or HCS2). HCS2 refers to the combination of HB 263, version H, the operating bill) and HB 265, version G (the Mental Health bill). The Legislative Finance Division reports in members' packets today refer to both bills when tracking totals and item changes. Before the committee is a proposed committee substitute for HB 263: the Operating bill, work draft 34-GH2498|H. The only changes made between version G and version H are changes recommended in the subcommittee close-out reports. There were no alterations made to subcommittee recommendations, A few things worth noting: First, there were items approved by the subcommittees that impacted, and required coordination between, multiple agencies These include the following: • Elimination of the Shared Services of Alaska division and transfer of those functions back to the various agencies. This required approving transfer of 57 Permanent Full-Time positions to the agencies to support accounting functions, such as account payables, travel, and expense activities. Funding for these positions remained in the agencies during the original consolidation in FY18, so no funding accompanied the transfers. • Transfer of Payroll processing functions from Department of Administration back to agencies which requested to reclaim these functions. These Department's included Corrections, Fish and Game, Law, Military and Veterans' Affairs, Natural Resources, Public Safety, and Transportation and Public Facilities. The remaining agencies opted to continue with the existing centralized processing and oversight in DOA. • All Information Technology classification study implementation increments were approved. The total for those increments is $1.9 million UGF/$7.9 million all funds. The Second thing worth noting is, the Department of Fish and Game subcommittee recommended an increment of $400.0 UGF for Commercial Fisheries to supplant the Bristol Bay Science Research Institute Contribution to Port Moller. • The subcommittee narrative and close-out report for this department asked that a technical correction be made to change the allocation from Westward Region Fisheries Management to Central Region Fisheries Management. We have made that change in this committee substitute. • That is reflected in the document titled "House Subcommittee to HCS2 Numbers Only Compare." The Third thing worth noting is, the Department of Transportation and Public Facilities subcommittee accepted the Alaska Marine Highway System move from a calendar year to a multi-year structure. • However, because language sections were not under the purview of the subcommittees, the DOT subcommittee could only accept the removal of Alaska Marine Highway System funding from the numbers section with the understanding that the multi-year funding would be added to the language section later. • The committee substitute before you adds the multi-year language. Co-Chair Josephson asked for confirmation that Mr. Schroeder was referring to the version marked with a G that was crossed out and replaced with an "H". Mr. Schroeder responded in the affirmative. 9:12:52 AM Mr. Schroeder continued reading the remarks: • If you turn to pages 58, 59, and 60 of the inline delete sections 4, 5, and 6. These sections were the operating expenditures of the Alaska Marine Highway System in the numbers sections. • If you then turn to page 69, beginning on line 28, the Alaska Marine Highway System is restored to a multi-year operating structure. • Lastly, if you turn to the last page, page 84, you can see on line 18 that Section 35 is deleted. This section was the effective date for the previous calendar year structure for the Alaska Marine Highway System. That concludes my remarks on specific changes in version H. Now, I would like to take a moment to talk about overall fund totals. There are two useful ways to review agency fund totals in this committee substitute: • The first is the difference between HCS1 and HCS2. - HCS1 to HCS2 tells the reviewer everything that has been added above the adjusted base, including Governor's requests and subcommittee changes. • The second is the difference between Gov Amend and HCS2. - Gov Amend to HCS2 tells the reviewer specifically what the subcommittee changed with regard to the Governor's requests. Although statewide items are included in the Agency Summary documents in your packets, statewide items were not changed in this committee substitute. Therefore, I will ignore statewide items in the following fund totals. The net change between HCS1 and HCS2 for FY27 agency operations is the following: • An increase of $147,728,800 in Unrestricted General Funds • An increase of $8,123,100 in Designated General Funds An increase of $17,584,600 in Other State Funds • An increase of $415,289,700 in Federal Receipts Again, these fund totals represent the net change when taking together the Governor's amendments and the subcommittee recommendations to the adjusted base. The net change between Gov Amend and HCS2 for FY27 agency operations is the following: • An increase of $42,778,100 in Unrestricted General Funds • A decrease of $14,950,100 in Designated General Funds A decrease of $14,623,000 in Other State Funds • A decrease of $256,735,200 in Federal Receipts Again, this is the total fund change when comparing just the subcommittee changes to Governor's amendments. That concludes the differences between HB 263, version G, and HB 263, version H. 9:15:58 AM Co-Chair Josephson asked why there was a decrease of approximately $256 million in federal receipts. Mr. Schroeder responded that the governor's amendments submitted on February 18, 2026, included funding for the Rural Health Transformation Fund and added approximately $272,175,000 in federal receipt authority. He explained that the federal receipts had not yet been incorporated into the CS because there were no corresponding changes to the language section of the bill. Representative Stapp referred to page 10 of the redline version under K12 support. He remarked that the figure contained many commas and digits and it was difficult to interpret. He suggested that the figure might be a drafting error and asked whether clarification could be provided. Mr. Schroeder responded that the question might be better directed to the Legislative Finance Division (LFD). He noted that staff from LFD were not currently present in the room. Representative Galvin suggested that the figure might be easier to identify in a different version of the bill. She wondered if the number was listed in the same format under the Department of Education and Early Development (DEED) section. Mr. Schroeder responded that the figure might actually represent two numbers: one number that was an appropriation and one number that was a general fund total. He thought the numbers might appear to be "smushed" together. Co-Chair Josephson noted that Mr. Schroeder was correct and that the figure was two numbers. Representative Galvin clarified that the figure appeared on page 10 in the redline version. Co-Chair Josephson added it was on line 17. 9:19:37 AM AT EASE 9:20:09 AM RECONVENED Representative Stapp referred to page 14 of the redline document and noted that it contained lengthy intent language related to the Office of Children's Services (OCS). He asked for an explanation of the purpose of the language, particularly the portions directing reporting requirements for positions within OCS. Co-Chair Josephson asked Mr. Schroeder if the referenced language was wordage. Mr. Schroeder replied that the language had been added during the subcommittee process through a single amendment. The amendment included all of the OCS language referenced by Representative Stapp. He stated that the intent was to clean up the language in a future CS. Co-Chair Josephson noted that he had chaired the Department of Family and Community Services (DFCS) subcommittee and the language reflected testimony received by the subcommittee and the findings of three phases of an audit examining the operations of OCS. He noted that there had been concerns originally addressed through HB 151 [passed in 2018 by the Thirtieth Alaska State Legislature]. Some portions of the intent language had direct fiscal implications, while other portions focused on policy direction and oversight. The language expressed the subcommittee's concern about improving child placement outcomes and addressing workforce retention challenges within OCS. The language also sought to emphasize the seriousness with which the subcommittee viewed those issues. Co-Chair Josephson added that he interpreted Mr. Schroeder's remarks to mean that the intent was to include the language as it had been presented by the subcommittee to ensure that the subcommittee's work would be accurately reflected. He suggested that a future language amendment could make language clearer and easier to read. 9:23:23 AM AT EASE 9:23:57 AM RECONVENED Co-Chair Josephson WITHDREW the OBJECTION. Representative Allard OBJECTED. 9:24:10 AM A roll call vote was taken on the motion. IN FAVOR: Jimmie, Galvin, Hannan, Foster, Schrage, Josephson OPPOSED: Allard, Stapp, Moore, Tomaszewski, Bynum The MOTION PASSED (6/5). There being NO further OBJECTION, Work Draft 34-GH2498\H was ADOPTED. HB 263 was HEARD and HELD in committee for further consideration. 9:25:15 AM Co-Chair Josephson requested a motion on HB 265. Co-Chair Schrage MOVED to ADOPT the proposed committee substitute for HB 265, Work Draft 34-GH2502\G (Marx, 3/6/26). 9:25:43 AM Co-Chair Josephson OBJECTED for the purpose of explanation. He asked Mr. Schroeder to review the changes. Mr. Schroeder read prepared remarks: Before the committee is the proposed committee substitute for HB 265: the mental health bill, work draft 34-GH2502\G. A redline comparing HB 265, version I and HB 265, version G is included in members' packets. The only changes made between version I and version G are changes recommended in the subcommittee close-out reports. There were no alterations made to subcommittee recommendations. That concludes the differences between the HB 265, version I, and HB 265, version G. Co-Chair Josephson WITHDREW the OBJECTION. There being NO further OBJECTION, Work Draft 34-GH2502\G was ADOPTED. HB 265 was HEARD and HELD in committee for further consideration. Co-Chair Josephson reviewed the agenda for the afternoon's meeting, which included public testimony on both budgets. Representative Bynum asked for clarity on which budget the committee would hear public testimony. Co-Chair Josephson responded, "Both" [HB 263 and HB 265]. Representative Bynum asserted that the operating budget was incomplete and many elements still needed to be addressed. He asked if the public was expected to comment on items that were not included in the bill during public testimony. Co-Chair Josephson responded that the short answer was yes. He explained that members of the public could testify on whatever issues they wished to raise. He noted that the Senate often took public testimony several weeks before completing the detailed work that the committee was currently undertaking. He suggested that Representative Bynum was likely referring to issues such as education funding and the Permanent Fund Dividend (PFD), which were not addressed in the current version of the budget. Representative Bynum confirmed that those were the types of issues he was referencing. He explained that constituents often asked him for information on what was occurring during public testimony on the operating budget. He relayed stated that his current response to the public had been that the bill remained a work in progress and that much work remained to be completed. He suggested that constituents testify on their aspirations or priorities for what they wanted to see included in the budget, rather than only addressing the items currently contained in the bill, because the bill was incomplete. He asked if his response to the public accurately reflected the committee's expectations for public testimony. Co-Chair Josephson replied that the description was accurate, but added that members of the public could also testify on the provisions currently included in the bill, either in support or opposition. ADJOURNMENT 9:30:29 AM The meeting was adjourned at 9:30 a.m.