Legislature(2019 - 2020)SENATE FINANCE 532

02/14/2019 09:00 AM FINANCE

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Audio Topic
09:02:03 AM Start
09:02:51 AM SB20
10:53:57 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 20 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
OMB Director Arduin
Departmental Review:
- Public Safety
- Law
- Corrections
- Military & Veterans Affairs
- Judiciary
- Governor
- Legislature
SENATE BILL NO. 20                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     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."                                                                                                    
                                                                                                                                
9:02:51 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  noted that the committee  would consider a                                                                    
Sponsor Substitute for SB 20.  He provided an outline of the                                                                    
budget  process.   He  thought   today's  meeting   was  the                                                                    
beginning of a lengthy process.                                                                                                 
                                                                                                                                
Co-Chair Stedman  continued his remarks. He  recognized that                                                                    
Senate President Cathy Giessel  was in attendance. He stated                                                                    
that   he  would   be  monitoring   decorum  in   the  room,                                                                    
encouraging  respectful  presentations  and  responses  from                                                                    
visitors.  He anticipated  there would  be some  people that                                                                    
did  not like  what was  being proposed.  He reassured  them                                                                    
there  would  be  an  opportunity   in  another  meeting  to                                                                    
testify.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman  invited the  director  of  the Office  of                                                                    
Management and Budget  (OMB) and her staff to  the table. He                                                                    
wanted to  confine the presentation  to the contents  of the                                                                    
slides  being presented  to keep  the meeting  on track.  He                                                                    
asked  members  to  direct   questions  to  the  appropriate                                                                    
parties, such  as agency staff  when in committee.  He spoke                                                                    
of  the large  budget reduction  and the  urgency the  state                                                                    
faced in terms of having to  fix the problem within a couple                                                                    
of years. The state faced a substantial structural deficit.                                                                     
                                                                                                                                
9:07:48 AM                                                                                                                    
                                                                                                                                
DONNA  ARDUIN, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                    
introduced herself and indicated  the budget director, Lacey                                                                    
Sanders, was with her.                                                                                                          
                                                                                                                                
Ms.  Arduin introduced  the presentation  "FY2020 Governor's                                                                    
Amended  Budget" (copy  on file).  She began  with slide  2,                                                                    
"Building the Budget: Core Programs":                                                                                           
                                                                                                                                
      Public Safety                                                                                                          
      Management of our natural resources                                                                                    
      Preserving  maintenance   of   our   transportation                                                                    
        infrastructure                                                                                                          
                                                                                                                                
Ms. Arduin reported that the  governor introduced his budget                                                                    
the previous day  and talked about building  the budget from                                                                    
the bottom up  based on the state's core  programs. She read                                                                    
the list of core services on the slide.                                                                                         
                                                                                                                                
Ms.  Arduin showed  slide 3,  "Building the  Budget: Guiding                                                                    
Principles":                                                                                                                    
                                                                                                                                
     ? Expenditures cannot exceed existing revenues                                                                             
     ? The budget is built on core functions                                                                                    
     ? Maintaining and protecting our reserves                                                                                  
     ? The budget does not take additional taxes from                                                                           
     Alaskans through taxes or PFD                                                                                              
     ? It must be sustainable, predictable, affordable                                                                          
                                                                                                                                
Ms. Arduin  stated that  the budget  was built  on a  set of                                                                    
guiding principles. She read the  list of guiding principles                                                                    
on the slide.  She explained that the state did  not rely on                                                                    
a Constitutional  Budget Reserve  (CBR) draw in  the budget.                                                                    
The   core  principles   were  that   the  budget   must  be                                                                    
sustainable,  predictable,  and  affordable which  was  more                                                                    
important than  the budget being unbalanced  and kicking the                                                                    
can down the road to future legislatures.                                                                                       
                                                                                                                                
Senator Wielechowski  asked if Ms. Arduin  considered taking                                                                    
money from the Permanent Fund  (PF) to pay for government to                                                                    
be a tax on Alaskans.                                                                                                           
                                                                                                                                
Ms.  Arduin commented  that the  guiding principal  was that                                                                    
the  state  did  not  take additional  taxes  from  Alaskans                                                                    
through taxes or the Permanent  Fund Dividend (PFD), and the                                                                    
budget was built on existing  revenues. She noted a law that                                                                    
allowed  for a  certain amount  of money  to be  transferred                                                                    
from the  PF to the  budget for appropriation  purposes, the                                                                    
Percent  of  Market  Value (POMV),  a  statutorily  existing                                                                    
revenue.  The budget  was partially  built on  the statutory                                                                    
amount  that   was  allowable  from  a   transfer  from  the                                                                    
Permanent Fund Earnings Reserve Account (ERA).                                                                                  
                                                                                                                                
Senator Wielechowski  did not think Ms.  Arduin answered his                                                                    
question. He  asked if she  considered using funds  from the                                                                    
ERA to be a tax on Alaskans.                                                                                                    
                                                                                                                                
Ms. Arduin  did not believe  that the existing  statute that                                                                    
allowed the  state to take  a portion of revenues  (about $1                                                                    
billion) from  the ERA through the  POMV statutory structure                                                                    
to  use for  the budget  as a  tax. She  thought it  was the                                                                    
statutory  limit the  legislature determined  that could  be                                                                    
taken from the ERA to allow  the balances of the ERA and the                                                                    
PF to continue to grow.                                                                                                         
                                                                                                                                
Co-Chair Stedman  explicated that  there was a  statute that                                                                    
limited the  draw of the  PF to  5.25 percent of  the market                                                                    
value over  5 of the 6  proceeding years. The intent  of the                                                                    
finance committee was to stay  within the 5.25 percent draw.                                                                    
He  reported  that  no  members  had  talked  to  him  about                                                                    
breaching that  percentage. He  continued that  the dividend                                                                    
was taken out  of the 5.25 percent POMV  draw. The remaining                                                                    
balance of the  draw was available for  appropriation by the                                                                    
legislature  for  core  services.  He thought  there  was  a                                                                    
philosophical  question  posed  by Senator  Wielechowski  in                                                                    
asking if  the POMV draw was  a tax. He did  not believe the                                                                    
OMB director was the policy person.                                                                                             
                                                                                                                                
Senator Olson thought it was a tax on Alaskans.                                                                                 
                                                                                                                                
9:12:27 AM                                                                                                                    
                                                                                                                                
Ms.  Arduin   reviewed  slide   4,  "Building   the  Budget:                                                                    
Historical  Look-back," which  displayed a  line chart  that                                                                    
showed  revenues  and  expenditures. She  pointed  out  that                                                                    
prior  to FY  13, revenues  exceeded expenditures.  However,                                                                    
since then it had been  the other way around. She referenced                                                                    
a  chart from  the Legislative  Finance Division  (LFD) that                                                                    
exhibited  the  expenditure  line,  represented  in  orange,                                                                    
which showed  that spending  levels were  not too  high. The                                                                    
current chart  suggested expenditures were too  high because                                                                    
they were  exceeding available revenues  and had  been since                                                                    
2013.  She  furthered  that the  gap  between  revenues  and                                                                    
expenditures had totaled over $16 billion in deficits.                                                                          
                                                                                                                                
Co-Chair Stedman  asked Ms. Arduin  to elaborate on  how the                                                                    
state backfilled the gap.                                                                                                       
                                                                                                                                
Ms.  Arduin   displayed  slide  5,  "Building   the  Budget:                                                                    
Historical   Savings,  Revenue   and  Expenditures,"   which                                                                    
contained a  bar graph showing budget  reserves. She pointed                                                                    
out  that due  to chronic  annual deficits,  budget reserves                                                                    
had been  spent down  from over $16  billion to  the current                                                                    
balance of about $2 billion.                                                                                                    
                                                                                                                                
Co-Chair Stedman defined that  the orange bars signified the                                                                    
Statutory Budget Reserve (SBR),  which was a smaller savings                                                                    
account  established by  the legislature.  It took  a simple                                                                    
majority vote to  withdraw money from the  account. The blue                                                                    
bar  signifying the  CBR took  a three-quarter  vote of  the                                                                    
legislature  to access  funds.  It was  the  fund which  the                                                                    
legislature had  depended on heavily  to balance  the budget                                                                    
for the previous several years. It  was the fund used at the                                                                    
end to muster enough political  support to get the budget to                                                                    
the governor's table. Currently, the  balance of the CBR was                                                                    
about $2  billion. He asked  the OMB director if  the amount                                                                    
was  too much  or too  little.  He asked  why the  committee                                                                    
should have an  interest in the positive balance  of the CBR                                                                    
rather than taking it to zero.                                                                                                  
                                                                                                                                
Ms. Arduin replied  that by spending revenues  the state did                                                                    
not  have, the  state  had been  spending  down its  savings                                                                    
accounts  to  about  $2 billion.  She  suggested  the  state                                                                    
needed to have reserve  funds available for emergencies, and                                                                    
she  strongly  cautioned  against  spending  them  down  any                                                                    
further.  She  explained  that  the  governor  believed  the                                                                    
fiscal problem needed  to be taken care  of presently rather                                                                    
than later.                                                                                                                     
                                                                                                                                
Co-Chair  Stedman stated  that  historically  $2 billion  to                                                                    
$2.5  billion had  been a  common target  range for  the CBR                                                                    
balance.                                                                                                                        
                                                                                                                                
Co-Chair von  Imhof asked  if the  administration considered                                                                    
the ERA  to be a  savings account. Ms. Arduin  answered that                                                                    
the  administration considered  the  ERA  (outside the  POMV                                                                    
draw)  to   be  reserved   for  PFD  payments   rather  than                                                                    
appropriations to the budget.                                                                                                   
                                                                                                                                
9:17:25 AM                                                                                                                    
                                                                                                                                
Co-Chair  von Imhof  considered that  although Ms.  Arduin's                                                                    
response differed from the founding  fathers and the trustee                                                                    
papers written  in the  late 1970s and  early 1980s,  it was                                                                    
counter to  the several  trustees who were  there, including                                                                    
her grandfather.  She quoted her grandfather  in saying that                                                                    
the PF was set up as a  "rainy day fund" to offset the boom-                                                                    
and-bust   cycle  of   a  commodities   market,  which   was                                                                    
applicable to Alaska's oil revenues.  The fund was set aside                                                                    
for many years  until it was large enough and  until the oil                                                                    
revenues began being  depleted. The fund was set up  to be a                                                                    
renewable resource  to be used  on an annual basis,  as long                                                                    
as there was "sane  and reasonable spending." She recognized                                                                    
Ms. Arduin was  trying to spend reasonably  with the budget.                                                                    
She stated she would be a  protector of the PF including the                                                                    
ERA. She agreed  with Co-Chair Stedman that  they were going                                                                    
to keep a close eye on the fund.                                                                                                
                                                                                                                                
Senator   Micciche  commented   that   Ms.  Arduin   sounded                                                                    
supportive  of  the  statutory structure  of  the  POMV.  He                                                                    
requested  that  in  future  slides  and  presentations  the                                                                    
slides be  changed to  reflect the POMV  as revenue  if that                                                                    
was the position of the  administration. He thought it would                                                                    
clarify  that  the  POMV would  contribute  to  filling  the                                                                    
state's fiscal gap.                                                                                                             
                                                                                                                                
Co-Chair Stedman  asked if Senator  Micciche had  a comment.                                                                    
He  stated the  committee  would  have OMB  or  LFD add  the                                                                    
additional  information to  a slide  in  a presentation.  He                                                                    
appreciated  Senator  Micciche's  point that  as  the  state                                                                    
moved forward into  the new dynamics of a  POMV approach the                                                                    
balance going  over from the  PF to the revenue  side should                                                                    
be clearly noted. He wanted  the information to be clear for                                                                    
the public and the legislature.                                                                                                 
                                                                                                                                
Senator Micciche remarked  that FY 19 was the  first year in                                                                    
which monies  from the ERA  were used. He wanted  the public                                                                    
to understand that  the gap was not as extreme  with the use                                                                    
of the POMV draw.                                                                                                               
                                                                                                                                
Senator Wielechowski stated that  the governor's budget drew                                                                    
about $1 billion  from the ERA which equated  to about $1500                                                                    
per  Alaskan. He  wondered if  the governor  would veto  any                                                                    
draws from the ERA greater  than that amount. Ms. Arduin was                                                                    
not  able to  speak for  the  governor. She  noted that  the                                                                    
governor had  constitutional authority  to veto any  item or                                                                    
bill that  he chose. She would  not limit his ability  to do                                                                    
so by saying what he would or would not do.                                                                                     
                                                                                                                                
Ms.  Arduin  discussed  slide 6,  "Alaska  Economic  Trends:                                                                    
GDP," which showed a line  graph of the state gross domestic                                                                    
product  (GDP). She  alleged that  there  had been  economic                                                                    
consequences   to  the   state's   unbalanced  budgets.   It                                                                    
coincided with  economic results  in Alaska that  had fallen                                                                    
below the  United States. She  pointed to the  state's gross                                                                    
domestic  product.  The  thicker  blue  line  on  the  chart                                                                    
represented Alaska's GDP  and the thinner blue  line was the                                                                    
United   States.  Since   2012,   Alaska's   GDP  had   been                                                                    
significantly  lower  than that  of  the  United States  and                                                                    
continued  to  fall.  The  rest  of  the  nation's  GDP  was                                                                    
growing.                                                                                                                        
                                                                                                                                
9:22:14 AM                                                                                                                    
                                                                                                                                
Ms.  Arduin turned  to slide  7, "  Alaska Economic  Trends:                                                                    
Population," which  showed that more people  were moving out                                                                    
of Alaska in the period.                                                                                                        
                                                                                                                                
Ms. Arduin showed employment declining  on slide 8, " Alaska                                                                    
Economic  Trends:   Payroll."  She  pointed  to   the  steep                                                                    
divergence since  2012. Alaska  continued to drop  while the                                                                    
rest of the country's employment was growing.                                                                                   
                                                                                                                                
Co-Chair  Stedman  pointed  to  slide  7  and  slide  8.  He                                                                    
mentioned that  the state  had set  a policy  of stimulation                                                                    
within Alaska's  oil basin  of massive  credits paid  to the                                                                    
industry  to  help  modify  and   catch  up  on  maintenance                                                                    
starting  in  2006.  He  recalled  that  employment  in  the                                                                    
industry   had   increased   from  8,500   to   16,000.   He                                                                    
reemphasized  the  large  credit  stimulus  of  billions  of                                                                    
dollars.  The policy  had changed  in  the previous  several                                                                    
years. Credits had been pulled  out of the system. There had                                                                    
been numerous  conversations about the credits.  He believed                                                                    
there   were  still   significant  outstanding   credits  at                                                                    
present.  He thought  the absence  of the  economic stimulus                                                                    
was reflective  of the state's  job market. He  thought some                                                                    
of  the change  was  driven  by Alaska's  policy  to try  to                                                                    
expand and stabilize its oil basis.                                                                                             
                                                                                                                                
Ms.  Arduin  thought  Co-Chair   Stedman  made  a  wonderful                                                                    
correlation.  She  suggested  that changing  tax  policy  to                                                                    
increase taxes  or reduce tax  credits for  oil exploration,                                                                    
other  businesses,  and  entrepreneurs   was  not  a  stable                                                                    
environment  for further  investment in  Alaska. One  of the                                                                    
reasons the  governor believed the  state needed to  get its                                                                    
fiscal house in order was  so that the state stopped sending                                                                    
uncertain signals to those who would invest in Alaska.                                                                          
                                                                                                                                
Senator Micciche was curious about  slides 7 and 8. He asked                                                                    
if Ms.  Arduin had  analyzed the  potential effects  on out-                                                                    
migration and unemployment considering  the magnitude of the                                                                    
cuts proposed  by the governor.  Ms. Arduin stated  that the                                                                    
purpose  of   the  slide   was  to   show  the   effects  of                                                                    
overspending,  having  deficits  in the  state,  and  having                                                                    
uncertainty  for business  investments by  entrepreneurs and                                                                    
oil explorers.  She thought  the numbers  strongly suggested                                                                    
that  if  the   budget  was  in  order   and  stability  was                                                                    
maintained,  the numbers  would be  reversed adding  GDP and                                                                    
employment to the state.                                                                                                        
                                                                                                                                
Senator Bishop disagreed with Ms.  Arduin. The current slide                                                                    
and the previous slide were  tied to Alaska's oil commodity.                                                                    
He opined  that people left  the state because the  price of                                                                    
oil dropped, and capital spending decreased.                                                                                    
                                                                                                                                
9:27:04 AM                                                                                                                    
                                                                                                                                
Senator Wielechowski  reminded Ms. Arduin that  she had only                                                                    
been  in the  state  for 8  weeks and  had  not been  around                                                                    
during the  oil tax  debates. All the  members at  the table                                                                    
had been around for the  debates. He recalled that the state                                                                    
had been  promised that  if it cut  oil taxes  and increased                                                                    
tax credits  to over $1  billion per year that  it currently                                                                    
paid,  the state  would see  increased production,  revenue,                                                                    
and  jobs. Instead,  the  state  had seen  a  drop in  jobs,                                                                    
revenue,  and  production.  He   thought  Ms.  Arduin  could                                                                    
suggest  that  cutting  taxes or  leaving  them  at  current                                                                    
levels  would provide  many economic  benefits. However,  he                                                                    
and  other  legislators had  seen  for  themselves that  the                                                                    
economic benefits had not come to fruition.                                                                                     
                                                                                                                                
Senator Micciche  recalled that  Ms. Arduin stated  the data                                                                    
suggested  something but  wondered if  she had  analyzed the                                                                    
potential  additional  out-migration   associated  with  the                                                                    
reduction of the budget and of  jobs. He wanted to know that                                                                    
the  state adequately  analyzed  their  effects. Ms.  Arduin                                                                    
stated  that   the  chief   economist  had   been  analyzing                                                                    
potential impacts  and clearly  believed that the  result of                                                                    
solving the  state's fiscal problems  would lead  to greater                                                                    
private sector  investment, outweighing the loss  of jobs in                                                                    
the government sector.                                                                                                          
                                                                                                                                
Ms.  Arduin informed  the  committee  that Director  Sanders                                                                    
would review the  fiscal summaries of which  there were two.                                                                    
The  first had  to do  with  defining the  problem (seen  on                                                                    
slide  9).  She  explained   that  the  supplemental  budget                                                                    
request and the  FY 20 budget dated December  14, 2019 could                                                                    
be seen on  the slide. She continued that  the December 14th                                                                    
budget was a  starting point for the  new administration and                                                                    
contained a deficit of $1.6 billion.                                                                                            
                                                                                                                                
Co-Chair  Stedman  invited  Ms.   Sanders  to  walk  through                                                                    
slide 9.                                                                                                                        
                                                                                                                                
9:30:22 AM                                                                                                                    
                                                                                                                                
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, reviewed slide 9 "Building  the Budget: Defining the                                                                    
Problem." She  explained that the  fiscal summary  which the                                                                    
committee  had seen  previously. She  highlighted the  left-                                                                    
hand column  that showed the  FY 19 management plan.  It was                                                                    
adjusted to  include the supplemental numbers  that had been                                                                    
proposed to  the legislature. It  included numbers  from the                                                                    
supplemental  bill and  the disaster  bill. There  were also                                                                    
several  supplemental items  in  the  operating and  capital                                                                    
budgets before the committee. She  pointed to the top of the                                                                    
page  where general  fund (GF)  revenue was  listed totaling                                                                    
$2.8 billion. Fund withdrawal appeared  below GF revenue and                                                                    
included  the  transfer  of   the  earnings  reserve  amount                                                                    
through the  POMV, an  amount of $172  million from  the SBR                                                                    
for  a  supplemental  appropriation  to  the  Department  of                                                                    
Health and  Social Services (DHSS), and  restricted revenue.                                                                    
The total revenue equaled $5.8 billion.                                                                                         
                                                                                                                                
Ms. Sanders  pointed out the  appropriations section  of the                                                                    
table  on slide  9. Appropriations  included an  operations,                                                                    
capital,  and  fiscal notes  line  which  she would  address                                                                    
shortly. She reported a deficit of $282 million.                                                                                
                                                                                                                                
Ms.  Sanders looked  to the  right-hand side  of the  table,                                                                    
which showed the FY 20  Unendorsed Dec. 14 Budget. A deficit                                                                    
of $1.6  billion was identified  and became the  target from                                                                    
moving the administration's budget forward.                                                                                     
                                                                                                                                
Co-Chair Stedman  referenced the $282.6 million  deficit. He                                                                    
recalled  the state  expecting a  $600 million  deficit that                                                                    
would come out  of the CBR. He thought it  sounded like good                                                                    
news that the state would have  a lower deficit and would be                                                                    
spending less.                                                                                                                  
                                                                                                                                
Ms. Arduin stated that the  reason for the lower deficit was                                                                    
because  of the  updated  revenue forecast  put  out by  the                                                                    
Department of  Revenue in December  2019. She  suggested the                                                                    
numbers  could change.  The final  deficit might  be larger.                                                                    
She agreed that taking less money from the CBR was better.                                                                      
                                                                                                                                
Co-Chair Stedman thought  it was nice to  highlight the good                                                                    
news during  budget meetings.  He hoped  revenues for  FY 20                                                                    
would  be greater  than expected  and expenditures  would be                                                                    
less.                                                                                                                           
                                                                                                                                
Ms. Arduin  conveyed that the  state was still looking  at a                                                                    
deficit for  the current  year. The good  news was  that the                                                                    
governor was  proposing a balanced budget  for FY 20 without                                                                    
a deficit.                                                                                                                      
                                                                                                                                
9:34:22 AM                                                                                                                    
                                                                                                                                
Ms.  Sanders  turned to  slide  10,  "Balancing the  Budget:                                                                    
Streamlined Fiscal Summary," which  showed a new streamlines                                                                    
fiscal summary for the FY  20 governor's amended budget. She                                                                    
pointed  to  the top  of  the  chart showing  the  projected                                                                    
general fund revenue  as well as the transfer  from the ERA.                                                                    
She  highlighted a  new item  on  the table  - revenue  from                                                                    
fiscal  notes. The  governor introduced  a  bill that  would                                                                    
eliminate local petroleum property  taxes and result in just                                                                    
under $400  million of new revenue.  Additionally, there was                                                                    
$20  million in  new revenue  associated with  the revolving                                                                    
loan funds that were slated for elimination.                                                                                    
                                                                                                                                
Ms.  Sanders continued  to discuss  slide  10. She  directed                                                                    
attention  to  the  lower portion  of  the  chart  outlining                                                                    
appropriations  including agency  and statewide  operations.                                                                    
The  total  capital  appropriations  came  to  $143  million                                                                    
primarily matching  federal projects. The fiscal  notes line                                                                    
included the proposed crime bill  repeal providing a surplus                                                                    
of $20 million.                                                                                                                 
                                                                                                                                
Co-Chair Stedman relayed that  the committee would be taking                                                                    
up some  of the crime  bill issues shortly which  he thought                                                                    
would reflect positive news for the public.                                                                                     
                                                                                                                                
Senator  Wielechowski asked  for  the total  amount lost  in                                                                    
federal funds under the proposed  budget and a detailed list                                                                    
of the  funds. He also  asked for  a list of  state matching                                                                    
funds required  to receive those  federal funds in  order to                                                                    
know what  amount would have to  be put back in  the budget.                                                                    
Ms. Sanders  agreed to provide  a list of federal  funds and                                                                    
the areas in  which they were being reduced.  She would also                                                                    
provide the  state match  requirements corresponding  to the                                                                    
federal funds.                                                                                                                  
                                                                                                                                
Co-Chair Stedman stated that the  committee would be looking                                                                    
at  the  information  by department  and  the  subcommittees                                                                    
would be looking at further detail.                                                                                             
                                                                                                                                
Senator Wielechowski  reiterated his question  regarding the                                                                    
total amount lost in federal  funding. Ms. Arduin referenced                                                                    
a  chart  that had  been  added  to the  presentation  under                                                                    
"Additional Slides" (copy on file).                                                                                             
                                                                                                                                
9:37:34 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:38:09 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Stedman  asked for the  delta on the  federal funds                                                                    
in aggregate.                                                                                                                   
                                                                                                                                
Ms. Sanders  looked at slide 3,  "FY2020 Budget: Statewide."                                                                    
The chart reflected a loss  of about $500 million in federal                                                                    
funding. She pointed to the  funding comparison on the slide                                                                    
which showed  the FY  18 management  plan plus  the proposed                                                                    
supplementals,  the FY  20 governor's  budget from  December                                                                    
14th, and the  FY 20 governor's budget from  February 13th -                                                                    
the current proposed  budget. On the right-hand  side of the                                                                    
slide was a comparison of positions from year-to-year.                                                                          
                                                                                                                                
Co-Chair Stedman  asked Ms. Sanders  to review  the position                                                                    
count  on the  slide.  Ms.  Sanders stated  that  the FY  19                                                                    
management  plan  showed  20,416 total  permanent  full-time                                                                    
positions. The amount of positions  for the FY 20 governor's                                                                    
budget on December 14th was  20,700. The number of positions                                                                    
in  the FY  20 governor's  amended budget  on February  13th                                                                    
equaled 20,075.                                                                                                                 
                                                                                                                                
Co-Chair Stedman clarified that  the budget submitted by the                                                                    
previous governor  on December 14th  was not being  used for                                                                    
much of anything.  It might be used for  comparison, but the                                                                    
committee would  be focusing  on the  FY 19  management plan                                                                    
compared to  the FY  20 governor's  plan dated  February 13,                                                                    
2019. He wondered if a little  less than 400 jobs were being                                                                    
reduced.   Ms.  Sanders   replied   that  the   400-position                                                                    
comparison  was to  the FY  19 management  plan. The  number                                                                    
referenced recently of 625 positions  was compared to the FY                                                                    
20 governor's budget dated, February 13, 2019.                                                                                  
                                                                                                                                
Senator  Wielechowski had  read an  Institute of  Social and                                                                    
Economic  Research  (ISER)  study that  concluded  that  the                                                                    
proposed  budget  would  result in  16,000  Alaskans  losing                                                                    
their jobs. Ms. Arduin  thought the ISER analysis considered                                                                    
only one  side of  the equation, which  was the  analysis of                                                                    
the  resulting reduction  in government  jobs. The  analysis                                                                    
did  not take  in  to  account the  benefit  to the  private                                                                    
sector of  having more money  through dividends,  less money                                                                    
going to government, and less taxes on private activity.                                                                        
                                                                                                                                
Co-Chair Stedman  thought committee members  were interested                                                                    
in having  an additional presentation by  an economist about                                                                    
expectations  and  an  economical analysis  reflecting  both                                                                    
sides.                                                                                                                          
                                                                                                                                
Senator  Wielechowski concluded  that  Ms. Arduin  disagreed                                                                    
with ISER's conclusion that with  the proposed budget 16,000                                                                    
Alaskans would lose  their jobs. He asked if  Ms. Arduin had                                                                    
done an  analysis and, if so,  he wanted a copy  provided to                                                                    
the committee.  Ms. Arduin stated  that the  chief economist                                                                    
at OMB performed  such analyses. She would be  happy to have                                                                    
him  make a  presentation to  the committee.  She reasserted                                                                    
that  the reduction  of 600  government jobs  would be  more                                                                    
than offset by the positive affects to the private sector.                                                                      
                                                                                                                                
Co-Chair Stedman  stated that the committee  would extend an                                                                    
invitation to  OMB to have  a comparative discussion  on the                                                                    
ISER study. He hoped that  the discussion could occur within                                                                    
the following two weeks.                                                                                                        
                                                                                                                                
9:43:12 AM                                                                                                                    
                                                                                                                                
Senator Wielechowski commented on  the topic of analysis. He                                                                    
asked, with  many of the proposed  cuts such as the  ones to                                                                    
education  and revenue  sharing, what  kind of  analysis had                                                                    
been done  regarding how much the  reductions would increase                                                                    
local  sales taxes  or property  taxes.  Ms. Arduin  replied                                                                    
that OMB  had not done  an analysis about  increasing taxes.                                                                    
The governor's budget did not propose to increase taxes.                                                                        
                                                                                                                                
Co-Chair  Stedman  thought  that   the  question  should  be                                                                    
directed  to the  economist  during  their presentation.  He                                                                    
would ask them  to discuss expectations at  the state level,                                                                    
within  the  private sector,  and  amongst  home owners.  He                                                                    
would  also  ask questions  regarding  some  or all  of  the                                                                    
proposals in  revenue changes. The committee  would keep the                                                                    
economist busy.                                                                                                                 
                                                                                                                                
Senator Olson commented that reliance  on the private sector                                                                    
to  make  up  for  lost  jobs reminded  him  of  the  Hoover                                                                    
administration  after the  stock market  crash of  1929 that                                                                    
resulted in  the Great Depression.  He was getting  the same                                                                    
flavor with the proposed budget. He brought up Ms. Sanders'                                                                     
consideration  of  new  revenues  for  the  state  regarding                                                                    
petroleum property  taxes. He asserted  that the  funds that                                                                    
were characterized  as new revenue were  actually funds that                                                                    
had  been  confiscated  by  the  administration  from  local                                                                    
government.  He objected  to the  shifting of  funds, as  he                                                                    
represented constituents from the pipeline corridor.                                                                            
                                                                                                                                
Co-Chair Stedman asked Senator Olson  to explain what he was                                                                    
referencing.  Senator Olson  relayed that  the governor  had                                                                    
introduced  a bill,  SB 57  having  to do  with gutting  the                                                                    
petroleum property tax that the  boroughs along the pipeline                                                                    
corridor charged  the oil companies for  running services on                                                                    
borough properties.  The taxes collected totaled  about $437                                                                    
million. He  continued that  85 percent  of the  amount came                                                                    
out of his district.                                                                                                            
                                                                                                                                
Co-Chair Stedman clarified that the  state had a 20 mil rate                                                                    
for oil  and gas production  facilities in the  state, which                                                                    
was  similar to  home  property tax.  The  funds were  split                                                                    
between  the state  and the  municipalities. The  governor's                                                                    
bill would potentially change the  split rather than the mil                                                                    
rate. The  bill would  change the sharing  relationship with                                                                    
the affected boroughs.                                                                                                          
                                                                                                                                
Senator  Bishop  stated  that  the  funds  equated  to  $372                                                                    
million for the  North Slope Borough, $11.8  million for the                                                                    
Fairbanks  North   Star  Borough,   $2.4  billion   for  the                                                                    
Municipality  of  Anchorage,  $15   million  for  the  Kenai                                                                    
Peninsula  Borough,  and  $38.4  million  for  the  City  of                                                                    
Valdez.                                                                                                                         
                                                                                                                                
9:47:42 AM                                                                                                                    
                                                                                                                                
Senator Micciche wanted  to clarify for the  public that Ms.                                                                    
Arduin's statement about no additional  taxes had to do with                                                                    
state taxes rather than municipality  taxes. He relayed that                                                                    
the Kenai Peninsula Borough mayor  was very conservative and                                                                    
had done a very good job  of cutting the budget and managing                                                                    
responsibly. The  reduction of  $15 million for  the borough                                                                    
would result in additional sales  taxes or property taxes to                                                                    
the people  of the  Kenai Peninsula.  He suggested  that the                                                                    
governor's budget was  working towards not having  a need to                                                                    
increase  taxes,   but  the  burden  would   be  shifted  to                                                                    
municipalities.  He asked  if Ms.  Arduin realized  that the                                                                    
revenue  had  to be  made  up  at  the local  level,  likely                                                                    
resulting  in higher  property taxes.  Ms. Arduin  could not                                                                    
comment  on how  local governments  would structure  budgets                                                                    
and treat revenues and expenditures.                                                                                            
                                                                                                                                
Senator   Bishop  asked   how  many   jobs  the   University                                                                    
anticipated losing with the  governor's proposed budget. Ms.                                                                    
Arduin was  unsure if  the University  had done  an analysis                                                                    
yet.  She conveyed  that, in  fairness,  the University  had                                                                    
just recently  received the news  of the  budget reductions.                                                                    
She had not expected the  University to have a plan together                                                                    
to  meet its  new  budget challenge  yet.  She believed  the                                                                    
University  would  be  on the  committee's  agenda  at  some                                                                    
point. Senator Bishop  thought the number was  close to 1300                                                                    
jobs.                                                                                                                           
                                                                                                                                
Co-Chair Stedman  informed the committee that  members would                                                                    
be hearing from  the University on Tuesday  of the following                                                                    
week.  He wanted  to hear  from the  education commissioner,                                                                    
the  University president,  and  an economist  to provide  a                                                                    
wholistic view for the purpose  of making informed decisions                                                                    
on the budget.                                                                                                                  
                                                                                                                                
Senator Wielechowski had received  a message from the school                                                                    
board president  in his district  who informed him  that the                                                                    
loss  to  Anchorage  in  education   funds  would  be  about                                                                    
$150 million   and  would   result  in   the  reduction   of                                                                    
approximately 1000  teachers. He  reminded members  that the                                                                    
Alaska Constitution  required the state to  provide adequate                                                                    
education  for  its  students.  He  wondered  what  sort  of                                                                    
analysis OMB  had done regarding  how the cuts  would impact                                                                    
the  state's   ability  to  provide  an   adequately  funded                                                                    
education system with the proposed magnitude of cuts.                                                                           
                                                                                                                                
Ms.  Arduin stated  that as  with municipalities,  the state                                                                    
did not tell  school districts how to  allocate revenues and                                                                    
expenditures.  A   subsequent  presentation   would  address                                                                    
education. She thought there were  some fair questions to be                                                                    
asked based on  data. For example, she  reported that across                                                                    
the board about 54 percent  of district funding went towards                                                                    
instructional  spending,   the  lowest  percentage   in  the                                                                    
country. There  were fair questions  that could be  asked of                                                                    
school districts.  The state did  not tell  school districts                                                                    
how to spend their funds.                                                                                                       
                                                                                                                                
9:52:32 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman indicated that  the Department of Education                                                                    
and Early  Development would be  before the  committee along                                                                    
with  OMB  to  address  certain questions.  He  thought  the                                                                    
meeting could be as soon as the upcoming Monday.                                                                                
                                                                                                                                
Senator Olson  stated that, although the  administration was                                                                    
focused  on  balancing the  budget,  he  was concerned  with                                                                    
ensuring  the  state  did not  get  into  another  education                                                                    
lawsuit.  The  Kasayulie  Case   and  the  Moore  Case  were                                                                    
lawsuits in  which the  state spent  millions of  dollars to                                                                    
defend  itself.  He  wanted to  caution  members  about  the                                                                    
sideboards of  being required to provide  an adequate public                                                                    
education. Co-Chair  Stedman asked Senator Olson  to explain                                                                    
the Kasayulie Case.                                                                                                             
                                                                                                                                
Senator Olson  recalled that  there were  a number  of rural                                                                    
school  districts  that were  not  being  given an  adequate                                                                    
amount of money to provide  a quality education. It resulted                                                                    
in  a lawsuit  against  the state  in  which the  plaintiffs                                                                    
prevailed.                                                                                                                      
                                                                                                                                
Co-Chair Stedman thought Senator  Olson was saying there was                                                                    
a third  branch of  government to  consider, the  court. The                                                                    
state had  to have adequate  education funding for  both the                                                                    
metropolitan  areas  and  the rural  areas  of  Alaska.  The                                                                    
financial  structure  for  education  had  to  be  equitable                                                                    
across the state.                                                                                                               
                                                                                                                                
Senator Olson replied  that it cost hundreds  of millions of                                                                    
dollars  to  provide  adequate   and  equitable  funding  in                                                                    
Alaska.  He  advised  the  finance   committee  to  be  very                                                                    
cautious about addressing the situation.                                                                                        
                                                                                                                                
Co-Chair  Stedman  would  bring  up the  question  with  the                                                                    
Commissioner of DEED.                                                                                                           
                                                                                                                                
Senator Micciche referenced  slide 9 and slide  10. He asked                                                                    
the chairman  to bring  the committee back  to the  point of                                                                    
transparency by separating general fund  by UGF and DGF. The                                                                    
administration continued  to discuss  user fees  which meant                                                                    
Alaskans  paying  their  own way  through  DFG.  He  thought                                                                    
eliminating  transparency  by  combining  UGF  and  DGF  was                                                                    
problematic.  He  noted that  in  the  additional slides  on                                                                    
page 2  UGF and  DGF were  separated. He  would like  to see                                                                    
both highlighted in the future.                                                                                                 
                                                                                                                                
Co-Chair Stedman  thought it was  clear that  members wanted                                                                    
to   see  the   funds  separated.   He  had   expressed  the                                                                    
committee's desire to  both LFD and OMB. He  believed it was                                                                    
necessary to look  at both GF sources and  then combine them                                                                    
to see all state spending. He  noted there were items in the                                                                    
budget  that  were  self-funded  and  were  proposed  to  be                                                                    
eliminated. Not all  UGF were the focus of  the state fiscal                                                                    
footprint reduction.  He indicated that if  Senator Micciche                                                                    
wanted any further bifurcation to let him know.                                                                                 
                                                                                                                                
9:57:27 AM                                                                                                                    
                                                                                                                                
Ms.  Arduin directed  attention  to slide  2 "Balancing  the                                                                    
Budget: Fiscal  Summary" from  the additional  slides, where                                                                    
undesignated  general  funds  (UGF) and  designated  general                                                                    
funds (DGF) were separated.                                                                                                     
                                                                                                                                
Ms. Sanders  relayed that  the fiscal  summary had  both the                                                                    
FY 19  management plan  and  supplementals  compared to  the                                                                    
FY 20 governor's  amended budget.  She highlighted  that UGF                                                                    
and DGF fund  sources were separated out and  also the total                                                                    
fund source amount was listed.                                                                                                  
                                                                                                                                
Co-Chair Stedman  asked for  specifics regarding  the change                                                                    
in  DGF  restricted  revenues  from  $1.1  billion  to  $932                                                                    
million. Ms. Sanders stated that  the increase in restricted                                                                    
revenue from  FY 19 over FY  20 had to do  with supplemental                                                                    
spending that  was added in FY  19 including a few  items in                                                                    
the  capital  budget:  An  Alaska  Marine  Highway  deferred                                                                    
maintenance  project  and  a   capital  project  within  the                                                                    
Department of Environmental Conservation.                                                                                       
                                                                                                                                
Co-Chair Stedman asked  if Ms. Sanders was  referring to the                                                                    
third  row from  the top,  where $1.1  billion went  down to                                                                    
about   $933   million.   Ms.  Sanders   answered   in   the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Co-Chair Stedman  thought it  was important  to note  if the                                                                    
amounts  were combined,  the impacts  of the  marine highway                                                                    
could not be seen.                                                                                                              
                                                                                                                                
Ms. Sanders discussed slide 11,  " UGF and DGF By Department                                                                    
- 12/14 Budget  vs 2/13 Sponsor Substitute,"  which showed a                                                                    
bar graph.  Undesignated general  fund spending was  in dark                                                                    
blue,  and  the DGF  budget  was  in yellow;  comparing  the                                                                    
December  14th  budget  to the  February  13th  budget.  She                                                                    
offered  that OMB  could  re-run the  graph  to compare  the                                                                    
management  plan.   Co-Chair  Stedman  responded   that  the                                                                    
comparison would be helpful.                                                                                                    
                                                                                                                                
10:00:50 AM                                                                                                                   
                                                                                                                                
Senator Wielechowski  referred to  the University  of Alaska                                                                    
budget. He  observed that $150 million  was transferred from                                                                    
UGF  to DGF  or  receipt authority.  He  asked what  receipt                                                                    
authority was  being contemplated.  Ms. Sanders  stated that                                                                    
there was a fund source change  within the UA budget of $155                                                                    
million  which   was  moved  from   UGF  to   receipts.  The                                                                    
University  could  develop a  plan  to  collect the  receipt                                                                    
amount.                                                                                                                         
                                                                                                                                
Co-Chair  Stedman asked  Ms. Sanders  to  provide a  greater                                                                    
explanation  for  the  public  of the  fund  source  change,                                                                    
specifically, the  UGF and DGF  distinction and  why members                                                                    
would have  an interest in  the difference between  the two.                                                                    
He drew  attention to the  UA bars  on the chart.  They were                                                                    
almost  equal.  He  wanted  the  public  to  understand  the                                                                    
difference.                                                                                                                     
                                                                                                                                
Ms.  Sanders explained  that UGF  dollars came  from general                                                                    
fund  revenue  and  could be  spent  dollar-for-dollar.  She                                                                    
continued  that  restricted  revenue dollars  (DGF  dollars)                                                                    
were more limited  in their use. Typically,  UGF dollars had                                                                    
statutory  designations placed  on  them and  could only  be                                                                    
used for the purposes they  were collected. For example, the                                                                    
tuition fees collected  at the University would  be used for                                                                    
paying tuition.                                                                                                                 
                                                                                                                                
Co-Chair Stedman  provided a hypothetical scenario  in which                                                                    
the designated fund category equaled  $1 billion rather than                                                                    
$300  million. He  concluded that  it would  not affect  the                                                                    
state's  cash   flow  if  additional  sales   could  not  be                                                                    
generated. He asked if he was correct.                                                                                          
                                                                                                                                
Ms.  Sanders answered  in the  affirmative.  She noted  that                                                                    
there  were  instances in  which  the  state had  designated                                                                    
funds that did not  require dollar-for-dollar collections in                                                                    
receipts.  Part of  the administration's  look working  with                                                                    
LFD  over  the  next  interim would  be  to  identify  where                                                                    
funding  sources were  receipt supported  and $1  had to  be                                                                    
collected  in  order  to be  expended.  There  were  several                                                                    
instances where  the dollars were  available and  not having                                                                    
to be collected.                                                                                                                
Co-Chair Stedman  thought the issue  existed for  the Alaska                                                                    
Pioneer Homes.  It was  referred to  in committee  as hollow                                                                    
receipt authority.                                                                                                              
                                                                                                                                
10:03:39 AM                                                                                                                   
                                                                                                                                
Senator  Wielechowski stated  that the  president of  UA had                                                                    
stated that  the proposed cut  would require the  closing of                                                                    
several  campuses or  approximately  doubling tuition  rates                                                                    
for UA students. He wanted to  see an analysis by OMB of how                                                                    
many  students  would  be forced  to  leave  the  University                                                                    
because of not  being able to pay a double  tuition rate. He                                                                    
aske if  an analysis had  been done. Ms. Arduin  answered in                                                                    
the negative.                                                                                                                   
                                                                                                                                
Co-Chair Stedman  stated that the committee  would be asking                                                                    
the  economist  the question.  The  question  could also  be                                                                    
posed to UA on the following Tuesday.                                                                                           
                                                                                                                                
Senator Wielechowski asked if Ms.  Arduin and her office had                                                                    
done any  sort of  analysis on  the impacts  of the  cuts to                                                                    
Alaskans.  Ms.  Arduin  stated that  OMB's  chief  economist                                                                    
could  present  the  implications   of  all  of  the  budget                                                                    
decisions   to  the   committee  including   the  governor's                                                                    
proposal  to  pay  full  dividends   through  the  PFD.  The                                                                    
economist  could  also  provide   analysis  of  all  of  the                                                                    
positive economic  impacts that would result  in getting the                                                                    
state's fiscal house in order.                                                                                                  
                                                                                                                                
Co-Chair Stedman  asked if Ms.  Arduin was referring  to Mr.                                                                    
King.  Ms.  Arduin  responded, "Correct."  Co-Chair  Stedman                                                                    
indicated the committee  would add to the list  of things to                                                                    
cover in his presentation.                                                                                                      
                                                                                                                                
Senator Wielechowski asked if  the analysis had already been                                                                    
done  prior  to  the  release   of  the  governor's  budget.                                                                    
Co-Chair Stedman suggested asking  the economist when he was                                                                    
before the committee.                                                                                                           
                                                                                                                                
Senator Wielechowski  asked Ms.  Arduin if the  analysis had                                                                    
already  been  done.  Ms. Arduin  responded  that  when  the                                                                    
economist  was before  the committee  he  would present  the                                                                    
analysis he had available.                                                                                                      
                                                                                                                                
Co-Chair Stedman suggested incorporating  a timeline. It was                                                                    
his understanding that  some of the analysis  had been done,                                                                    
and some of it had not been completed.                                                                                          
                                                                                                                                
10:06:25 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof appreciated slide  11. She thought it was                                                                    
interesting  to have  federal funds  and  other state  funds                                                                    
listed along with  DGF and UGF because, in the  past, it had                                                                    
been  a habit  of state  government to  cost shift  UGF into                                                                    
federal  funds. In  particular, it  had occurred  within the                                                                    
Department of  Health and Social Services  (DHSS). She noted                                                                    
there had  been tribal compact agreements  in which programs                                                                    
that remained  in existence  were being  funded differently.                                                                    
She thought it  was important to add two more  colors to the                                                                    
graph to represent other state  funds and federal funds. She                                                                    
asked for the  rationale of comparing the  December 14, 2018                                                                    
budget  (Governor Walker's  exit  budget)  versus using  the                                                                    
FY 19 enacted budget.                                                                                                           
                                                                                                                                
Ms. Arduin stated  that slide 11 was an  overview slide. The                                                                    
administration was  showing how  the governor  was proposing                                                                    
to solve  the $1.6 billion  deficit. She continued  that the                                                                    
$1.6  billion   deficit  was  a   comparison  of   the  past                                                                    
administration's  proposed  budget and  Governor  Dunleavy's                                                                    
budget. She  suggested that there  would be slides  for each                                                                    
of the  agencies showing all  of the funding sources  in the                                                                    
FY 19  management plan,  the December  14th budget,  and the                                                                    
proposed FY 20 budget.                                                                                                          
                                                                                                                                
Co-Chair von  Imhof reported  that in looking  at the  FY 20                                                                    
governor's amended budget compared to  the FY 19 budget, the                                                                    
magnitude of the reductions were less.                                                                                          
                                                                                                                                
Co-Chair  Stedman thought  the committee  was interested  in                                                                    
comparing the  FY 19  management with  the FY  20 governor's                                                                    
budget  dated  February  13th and  little  interest  in  the                                                                    
previous  governor's   budget  submitted  in   December.  He                                                                    
thought   including  the   December   14th   budget  was   a                                                                    
distraction and not relevant. He  would work with members on                                                                    
how they  wanted to see  the data presented. He  agreed with                                                                    
Co-Chair  von Imhof  and other  members as  to how  the data                                                                    
should be presented.  He did not want data to  be skewed one                                                                    
way or another.  The decisions the legislature  was going to                                                                    
have to make would be difficult.                                                                                                
                                                                                                                                
10:10:20 AM                                                                                                                   
                                                                                                                                
Senator  Wielechowski  asked  about   oil  tax  credits.  He                                                                    
wondered if  the amount  of oil tax  credit payments  by the                                                                    
state  from AIDEA  had increased  by $227  million. Co-Chair                                                                    
Stedman asked  for the senator  to clarify  what information                                                                    
he  was referring  to. Senator  Wielechowski was  looking at                                                                    
pages 68  and 69 of  the budget  beginning on page  68, line                                                                    
29. He read directly from the referenced pages and lines.                                                                       
                                                                                                                                
Co-Chair Stedman explained that  the committee was trying to                                                                    
get a  general feel for  the budget in the  current meeting,                                                                    
rather than getting into the line item detail.                                                                                  
                                                                                                                                
Ms. Arduin stated that OMB  would have a presentation on the                                                                    
issue and  would provide information  on the details  of the                                                                    
budget in the  current day and into the  following week. She                                                                    
reported that the statutory minimum  for oil and gas credits                                                                    
was proposed to be paid in the  budget for FY 20, as well as                                                                    
the remainder  of the  unpaid statutory  minimum for  FY 19.                                                                    
Co-Chair Stedman  stated that the matter  would be addressed                                                                    
in  more  detail in  subsequent  meetings,  as well  as  the                                                                    
matter of the bond package.                                                                                                     
                                                                                                                                
Ms.  Arduin  spoke  to  slide  12,  "FY2020  Budget:  Policy                                                                    
Groupings ":                                                                                                                    
                                                                                                                                
     ? Reducing dependence                                                                                                      
     ? Business process realignment                                                                                             
       Unleashing entrepreneurialism                                                                                            
     ? Program reform                                                                                                           
     ? Maximizing return on assets                                                                                              
     ? Outsourcing                                                                                                              
     ? Reducing regulatory burden                                                                                               
     ? Eliminate duplication                                                                                                    
     ? Non-essential programs                                                                                                   
     ? User pay                                                                                                                 
                                                                                                                                
Ms. Arduin  noted that the  slide showed  additional guiding                                                                    
principles   for  formulating   the  proposed   budget.  She                                                                    
reviewed the list on the slide.                                                                                                 
                                                                                                                                
Co-Chair  Stedman  asked if  Ms.  Arduin  would discuss  the                                                                    
substantial  amount of  legislation coming  forward to  help                                                                    
enact  the  proposed budget.  He  asked  her to  provide  an                                                                    
overview of  expectations, as  the budget  bill was  not the                                                                    
entire package.  Ms. Arduin  stated that  not all  the bills                                                                    
accompanying  the budget  had  been  introduced. There  were                                                                    
several bills  that would enforce the  proposals in statute.                                                                    
For example,  if the administration proposed  to eliminate a                                                                    
program  in the  appropriations bill,  it would  be followed                                                                    
with  a  statutory  proposal to  eliminate  the  program  in                                                                    
statute.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman's impression  was that  OMB would  provide                                                                    
documents that  would make it  easier for  committee members                                                                    
and  the public  to  understand all  of  the components.  He                                                                    
asked  if  he  was  correct.  Ms.  Arduin  answered  in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Co-Chair Stedman asked for an  estimated time-frame when the                                                                    
bills would  be submitted. Ms.  Arduin asked if  the Senator                                                                    
was talking about all of the bills.                                                                                             
                                                                                                                                
Co-Chair  Stedman   asked  if   the  information   would  be                                                                    
presented all  at once on  the following Monday or  over the                                                                    
following  several weeks.  He  was not  trying  to hold  Ms.                                                                    
Arduin  to  a specific  date,  rather  to provide  a  larger                                                                    
picture. Ms.  Arduin responded that on  the following Monday                                                                    
OMB was  scheduled to discuss statewide  items including the                                                                    
legislative  proposals.  However,  she   could  not  give  a                                                                    
timeline as  to when all of  the bills would be  drafted and                                                                    
presented to  the legislature. She would  present an outline                                                                    
for  the  committee in  the  presentation  on the  following                                                                    
Monday. Co-Chair Stedman  added that that it  would begin on                                                                    
Monday and for however long thereafter.                                                                                         
                                                                                                                                
10:15:52 AM                                                                                                                   
                                                                                                                                
Senator Bishop asked  if Ms. Arduin had  heard anything from                                                                    
the  state's  credit  rating agency  since  the  budget  was                                                                    
presented. Ms. Arduin stated that  OMB and the Department of                                                                    
Revenue  were scheduled  to discuss  and  review the  budget                                                                    
proposal  with   the  credit  rating  agency,   as  was  the                                                                    
customary practice on the part of the state.                                                                                    
                                                                                                                                
Senator Bishop  wanted Ms.  Arduin to  ask how  the proposed                                                                    
budget  would impact  the credit  rating of  local municipal                                                                    
governments.                                                                                                                    
                                                                                                                                
Co-Chair Stedman  suggested when  the committee  was dealing                                                                    
with the forthcoming package of  potential changes needed to                                                                    
implement the proposed budget, OMB  had done a very good job                                                                    
of encouraging departments to provide  a list of priorities.                                                                    
It was  important to have  a basis for making  decisions. He                                                                    
was curious when committee members  would be given that data                                                                    
for their subcommittee work.                                                                                                    
                                                                                                                                
Ms.  Sanders   stated  that  agencies  had   prepared  their                                                                    
priority lists which were available.  She would make sure to                                                                    
provide them to the subcommittees.                                                                                              
                                                                                                                                
Co-Chair  Stedman  stated  that  the  legislature  had  been                                                                    
waiting  for  years  to  see   prioritized  lists  from  the                                                                    
agencies. The  legislature had  never been  able to  get the                                                                    
departments  to prioritize  a list.  The committee  was very                                                                    
interested  in the  information  and would  take them  under                                                                    
advisement.                                                                                                                     
                                                                                                                                
Senator Olson  requested that, in addition  to the economist                                                                    
from  OMB,   the  committee   invite  economists   from  the                                                                    
Department of Labor and Workforce  Development and from ISER                                                                    
to make a presentation.                                                                                                         
                                                                                                                                
Co-Chair Stedman encouraged members  to communicate with the                                                                    
co-chairs as to who they might  want to have come before the                                                                    
committee. He  relayed that the Department  of Public Safety                                                                    
would be up next. He  reviewed the protocol for hearing from                                                                    
the individual agencies.                                                                                                        
                                                                                                                                
Co-Chair von  Imhof stated that there  had been conversation                                                                    
about  forthcoming  bills  to   accompany  the  budget.  She                                                                    
referenced  crime bills  that were  currently in  committee.                                                                    
She  asked if  testifiers  could address  whether the  bills                                                                    
with fiscal notes that had not  been passed but were in play                                                                    
were included in the budget.  If they were not included, she                                                                    
wanted to know about the fiscal impacts.                                                                                        
                                                                                                                                
Co-Chair Stedman wanted to strive  for clarity in the entire                                                                    
budget.  He acknowledged  Senator Gary  Stevens and  Senator                                                                    
Shelley Hughes in attendance.                                                                                                   
                                                                                                                                
10:21:59 AM                                                                                                                   
                                                                                                                                
DAN  SPENCER, ADMINISTRATIVE  SERVICES DIRECTOR,  DEPARTMENT                                                                    
OF PUBLIC SAFETY, OFFICE OF  MANAGEMENT and BUDGET, conveyed                                                                    
Commissioner Price's apologies for  not being in attendance,                                                                    
as she  had to go up  North unexpectedly. He moved  to slide                                                                    
14,  "FY2020 Budget:  Department  of  Public Safety,"  which                                                                    
showed the  budget changes in  the FY 20  governor's amended                                                                    
budget  from  the  FY  19 management  plan.  He  reported  a                                                                    
decrease  of  about  $3.1  million   in  general  funds,  an                                                                    
increase of about  $620,000 in other funds,  and an increase                                                                    
of about $9.2 million in  federal funds. He noted that there                                                                    
was a very small change  in positions. There was a reduction                                                                    
of  two   permanent  full-time  positions   in  the   FY  20                                                                    
governor's amended  budget, and there  was no change  in the                                                                    
number of part-time positions or non-permanent positions.                                                                       
                                                                                                                                
Co-Chair Stedman clarified that  looking at the middle graph                                                                    
reflecting  the FY  20 Governor's  plan from  12/14/19 there                                                                    
was an increase  of two people. Mr. Spencer  answered in the                                                                    
affirmative.  Co-Chair Stedman  asked about  vacancy issues.                                                                    
Mr. Spencer  was not sure  what the vacancy issues  were for                                                                    
the non-trooper positions. However,  there were currently 40                                                                    
trooper  vacancies. He  relayed  that there  was an  academy                                                                    
starting at the end of the  month with 18 recruits signed up                                                                    
for the training.                                                                                                               
                                                                                                                                
Co-Chair Stedman asked if the  40 vacancies were included in                                                                    
the 807 positions  listed on the graph.  Mr. Spencer replied                                                                    
in  the  negative.  He  indicated   that  the  807  depicted                                                                    
positions rather than persons.                                                                                                  
                                                                                                                                
10:24:15 AM                                                                                                                   
                                                                                                                                
Senator  Micciche  clarified  that  the  40  positions  were                                                                    
included  in the  807. The  number  reflected all  positions                                                                    
budgeted for  the department.  He asked  if he  was correct.                                                                    
Mr. Spencer answered, "That's correct."                                                                                         
                                                                                                                                
Co-Chair  Stedman asked  about  the  comparison between  the                                                                    
FY 19  management  plan  to  the  FY  20  governor's  budget                                                                    
(2/13). Mr.  Spencer stated  that on  the left-hand  side of                                                                    
the  page it  showed a  decrease  of about  $3.1 million  in                                                                    
general funds, an  increase of $620,000 in  other funds, and                                                                    
an increase of $9.2 million in federal funds.                                                                                   
                                                                                                                                
Co-Chair  Stedman wanted  Mr. Spencer  to  clarify that  the                                                                    
department would  have more money  for the FY 20  budget and                                                                    
that there would be more  cops rather than less. Mr. Spencer                                                                    
confirmed that the  department would have more  money to run                                                                    
the budget.  He reported DPS  would have fewer  general fund                                                                    
dollars and more of all other funds.                                                                                            
                                                                                                                                
Senator  Micciche asserted  that the  number one  concern of                                                                    
Alaskans   was  the   issue  of   crime.  There   were  four                                                                    
administration   crime   bills   and  a   couple   of   non-                                                                    
administration crime  bills to address the  issue. There was                                                                    
a  demand for  additional law  enforcement resources  around                                                                    
the state.  It appeared that  the state was only  adding two                                                                    
positions.  He was  unsure if  two additional  positions and                                                                    
the  filling of  the other  40 vacancies  would satisfy  the                                                                    
expectations of  Alaska's public. He asked  Mr. Spencer what                                                                    
legislators should say  to Alaskans that are  focused on the                                                                    
issue.                                                                                                                          
                                                                                                                                
Mr. Spencer responded  that he would tell  Alaskans that the                                                                    
department  would  not  ask  for money  it  would  not  use.                                                                    
Currently, with  the 18 individuals  coming into  the Alaska                                                                    
State  Troopers academy  and  the  Alaska Wildlife  Troopers                                                                    
academy  and the  individuals planning  to  attend the  Fall                                                                    
academy all of  the trooper positions would  be filled. Only                                                                    
after all of the positions  were filled would the department                                                                    
request  new positions.  Historically, there  were extremely                                                                    
high vacancy  rates for state  troopers. Neither  the Office                                                                    
of  Management and  Budget nor  the  commissioner wanted  to                                                                    
request money  for positions  that could  not be  filled. He                                                                    
would  bring up  additional funding  once all  the vacancies                                                                    
were filled.                                                                                                                    
                                                                                                                                
Co-Chair  von  Imhof  asked  why   the  positions  had  been                                                                    
difficult  to fill  and why  Mr. Spencer  was confident  the                                                                    
positions could  be filled in  the coming Fall.  Mr. Spencer                                                                    
was  uncertain  why  the  recruitment  unit  had  difficulty                                                                    
filling  the  positions. In  the  current  year, the  Alaska                                                                    
State  Troopers  had  its  largest   academy  in  years.  He                                                                    
highlighted  that   there  were  more   municipal  employees                                                                    
attending the next academy than  state troopers. He had seen                                                                    
downturns  in  recruitment. He  would  respond  back to  the                                                                    
committee on the reason for the increased enrollment.                                                                           
                                                                                                                                
Co-Chair Stedman asked about  a previous legislative concept                                                                    
that included  a salary increase  for state troopers  with a                                                                    
2-year step increase.                                                                                                           
                                                                                                                                
10:28:31 AM                                                                                                                   
                                                                                                                                
Mr. Spencer stated that in  the previous year for the Alaska                                                                    
State  Troopers, there  was  a  classification increase  for                                                                    
Alaska  State  Troopers.  The increase  had  the  effect  of                                                                    
increasing the  troopers salary by  7.5 percent  on average.                                                                    
In  addition,  there  were letters  of  agreement  with  the                                                                    
Public  Safety  Employees   Association  for  an  additional                                                                    
increase  in  salaries, about  another  7.5  percent, and  a                                                                    
couple of  other smaller changes to  salaries. He referenced                                                                    
an  ongoing issue  of other  police  departments in  Alaska,                                                                    
such  as  the  Anchorage  Police  Department,  having  wages                                                                    
higher than Alaska  State Troopers. The state  had lost some                                                                    
state  troopers  to   that.  Wages  in  the   Lower  48  had                                                                    
increased, also adding to the  problem of losing troopers to                                                                    
other  employment opportunities.  He reported  that in  exit                                                                    
surveys he  had consistently seen comments  about wages paid                                                                    
in  other places.  The intent  was to  address the  issue of                                                                    
wages and to help with  recruitment. He was uncertain if the                                                                    
reasons he had mentioned were driving recruitment.                                                                              
                                                                                                                                
Co-Chair  Stedman  recalled  a two-year  implementation  and                                                                    
asked if  there were any  changes in it. Mr.  Spencer stated                                                                    
that  the  information  the  Senator  had  remained  in  the                                                                    
budget.                                                                                                                         
                                                                                                                                
Senator Micciche  thought it was  important that  the public                                                                    
knew that there  had been a study which had  made clear that                                                                    
in order for the state troopers  to be on par with other law                                                                    
enforcement  organizations,   an  increase   was  necessary.                                                                    
Otherwise,  the gap  was  too great  for  individuals to  be                                                                    
interested. He thought the changes  had made a difference in                                                                    
morale and had increased the numbers in the academy.                                                                            
                                                                                                                                
Co-Chair Stedman asked  if the increase was  included in the                                                                    
FY 20  budget. Mr. Spencer responded  that it was in  the FY                                                                    
20  budget. He  noted there  was a  separate section  in the                                                                    
operating budget bill that addressed salary increases.                                                                          
                                                                                                                                
Senator Olson  noted Mr. Spencer  had witnessed  the Village                                                                    
Public Safety  Officer (VPSO) numbers  fluctuate. Currently,                                                                    
the numbers  were down significantly.  He asked if  the same                                                                    
considerations had been provided,  such as exit surveys with                                                                    
VPSO  personnel  to  find  out  their  reasons  for  leaving                                                                    
service.                                                                                                                        
                                                                                                                                
Mr. Spencer  did not know  if DPS had conducted  surveys. He                                                                    
reminded the  audience that VPSOs were  not state employees.                                                                    
Rather, they  were employees of the  regional non-profits or                                                                    
the one  municipal government  that ran  a VPSO  Program. He                                                                    
noted  that in  FY 12  VPSO salaries  were increased  and in                                                                    
FY 19 VPSO salaries  were increased by 6  percent. The state                                                                    
offered a  retention bonus of  $5,000 for VPSOs  that stayed                                                                    
for a minimum period of 3  years. There was one other salary                                                                    
incentive. The  state recognized  that the VPSO  Program had                                                                    
many  of the  same  challenges as  the  trooper program.  He                                                                    
would be addressing  the VPSO Program being  down in numbers                                                                    
later in the presentation.                                                                                                      
                                                                                                                                
10:32:44 AM                                                                                                                   
                                                                                                                                
Mr. Spencer spoke  to slide 15, "  FY2020 Budget: Department                                                                    
of Public Safety Snapshot":                                                                                                     
                                                                                                                                
     ? Training Academy - Interagency Receipt Authority for                                                                     
     Anticipated Training                                                                                                       
     Academy Revenues (+$500.0 Other)                                                                                           
     ? Statewide Support  Executive Branch 50% Travel                                                                           
     Reduction (-$103.8 GF)                                                                                                     
     ? Align Village Public Safety Officer Funding (-                                                                           
     $3,000.0 GF)                                                                                                               
     ? Reverse State Support for Civil Air Patrol (-$302.3                                                                      
     GF)                                                                                                                        
     ? Federal Receipt Authority for the High Intensity                                                                         
     Drug Trafficking Areas Program (+$5,000.0 Fed)                                                                             
     ? Council on Domestic Violence and Sexual Assault                                                                          
     Federal Receipt Authority for Victim of Crime Act                                                                          
     Grant Award (+$4,000.0 Fed)                                                                                                
                                                                                                                                
Mr.  Spencer noted  that the  training academy  was in  Sita                                                                    
where the  state troopers,  many municipal  police officers,                                                                    
and VPSOs received their training.  He drew attention to the                                                                    
$500,000  other  increase  was for  interagency  receipts  -                                                                    
payments that would come from  the Alaska State Troopers and                                                                    
the  Alaska Wildlife  Troopers to  the  academy (a  separate                                                                    
component because  of the  increased enrollment).  There was                                                                    
also a  $150,000 general fund  program receipt that  was not                                                                    
bulleted  on  the  slide  for  additional  collections  from                                                                    
municipalities  for sending  their law  enforcement officers                                                                    
to the academy.                                                                                                                 
                                                                                                                                
Co-Chair  Stedman asked  about  the capacity  of the  police                                                                    
academy. Mr. Spencer  did not know the  answer. He estimated                                                                    
40 recruits as the maximum class size.                                                                                          
                                                                                                                                
10:34:27 AM                                                                                                                   
                                                                                                                                
Mr. Spencer  continued to  address slide  15. He  pointed to                                                                    
the  50   percent  reduction  to  travel   within  statewide                                                                    
support. He explained  that most of DPS was  not affected by                                                                    
the   decrease.  The   travel  reduction   applied  to   the                                                                    
commissioner's    office,   the    administrative   services                                                                    
division,  information  services,  the crime  lab,  and  the                                                                    
academy.                                                                                                                        
                                                                                                                                
Ms. Arduin added that the  50 percent travel reduction was a                                                                    
statewide reduction that would  be reflected in other agency                                                                    
budgets.  Certain  functions  were exempt  from  the  travel                                                                    
reduction such as law enforcement.                                                                                              
                                                                                                                                
Mr.  Spencer   noted  the  reduction  to   VPSO  funding  of                                                                    
$3 million  which was  a  continuation  from a  supplemental                                                                    
appropriation.  The reduction  was not  a comment  about the                                                                    
VPSO Program.  The sum  reflected the  amount lapsed  in the                                                                    
past. In each  of the previous 2 years about  $3 million was                                                                    
left over.  The amount  had been about  $800,000 in  each of                                                                    
the 2 years before that.                                                                                                        
                                                                                                                                
Mr. Spencer  continued to discuss the  proposed reduction to                                                                    
VPSO funding. He  reported that at the end  of January 2019,                                                                    
the VPSO Program had 42 people  in it. At its high point and                                                                    
very briefly,  the program  had 101  VPSOs. Since  then, the                                                                    
program had  been in  a steady  downward trend.  The funding                                                                    
over  the  previous 4  years,  after  a brief  reduction  in                                                                    
funding   at    the   start   of   the    prior   governor's                                                                    
administration,  had been  relatively  flat.  The number  of                                                                    
VPSO  that  were  being  employed   by  non-profits  in  the                                                                    
Northwest  Arctic Slope  Borough continued  to decline.  The                                                                    
department would like to see  the numbers improve, as it was                                                                    
the  job of  the department  to promote  and provide  public                                                                    
safety. The state had viewed  the VPSO Program as a partner.                                                                    
The  state was  also  looking at  other  innovative ways  to                                                                    
improve  public  safety  overall  instead of  only  the  law                                                                    
enforcement  aspect.  He  recalled that  the  VPSO  Program,                                                                    
started  in  the  '70s  and   was  not  as  much  about  law                                                                    
enforcement as it  was about other things  related to public                                                                    
safety  such  as  search and  rescue,  fire,  and  emergency                                                                    
medical  response. The  department  wanted to  get the  VPSO                                                                    
Program doing  what it  was intended to  do and  taking full                                                                    
advantage  of  the available  funding  in  order to  make  a                                                                    
difference in communities.                                                                                                      
                                                                                                                                
10:38:57 AM                                                                                                                   
                                                                                                                                
Senator Olson  referenced the  VPSO Task  Force that  he had                                                                    
chaired.  He noted  that one  of the  strong recommendations                                                                    
was for  the legislature  to provide compensation  for VPSOs                                                                    
equitable to  the compensation the unionized  state troopers                                                                    
received.  He wondered  if the  recommendation was  followed                                                                    
and whether  Mr. Spencer  remembered the  amount recommended                                                                    
during the VPSO Task Force era.                                                                                                 
                                                                                                                                
Mr. Spencer could  not speak to the previous  four years, as                                                                    
he  was  not with  the  department  during those  years.  He                                                                    
reiterated  that VPSOs  had received  a salary  increase. He                                                                    
agreed that  the Alaska State Troopers  were state employees                                                                    
and  were  represented by  a  bargaining  unit. The  Village                                                                    
Public  Safety  Officers  were  employees  of  various  non-                                                                    
profits.  The state  had a  salary  schedule which  included                                                                    
merit  increases. He  could  get back  to  the committee  in                                                                    
terms of what  happened over the past several  years. He did                                                                    
not know.                                                                                                                       
                                                                                                                                
Senator Wielechowski  did not  understand the  rationale for                                                                    
the proposed  reduction to the  VPSO Program He  argued that                                                                    
the legislature  had a constitutional obligation  to provide                                                                    
public safety to  both rural and urban areas.  The wages and                                                                    
benefits were  set so low  that it was difficult  to attract                                                                    
qualified VPSOs, yet the administration  cut the funding. It                                                                    
appeared as though the department was admitting to failure.                                                                     
                                                                                                                                
Mr. Spencer  rebutted that the department  was not admitting                                                                    
to  failure  or  reducing  funding for  VPSO  salaries.  The                                                                    
department was basing its  reduction on historical patterns.                                                                    
The  VPSO Program  had  not been  able to  fill  all of  its                                                                    
positions or  use all the  money that was  appropriated. The                                                                    
governor's commitment was to not  ask for money that was not                                                                    
going  to be  spent. If  the VPSO  Program had  enough VPSOs                                                                    
onboard  and  it  appeared  the  program  needed  additional                                                                    
funding, he  was certain the  governor would  reevaluate the                                                                    
program.  The administration's  attitude had  been that  the                                                                    
state  would fund  the positions  if  the non-profits  could                                                                    
fill them. Senator Olson did not agree with Mr. Spencer.                                                                        
                                                                                                                                
10:42:10 AM                                                                                                                   
                                                                                                                                
Senator Wielechowski  thought there was a  problem in saying                                                                    
"Don't even  try." He  suggested that if  the VPSOs  came up                                                                    
with a solution in July,  August, or September, they did not                                                                    
have  the  funds  to  fill the  positions.  He  thought  Mr.                                                                    
Spencer was saying,  "Give up. Don't even  try." He wondered                                                                    
what would be  wrong with putting the funds  into the budget                                                                    
and urging the  program to find solutions. If  the money was                                                                    
not spent it could be rolled back into the general fund.                                                                        
                                                                                                                                
Ms. Arduin stated  that the department was  trying very hard                                                                    
to work  on the issue.  The issue  had been around  for many                                                                    
years.  The  administration   would  welcome  any  proposals                                                                    
legislators might have to try  to improve the situation. She                                                                    
reiterated that if the program  filled all of its positions,                                                                    
the   administration  would   be   asking  for   expenditure                                                                    
authority.                                                                                                                      
                                                                                                                                
Co-Chair Stedman  suggested that the committee  wait for the                                                                    
attendance of the commissioner to  have a dialogue regarding                                                                    
the VPSO Program. He thought  there was concern that some of                                                                    
the  small villages  needed additional  assistance. In  some                                                                    
cases, some of  the villages had gone a long  time without a                                                                    
VPSO.  In  some  instances  recruitment  was  difficult.  He                                                                    
wanted  to   speak  further  with  the   commissioner  about                                                                    
attracting more participation.  The smaller communities were                                                                    
very  concerned  about  the safety  of  their  children  and                                                                    
families. If  there were more people  interested in becoming                                                                    
VPSOs, he believed the  legislature would support additional                                                                    
funding.                                                                                                                        
                                                                                                                                
Senator  Olson considered  budget  deficits,  and asked  Mr.                                                                    
Spencer  about any  potential plans  for  VPSO aircraft.  He                                                                    
recalled  when  he  started  there  was  a  Jet  Ranger  and                                                                    
currently there  were two  A-Stars, one  of which  was moth-                                                                    
balled in  Fairbanks or was  being readied  for liquidation.                                                                    
He asked for confirmation.                                                                                                      
                                                                                                                                
Co-Chair  Stedman thought  some  of his  questions could  be                                                                    
posed to the commissioner. He  asked Mr. Spencer to comment.                                                                    
Mr. Spencer had not had  the opportunity to have discussions                                                                    
with  the commissioner  regarding the  aircraft. He  thought                                                                    
the question would be better answered by the commissioner.                                                                      
                                                                                                                                
10:45:42 AM                                                                                                                   
                                                                                                                                
Mr.  Spencer continued  his  remarks on  slide  15. He  drew                                                                    
attention  to  the  reversal  of funds  for  the  Civil  Air                                                                    
Patrol.  He   recalled  that  in   the  previous   year  the                                                                    
legislature  put in  a  one-time  appropriation of  $302,300                                                                    
general fund dollars. The item had  not been added back in -                                                                    
one of  the differences  between the FY  19 funding  and the                                                                    
FY 20 proposed funding.                                                                                                         
                                                                                                                                
Co-Chair  Stedman asked  if the  one-time  funding had  been                                                                    
historically  in the  budget.  Mr. Spencer  answered in  the                                                                    
affirmative,  although the  amount  varied.  There had  been                                                                    
many  discussions over  the years  whether the  state should                                                                    
continue  to  fund the  program.  The  legislature made  the                                                                    
choice to include the appropriation  in the budget in FY 19.                                                                    
He was unsure of the history of the requests.                                                                                   
                                                                                                                                
Mr. Spencer discussed the federal  receipt authority for the                                                                    
High Intensity  Drug Trafficking  Area (HIDTA)  Program. The                                                                    
president  gave  the  state   the  designation  of  a  HIDTA                                                                    
Program.  The state  had already  received  $2.5 million  in                                                                    
federal  grant  funding  and   would  receive  another  $2.5                                                                    
million in federal  FY 19. He was expecting  the state would                                                                    
receive $2.5  million each year into  the foreseeable future                                                                    
and possibly more. The department  was asking for additional                                                                    
receipt authority so that when  the funds came in they could                                                                    
be spent.  The department  was working with  law enforcement                                                                    
around the state to try to  do something to reduce the crime                                                                    
rate, the drug abuse rate, and associated crimes.                                                                               
                                                                                                                                
Co-Chair Stedman asked  if the funds could be  used for drug                                                                    
interdiction with  drug dogs to  help with mail  coming from                                                                    
various   delivery  sites.   Mr.  Spencer   understood  that                                                                    
anything  was fair  game to  stop the  flow of  drugs coming                                                                    
into the state.                                                                                                                 
                                                                                                                                
Co-Chair  Stedman had  heard from  his  district that  drugs                                                                    
were flowing into  small communities that did  not have much                                                                    
of  a law  enforcement  presence. He  used  Prince of  Wales                                                                    
Island as an example. He thought  it tied in with VPSO needs                                                                    
along with working with drug  enforcement to close the gaps.                                                                    
He advocated for additional drug dogs.                                                                                          
                                                                                                                                
10:49:16 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof  thought it was good news  that the state                                                                    
had received  some of the  grant funds. She wondered  if the                                                                    
funding would flow into FY 20.  She noted the $5 million for                                                                    
the HIDTA  program and the  Victim of Crime Act  Grant Award                                                                    
of  $4 million  for the  Council  on  Domestic Violence  and                                                                    
Sexual  Assault (CDVSA).  She observed  that although  there                                                                    
were additional  funds of  $9 million,  there were  not many                                                                    
additional employees.  She wondered  how the money  would be                                                                    
spent. If the  money was going to be spent  on programs, she                                                                    
asked who would be running the programs.                                                                                        
                                                                                                                                
Mr.  Spencer stated  that there  were joint  agreements with                                                                    
several  agencies. The  department  would spend  funds on  a                                                                    
variety  of things.  An  example  was reimbursing  municipal                                                                    
police  officers   for  some  time.  The   department  might                                                                    
purchase  equipment   or  drug  dogs.  It   was  not  always                                                                    
necessary to  hire more  individuals. Much  of the  time the                                                                    
department  could do  more with  the individuals  it already                                                                    
had  with  more  funding.  He   would  be  able  to  provide                                                                    
additional detail in the finance subcommittee.                                                                                  
                                                                                                                                
Mr. Spencer addressed  the last item on slide  15, which was                                                                    
the Council on Domestic  Violence and Sexual Assault federal                                                                    
receipt authority for  the Victim of Crime  Act (VOCA) Grant                                                                    
Award of $4  million in federal funds.  The funding included                                                                    
$500,000   for  prevention   efforts,   safe  housing,   and                                                                    
shelters, particularly  in rural  areas. The  department had                                                                    
requested receipt authority from  the Legislative Budget and                                                                    
Audit Committee for these funds.                                                                                                
                                                                                                                                
Mr. Spencer noted that in  the previous year the legislature                                                                    
had  made  a change  that  allowed  Permanent Fund  Dividend                                                                    
criminal funds, funds from convicted  felons, to be used for                                                                    
domestic  violence  and  sexual assault.  He  reported  that                                                                    
$215,000 of authority was added to the CDVSA budget.                                                                            
                                                                                                                                
Co-Chair Stedman  discussed the  schedule for  the following                                                                    
day.                                                                                                                            
                                                                                                                                
SB  20  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
FY2020 Gov Amend Budget to SFC 2.14.19.pdf SFIN 2/14/2019 9:00:00 AM
SB 20
FY2020 Gov Amend Budget to SFC 2.14.19 Additional Slides.pdf SFIN 2/14/2019 9:00:00 AM
SB 20
SFIN-2-15 Dept. of Law Vacant Positions.pdf SFIN 2/14/2019 9:00:00 AM
SB 20
2.14-15.19 OMB Response.pdf SFIN 2/14/2019 9:00:00 AM
SB 20
FY19 Mgt Plan to FY20 Gov Amend Federal Funds Comparison.pdf SFIN 2/14/2019 9:00:00 AM
SB 20
Dept Chart All Funds.pdf SFIN 2/14/2019 9:00:00 AM
SB 20