Legislature(2017 - 2018)SENATE FINANCE 532

02/22/2018 09:00 AM Senate FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Heard & Held
SENATE BILL NO. 168                                                                                                           
     "An  Act making  supplemental appropriations  and other                                                                    
     appropriations; making  an appropriation  to capitalize                                                                    
     a fund;  amending appropriations; and providing  for an                                                                    
     effective date."                                                                                                           
9:03:19 AM                                                                                                                    
Co-Chair Hoffman  informed the committee that  in past years                                                                    
the  supplemental  bill  had   been  incorporated  into  the                                                                    
capital  budget;  and  in the  current  year  the  committee                                                                    
intended  to   address  the  supplemental  bill   early.  He                                                                    
believed that addressing the bill  early was a positive move                                                                    
for the  agencies. He indicated that  an identical companion                                                                    
bill  was  expected  to  arrive  from  the  other  body  the                                                                    
following week.                                                                                                                 
Co-Chair  MacKinnon MOVED  to ADOPT  the proposed  committee                                                                    
substitute    for   SB    168,   Work    Draft   30-GS2781\D                                                                    
(Wallace/Martin, 2/20/18).                                                                                                      
Co-Chair Hoffman OBJECTED for discussion.                                                                                       
PETE  ECKLUND, STAFF,  SENATOR LYMAN  HOFFMAN, reminded  the                                                                    
committee  that supplemental  items  were  requested in  the                                                                    
governor's  original operating  and capital  budget requests                                                                    
on December  15, 2027. On  January 31, 2018 he  introduced a                                                                    
standalone supplemental  bill. He  noted that  the committee                                                                    
had  held  overviews  on  all  the  governor's  supplemental                                                                    
9:06:07 AM                                                                                                                    
Mr. Ecklund  addressed that the high  level figures included                                                                    
in the bill  were $67.7 million in all  funds, $49.5 million                                                                    
in  Unrestricted  General  Funds   (UGF),  $5.1  million  in                                                                    
Designated General  Funds (DGF), and $13.1  million in other                                                                    
Mr.  Ecklund addressed  the  spreadsheet  document "FY  2018                                                                    
Supplemental Bill" (copy  on file). He reported  that item 2                                                                    
was  in  the  amount  of  $453.5  thousand  for  the  Public                                                                    
Defender Agency.  He delineated that the  agency experienced                                                                    
a reduction in  Criminal Rule 39 fee  revenue, exceeding the                                                                    
ethical  number   of  maximum  caseloads.  The   funds  were                                                                    
necessary to  replace the  reduced program  receipt revenue,                                                                    
maintain  staffing  levels,  and  reduce  the  caseload.  He                                                                    
turned  to  the  item  3   for  $10,447.6  million  for  the                                                                    
Department  of  Corrections  (DOC),  Institution  Director's                                                                    
Office and  offered that  the funds  were necessary  to meet                                                                    
institutional shortfalls  from overestimating  the reduction                                                                    
in offender  populations due to  passage of SB 91  - Omnibus                                                                    
Crim  Law &  Procedure;  Corrections [CHAPTER  36  SLA 16  -                                                                    
07/11/2016]. He  highlighted item  4 amounting  to $10,341.5                                                                    
million  for DOC,  Institution Director's  Office. He  noted                                                                    
that the funding was needed  to meet increased inmate health                                                                    
care  costs.  He  reviewed  item 5  for  the  Department  of                                                                    
Environmental  Conservation  (DEC), Solid  Waste  Management                                                                    
for  increased Program  Receipt Authority  in the  amount of                                                                    
$35 thousand.  The department  increased its  fees effective                                                                    
October  27, 2017  and the  increased receipt  authority was                                                                    
necessary  to collect  the additional  revenue. He  moved to                                                                    
item 6  for DEC, Air  Quality for decreased  Program Receipt                                                                    
Authority in the  amount of $35 thousand.  He addressed item                                                                    
7  for the  Department  of Revenue  (DOR), Alaska  Permanent                                                                    
Fund Corporation  (APFC) Investment Management  Fees request                                                                    
of  $5   million  for  Investment   and  Custody   Fees.  He                                                                    
underlined  item  8   for  the  Legislature,  Administrative                                                                    
Services  totaling   $121.3  thousand  in   Program  Receipt                                                                    
Authority  and   Expenditure  for  Contractual   Lease  Cost                                                                    
Mr. Ecklund  continued with  item 13  for the  Department of                                                                    
Commerce,  Community   and  Economic   Development  (DCCED),                                                                    
Alaska  Reinsurance  Program that  was  a  repayment of  $25                                                                    
million from  Premera to the Reinsurance  Program. He turned                                                                    
to item  14 and noted  that it  was the only  capital budget                                                                    
item  in the  supplemental. The  item was  for DCCED  in the                                                                    
amount  of $8.125  million in  Statutory Designated  Program                                                                    
Receipts   for  the   Alaska  Energy   Authority  Volkswagen                                                                    
Settlement  that  represented  the state's  portion  of  the                                                                    
settlement for emission problems.                                                                                               
9:10:38 AM                                                                                                                    
Senator  von Imhof  observed that  item  13 corresponded  to                                                                    
Section  4 (a)  in  the  bill that  showed  the  sum of  $30                                                                    
million  versus  the $25  million  on  the spreadsheet.  Mr.                                                                    
Ecklund explained  that the  original appropriation  was $55                                                                    
million, and the current version  modified the amount to $30                                                                    
million, which was a difference of $25 million.                                                                                 
Mr. Ecklund  continued to  address the  Supplemental summary                                                                    
spreadsheet.  He turned  to item  15 for  the Department  of                                                                    
Education   and   Early    Development   (DEED),   Executive                                                                    
Administration  that  extended  a grant  for  Every  Student                                                                    
Succeeds Act  (ESSA) support  funding. The  request extended                                                                    
the date  for expending the  funds. He reviewed item  16 for                                                                    
Special Appropriations;  Judgments, Claims,  and Settlements                                                                    
in  the amount  of $322  thousand for  a DEC  Wage and  Hour                                                                    
settlement.  He  noted  that   item  17  was  an  open-ended                                                                    
language appropriation for FY  18 Judgments and Settlements.                                                                    
He   presented   item   18  that   pertained   to   a   Fund                                                                    
Capitalization  for   the  Community  Assistance   Fund.  He                                                                    
detailed that the statutes dictated  that if there was no FY                                                                    
18 appropriation  to the  fund the  balance would  total $60                                                                    
million, and  one-third of the balance  would be distributed                                                                    
to communities  in FY 19 in  the amount of $20  million. The                                                                    
supplemental originally proposed to  use $30 million in one-                                                                    
time funds from the  Power Cost Equalization (PCE) Endowment                                                                    
Fund using  FY 17  earnings for FY  19. The  statue mandated                                                                    
that  FY 17  earnings were  intended for  the FY  19 budget.                                                                    
Therefore, the current  supplemental proposed to appropriate                                                                    
$30   million   in   one-time  funding   from   the   Alaska                                                                    
Comprehensive Health Care Fund  for the Community Assistance                                                                    
Fund bringing  the balance from  $60 million to  $90 million                                                                    
and providing the $30 million payout to communities.                                                                            
Co-Chair Hoffman  stated the amount would  bring the program                                                                    
back on track.                                                                                                                  
Senator  Olson asked  about  the effect  on  the Power  Cost                                                                    
Equalization Endowment  Fund. Mr.  Ecklund replied  that the                                                                    
FY 17  earnings would be available  to pay FY 19  PCE costs,                                                                    
community assistance,  renewable energy, and other  items in                                                                    
the capital budget per statute.  Senator Olson was concerned                                                                    
what  the   balance  of   the  fund   would  be   after  the                                                                    
supplemental  appropriation.  Mr.  Ecklund stated  that  the                                                                    
appropriation in the supplemental did not expend PCE funds.                                                                     
9:14:52 AM                                                                                                                    
Co-Chair  MacKinnon   interjected  that  the   chairman  had                                                                    
presented  a  way  to  ensure  that the  PCE  fund  was  not                                                                    
overdrawn as  it had been  in the past. She  elaborated that                                                                    
the PCE  Fund maintained a  lower expectation on  returns to                                                                    
ensure adequate  funding for its main  purpose; to stabilize                                                                    
energy  costs in  rural Alaska.  Additionally,  she and  Co-                                                                    
Chair  Hoffman had  carried two  pieces  of legislation  the                                                                    
previous  session  that  protected  the  PCE  endowment  and                                                                    
"rolled  off"   funds  for   community  assistance   if  the                                                                    
endowment  earnings  were  sufficient. The  returns  in  the                                                                    
previous year  allowed a $30  million draw from the  fund in                                                                    
FY  19.   The  administration   had  proposed  to   take  an                                                                    
additional $30  million from the PCE  fund, which threatened                                                                    
to  overdraw  of  the  fund.  The  current  version  of  the                                                                    
supplemental  proposed  the legislature's  original  intent;                                                                    
excess  PCE  earnings  would start  to  fund  the  Community                                                                    
Assistance Fund  and possible  energy projects  statewide in                                                                    
FY 19.  Therefore, the current  version of  the supplemental                                                                    
employed another source of funding for FY 18.                                                                                   
Co-Chair Hoffman pointed out that  when Office of Management                                                                    
and  Budget (OMB)  Director, Pat  Pitney  had presented  the                                                                    
budget  she  spoke  of transparency.  He  had  informed  Ms.                                                                    
Pitney that  the governor's budget had  short-funded the PCE                                                                    
program and  a "couple"  other items. He  specifically noted                                                                    
that if  the $30  million was  expended from  PCE for  FY 18                                                                    
then a $60 million deposit  would be necessary the following                                                                    
year.  The current  supplemental transaction  was attempting                                                                    
to get the fund balances "back on track."                                                                                       
9:17:51 AM                                                                                                                    
Senator  Micciche asked  if the  committee would  review the                                                                    
purpose  of the  Community  Assistance Program.  He was  not                                                                    
sure that  Alaskans were aware  of how the funds  were used.                                                                    
He  discussed  the  use  of  funds  for  emergency  response                                                                    
services for  people utilizing roads in  the jurisdiction of                                                                    
small rural communities, which was  the only source of state                                                                    
support for the communities.                                                                                                    
Co-Chair  Hoffman  thought  the   topic  was  expedient.  He                                                                    
recounted that  the previous  community assistance  fund was                                                                    
too  heavily   dependent  on  state  resources   and  became                                                                    
unaffordable to maintain. Three  years earlier the Co-Chairs                                                                    
of  the  Senate  Finance Committee,  Senator  MacKinnon  and                                                                    
Senator  Kelly reduced  the  program by  50  percent, so  it                                                                    
could be  more affordable for  the state, but still  be able                                                                    
to provide services to many  communities. He agreed that the                                                                    
subject should  be revisited in  a future meeting.  He added                                                                    
that   he  had   cautioned  the   administration  that   the                                                                    
governor's original  budget placed a large  financial burden                                                                    
on  the  state  with  his  proposed  $30  million  draw.  He                                                                    
reiterated his effort to get the program back on track.                                                                         
9:20:22 AM                                                                                                                    
Co-Chair  MacKinnon stated  that  given  the state's  fiscal                                                                    
situation, it might  be helpful to discuss  the inception of                                                                    
the PCE program.  She thought some might  not understand the                                                                    
genesis of the  program. She delineated that  many years ago                                                                    
the legislature  had "heavily invested" in  capital projects                                                                    
(dams)  in  urban Alaska  to  provide  a lower  cost  stable                                                                    
energy supply.  In an effort  to support  rural communities,                                                                    
the legislature  had established  an "investment  model;" an                                                                    
endowment set up like the  corpus of the Permanent Fund. She                                                                    
reiterated  that the  PCE  fund was  adjusted  to allow  the                                                                    
"rolling  off"  of  funding  to  urban  communities  through                                                                    
community assistance. The entire  state was benefitting from                                                                    
the saved assets,  but the original function  of the program                                                                    
was  to   ensure  the  equitable  investment   of  resources                                                                    
throughout the state.                                                                                                           
Senator  von  Imhof asked  for  an  explanation of  how  the                                                                    
funding worked.                                                                                                                 
Co-Chair  Hoffman explained  that when  the $60  million per                                                                    
year distribution  for the Community Assistance  Program was                                                                    
reduced  to   a  $30  million  per   year  distribution  the                                                                    
communities  were given  an  additional  two year's  notice.                                                                    
Therefore,  and  additional  $60 million  appropriation  was                                                                    
necessary  bringing  the  total  to  $90  million.  The  $30                                                                    
million  would be  matched with  and additional  $30 million                                                                    
appropriation  to  guarantee  the amount  communities  would                                                                    
receive for  the two years.  Senator von Imhof asked  if the                                                                    
money would  no longer be  available in approximately  FY 20                                                                    
or  FY 21.  Co-Chair Hoffman  answered in  the negative.  He                                                                    
continued  that next  year a  $30 million  appropriation was                                                                    
necessary.  He reminded  the committee  that the  amount was                                                                    
subject to appropriation by the legislature.                                                                                    
Senator  Micciche   shared  that  when  the   fiscal  crisis                                                                    
developed  he  wanted  to  shut  down  the  revenue  sharing                                                                    
program. However,  as he  reviewed the  public value  of the                                                                    
program  he  appreciated  the  changes   made  to  save  the                                                                    
program.  He  strongly  endorsed  an  informational  meeting                                                                    
about PCE and the CAP programs.                                                                                                 
9:25:26 AM                                                                                                                    
Mr. Ecklund  continued to  review the  supplemental summary.                                                                    
He addressed  Item 19, which  was a Fund  Capitalization for                                                                    
the Disaster  Relief Fund  increased from  $2 million  to $4                                                                    
million. The increase  was necessary due to  the low balance                                                                    
of the disaster relief fund  and the estimated amount needed                                                                    
for  spring 2018  disasters. He  stated  that currently  the                                                                    
balance   of   the   fund  was   $1.5   million,   and   the                                                                    
administration typically kept $5 million in the fund.                                                                           
Senator  Micciche asked  if there  had ever  been a  problem                                                                    
appropriating additional  funds when  the fund was  used for                                                                    
significant disaster  response. Mr. Ecklund stated  that the                                                                    
recommended balance  of the fund  was $5 million and  if the                                                                    
fund  ran  out of  money  he  was  unsure whether  merely  a                                                                    
ratification  or   a  special   session  was   necessary  to                                                                    
appropriate  more funding.  Senator Micciche  was struggling                                                                    
with the  appropriation because he  was uncertain  the state                                                                    
could afford to "tie up" the money.                                                                                             
Co-Chair  Hoffman was  not sure  that the  funds were  being                                                                    
"tied up." He viewed the funds as a "safety measure."                                                                           
9:27:44 AM                                                                                                                    
DAVID TEAL,  DIRECTOR, LEGISLATIVE FINANCE  DIVISION, stated                                                                    
that  historically  funding  for disaster  relief  had  been                                                                    
intermittent   and   jumped    between   large   and   small                                                                    
appropriations. He  recalled that $32 million  was deposited                                                                    
into the  Disaster Relief Fund 5  years prior. Subsequently,                                                                    
the balance had  since fallen from over $30  million down to                                                                    
the   current  $1.5   million.   He   determined  that   the                                                                    
legislature faced a  choice of a higher  annual funding rate                                                                    
or  a  large  lump  sum when  necessary.  Given  the  fiscal                                                                    
situation,  the recommendation  was to  increase the  annual                                                                    
deposit to $4 million and hope the amount was sufficient.                                                                       
Senator Micciche  supposed that  the administration  had the                                                                    
authority to spend on emergency  response over the amount of                                                                    
the fund. He offered that  he viewed the funding differently                                                                    
under  the  climate  of  constrained  spending.  He  favored                                                                    
keeping  funding in  accounts  that  earned interest  rather                                                                    
than depositing  large amounts of  funding in  accounts that                                                                    
accrued nothing. Mr.  Teal had neglected to  mention that it                                                                    
was possible to  spend more money than was in  the fund, but                                                                    
the amount  was limited to  $1 million. He reasoned  that if                                                                    
the  balance was  too low  when disaster  struck, additional                                                                    
funding  beyond  the $1  million  authority  was subject  to                                                                    
Co-Chair  Hoffman interjected  that it  was important  to be                                                                    
able to  respond to a  disaster no  matter what part  of the                                                                    
state   the    disaster   happened.   He    considered   the                                                                    
appropriation   a  small   amount  of   insurance  for   the                                                                    
protection of Alaskan citizens.                                                                                                 
Senator Micciche  agreed with  Co-Chair Hoffman.  He thought                                                                    
it was  time to reevaluate  the $1 million  in over-spending                                                                    
authority and felt that it was insufficient.                                                                                    
Co-Chair MacKinnon  asked if Mr.  Teal had a figure  for the                                                                    
use  of  the fund  in  the  previous  year. Mr.  Teal  would                                                                    
provide the numbers.                                                                                                            
9:32:30 AM                                                                                                                    
Mr. Ecklund continued to  discuss the Supplemental document.                                                                    
He  addressed Item  20 for  Fund Transfers  into the  Alaska                                                                    
Marine  Highway   System  (AMHS)  Fund  in   the  amount  of                                                                    
$23,918.2  million.  He  remarked  out of  the  $30  million                                                                    
appropriated  from GF  to the  AMHS fund  for FY  2018, only                                                                    
$6,081,800 was  available to transfer due  to the associated                                                                    
contingent  language.  The   appropriation  back-filled  the                                                                    
short fall.  He moved to item  21 for Fund Transfers  to the                                                                    
Civil Legal  Services Fund for  $10.4 thousand.  He reviewed                                                                    
item  22 for  Salary  and Benefit  Adjustments. He  reported                                                                    
that after  the prior session was  over, contract agreements                                                                    
had  been reached  with  the  Fairbanks Firefighters  Union,                                                                    
IAFF  Local  1324  and  the   United  Academics  -  American                                                                    
Association  of University  Professors, American  Federation                                                                    
of Teachers without any monetary impacts.                                                                                       
Senator von  Imhof referenced  item 21  and asked  why there                                                                    
was no amount of UGF  listed. Mr. Ecklund corrected that the                                                                    
amount was $10.4 thousand and not million.                                                                                      
Mr.   Ecklund   noted   that  the   remaining   items   were                                                                    
ratifications that did  not add to the  budget. He indicated                                                                    
that   ratifications   "straightened    out"   prior   years                                                                    
9:34:54 AM                                                                                                                    
Senator  Stevens referenced  the  Disaster  Relief Fund  and                                                                    
wanted to  see the  longer term  use of the  fund -  for the                                                                    
prior  five years.  Co-Chair Hoffman  agreed to  provide the                                                                    
Co-Chair  Hoffman WITHDREW  his  objection.  There being  NO                                                                    
further  OBJECTION,  it  was  so  ordered.  The  CS  for  SB
168(FIN) was ADOPTED.                                                                                                           
Co-Chair Hoffman handed the gavel to Co-Chair MacKinnon.                                                                        
9:36:34 AM                                                                                                                    
AT EASE                                                                                                                         
9:39:04 AM                                                                                                                    

Document Name Date/Time Subjects
SB 104 Sponsor Statement.pdf SFIN 2/22/2018 9:00:00 AM
SB 104
CSSB 104 Version N Sectional Analysis.pdf SFIN 2/22/2018 9:00:00 AM
SB 104
SB 168 work draft version D.pdf SFIN 2/22/2018 9:00:00 AM
SB 168
SB 168 Fast Track StatewideTotals-Op Cap.pdf SFIN 2/22/2018 9:00:00 AM
SB 168
SB 168 FY18 Supplemental Summary and Detail with LFD Notes-Senate.pdf SFIN 2/22/2018 9:00:00 AM
SB 168
SB 104 work draft version N.pdf SFIN 2/22/2018 9:00:00 AM
SB 104