Co-chair Foster and myself co- chair Josephson also present today our house finance committee staff committee assistance
Assistant Helen Phillips page Tallulah Lostefka secretary Brie Wiley and secretary Leah Frazier
We also have moderator Emily mesh with us
from the legislative information office
Before we start, please mute your cell phones in today's meeting
We will introduce and have our first hearing on house bill 283 titled appropriations supplemental
followed by invited testimony.
Then we will have the Legislative Finance Division presented as overview of the Governor's FY27 budget.
We're joined by Representative Stapp.
First on the agenda is House Bill 283, my staff, Ken Alper is prepared to present on
the committee bill.
Mr. Alber, please come forward, put yourself on their record.
Good afternoon, Mr. Chairman for the record. My name is Ken Alper staff to yourself represent a Josephson and the House Finance Committee
What you have before you today, mr.. Chairman is a committee bill introduced under the name of the finance committee
However, these are all governor's items
Meaning when governor Dunleavy introduced his fixed fiscal plan his budget in December and January
The supplemental items the the items that take effect during the current fiscal year between
That solved needs between now and June. We're all embedded within his regular operating and capital budgets
He did not have a standalone
supplemental budget and based on
Input from from the construction industry and others the you felt there was a need to get a
Supplemental budget moving sooner moving ahead so that these items could be pinned down and funded earlier
So the decision was made to pull those items from the governor's bills, the operating and capital budget,
out and create a separate bill with just the supplemental, introduce it as a
separate committee bill and try to make it into something of a fast track.
So that's the broad background.
There's not that many things here.
The spreadsheet on the screen, which members have had since yesterday, the public as well,
is what is in this bill, House Bill 283, and I'm happy to go through them.
And then how they're funded and where they sort of tie into other legislation.
That they should this Bill pass, obviously, they would be removed from amended versions of the other budget bills.
So, and the first thing in this bill, Mr. Chairman, is that it's intended to provide a funding source for the known budget deficit for things that have already passed.
You might recall when the budget passed at the end of the prior legislative session, there was an expectation of a surplus.
Even after the governor's vetoes and then the overrides that occurred in August,
we were expecting about $130 million more in revenue than we had in known expenditures.
And when the fall revenue forecast came out, there was about $180 million shift in revenue taking us from a 130 surplus to what's now a known $51 million deficit based on the forecast revenue numbers from last month.
So this bill would fund those.
And then we go into the individual items.
There's one exception and that's the first item on the list.
Sections one through three, the number section operating of this bill is a Medicaid line item
that came to us in a report from the Department of Health.
It's a relatively precise number.
It is the known shortfall in state match to the Medicaid program.
To put this in context, Mr. Chairman, it's about the largest program in the state budget.
dollars overall, the rest of it federal, and based on what they know at the Department
of Health, this is going to be short by $36.4 million.
Based on the testimony of the OMB Director,
this the number that you expect to see in the next round of Governor's supplemental
proposals that will be coming to the committee next week, but it was not in
the Governorís budgets as introduced in December.
So thatís one thing that we, your committee, have added to this bill.
My items, and I'm happy if people need to interrupt the next questions as we go throughout at your discretion.
There's only six or eight items here.
The next item in sections four through six is the item that's probably had the most coverage,
the best press associated with it.
That is federal DOT matching funds, mostly for the highway program.
This replaces money that was originally appropriated last year through re-appropriations that the governor vetoed.
So there's this gap out there.
And that $70 million represents matching funding for up to what could be $700 million in federal construction funding.
That the hope is to have that money pinned down so that contracts can be let, and that work could done in the coming construction season.
And you could see that funding in sections four through six of the bill.
Mr. Hopper, I'm going to do some housekeeping of Representative Ellerd and Representative Thomas Shefsky have joined us
Representative Colom is with us in the gallery. Please continue if there's more
Mr.. Chairman
Representative Galvin question for Mr
I have a quick question, please regarding the line item that you just covered so it's a
69.695 and I you mentioned hope to be
700 million are you referring then it? It's attend to one match. I just want to make sure I
I understand that through the chair representative Galvin. Yeah, most of these highway programs that I
understand it is actually a 9 9010 match
So whatever we put in would leverage nine times that amount in federal funding. Okay, thank you
Anything more mr. Helper
Mr. Chairman my understanding is after I'm done presenting the underlying bill
You have invited testimony from the the contracting and construction industry that could speak with a lot more detail on the and the need and urgency of of this particular line item
The
The next item on the bill is a, is what you call a re-aprope.
It's taking a previous appropriation that has some leftover funding in it and
using it as a match for a US Department of State Energy Program.
It $650,000, it's not new money.
But it's something that the governor put in his capital budget as a supplemental item and we simply pulled it out when we were doing a fairly comprehensive job of moving the supplemental items to this new bill and put it in here.
The eight of the bill itself are the fund capitalization sections of $40 million to the disaster relief fund.
This is the governor's number, this is what we.
I believe is the need for the rest of this year.
There's other disaster relief fund appropriations
in the underlying operating budget
that'll be FY 27 money.
Obviously, there's some large disasters
in past interim, the typhoon and hollang, et cetera.
That'll have a lot of cost associated with it.
And Alexi Painter, when he speaks later,
can go into much more nuanced detail than me
on the nature and timing of that funding
and how it works with federal disaster money
and that sort of thing.
There's a lot of moving parts with disasters.
The next line item is the fire suppression fund.
This one is a little bit unusual just because there's
a bit of inconsistency in how the administration's information came to the committee.
totaling of the supplemental need, the fiscal summaries,
the tables include the assumption that there's a $55 million
fire suppression expenditure.
And by and large, Mr. Chairman, that money hasn't been spent.
That this is money that, there was a disaster declaration
related to fires over the summer.
The monies have been spent under the terms
of disaster declarations.
And so we just need to appropriate it.
cover for the fact that the money has actually been spent.
But the governor didn't put that $55 million line item in his actual budget.
Our understanding, at least at the beginning of session and leading into that,
was that they intended to use ratification, a little bit different mechanism.
I don't know if that's still their intent, but based on the guidance we got from legislative finance and
historic practice of the legislature, we thought it would be best to put it in the budget as a line.
the fire suppression fund to meet its needs and to
meet what frankly has already been expended.
So far as we know, $55 million.
The next line items are related to the oil and hazardous release prevention and
response funds.
These are the items that handle spill.
clean up and spill response, and they're funded through a couple of small taxes,
both the so-called Nikola Barrel surcharge on oil production from the North Slope,
as well as the slightly less than one cent per gallon tax on refined fuels
that's administered as part of the motor fuel tax at the Department of Revenue.
The way those work mechanically is that the money comes in over the course of
an appropriation that moves it into these management funds that are at the Department of Environmental Conservation.
It's a routine activity, it's always a supplemental item.
And so we moved it in to this bill rather than leaving it, in the operating budget.
Because again, its a subliminal item, there's no new money here,
it is all revenue that we are already receiving and it simply putting it
in its statutorily designated place because we can't have dedicated funds.
where it belongs every year.
The next line item, 9C of the bill, is a large fund transfer to refill the higher education investment fund.
Now, this is the fund that's an endowment that funds programs such as performance scholarships, the whammy program.
And it has, when it's full, about $400 million in it.
And its income funds these various essential education programs.
$25 last year to balance the supplemental budget because there was not another funding source made available.
Many have said, including the governor, the other body,
the house leadership, that there's a desire to refill that fund.
We now know the number.
The number is slightly less than $130 million.
And this bill refills the higher education fund so that it brings it up to its full amount.
We don't have recurring overdraws, bringing down its balance in the years to come as we fund the programs.
And so all of that adds up to just under 382.3 million dollars.
Now the number that you might have seen back when the governor was introducing his budget was 346.
294 of new stuff in the budget plus 51 of the deficit that we're feeling that
we already know about is 346.
To that, we added the roughly 36 million in Medicaid, which was a known incoming number to get to the 382.
And the way that we're proposing to fill this in House Bill 283 is with the Constitutional Budget Reserve Fund.
That is the same way the governor was looking to do this.
He had worded it a little bit different, structured it slightly differently.
And his only added up to 280 million, really the 246 that was in the bill.
Plus a little bit of what they call headroom.
We don't have any head room in this budget.
By adding the Medicaid, we went slightly over the 380 to 382.
And then put a cap in there's budget of right at the 38 2.
So it would require the three quarter vote for
the constitutional budget reserve to fund all of these items when this bill would get to final passage.
Mr. Chairman that is what is in house bill 283 and I'm happy to take any questions
Okay, one thing I want to clarify on is you said there was 294 million of new stuff. It's really not new. Stuff.
It it's it it just not read ink
Thank you. Yeah, mr. Charron by new Stuff
I mean
Newer than what was in last year's budget the 51 is last years budget. That's already passed
the 293 are the line items that I just
introduced that are in front of you here that were that
needs that were identified by the governor and then plus the 36th of Medicaid, which is the new one
Rep Thomas chef's key. I think you coach your
Josephson through the chair
you mentioned the
higher education fund the hundred and twenty nine million that was
withdrawn to bounce a budget last
Last go around you said something interesting when you that you say you didn't want to see or
We didn't want to see reoccurring withdrawals from this fund as that ever been, we ever
used that fund before to balance a budget.
Mr. Halle.
Through the Chair, Representative Tom Myshevsky, let me try to rephrase that.
I didnít intend it to be taken that way.
What I meant to say was there is this demand on the earnings and the proceeds of the fund
that are based on what the fund is expected to produce when it has $400 million in it.
If there's only $270 million dollars in, it's earnings out there in the market are going to be less than the annual demand.
And that means every year we'll be taking more out than we're putting back in through earnings and
gradually the value of the funds will be eroded.
And, that's what this refilling is intended to prevent.
Just follow-up.
Follow-ups.
So, thank you.
Through the chair.
So has that fund ever been used in the way it was used last year?
Through you?
Thank you, Chairman.
Do you know it?
No, it has not.
This was the first time, at least to my knowledge, that this had ever happened.
Okay.
Thank You.
It was swept away once, however.
Mr. Chairman, Thankyou.
That's an important, over the years, and you yourself have been in
the middle of these debates.
What is subject to the so-called CBR sweep at the end of it every fiscal year under about section 17d?
What in past years
There was a year. I think it was 2020 or 2021 where the socalled reverse sweep
vote didn't happen and the higher education fund was wiped for a period of months and then in the
next session it was reconstituted to its full amount. Actually it must have been 2021 because it
was the 2022 session that we had surpluses and high oil prices and we conveniently had enough cash
an important of priority to that legislature to recapitalize.
Absolutely, Mr. Chairman, that we got,
it was close to $400 million that was put back into the fund in 2022.
Representative Hannon.
Thank you, Co-Chair Josephson. Mr Alper,
my question has to do with section five.
The DOT match and on page six of the bill as drafted.
When we look at that item, we've got the 69.695 match money.
And then we also have 459,000 in receipts.
So I just want to make sure and I understand we're not appropriating 451 of UGF.
This 459,000 is going to show on there, so I want to make sure that you have articulated on the record that that is not.
Because if we're looking at your summary sheet, and if you're matching the sections, the totals would be different.
Because it doesn't mention the program receipts.
And I also want verify that those program recedes are not,
are they are dependent on that match money being allocated?
Through the chair, Representative Hannon,
I don't know that I can answer all of those questions, it's a hundred percent. I will say you're looking at section five.
You should let's back up a page to page five to section four, which has a little bit more detail on the line items there, and you can see
the reason it is in two separate places is
the 69.9 million the larger number is what they're calling federal program match the sort of nine-to-one
share going to the federal appropriations versus the smaller number which they're calling statewide federal programs which also is matching to federal funds, but it might require someone from DOT or maybe Mr. Painter to explain the nuance of the difference.
We took it the way it was written in the governor's budget.
I do want to call out through the chair that the summary sheet does have both numbers on it.
Number down is the 69.6, and then the fourth number down, is that 459,000 number?
So, follow up, but I guess it's more of a statement of, I will look to Mr. Payne to explain it, because of course we have heard the federal match being restored via supplemental, or in the governor as a 70 million.
And sometimes this 69, And if the different is these program receipts,
If it needs to be part of the supplemental, I want it there so that we are maximizing our federal match.
But if it's not a supplemental if its just ongoing receipts,
then it inflates how much we're putting in the subliminal bill.
Well I see Mr. Painter has-
And we can wait till he's there to present.
I think as Mr Upper said, this was identified as a supplement in
the operating budget, House Bill 264.
Mr. Painter, can you come up and clarify this issue?
I think we say 70 million for expediency, basically.
The record of the Lexi Painter Legislative Finance Division, sorry, I was identifying the public version of
the bill that was copied, just missing some pages.
So, through the Chair, Representative Hannon, if I'm understanding correctly your question is
budget section, there's 459,000 in unrestricted general funds, the question?
I guess, what's the questions of that?
So I started on page six of the bill where it shows it as unrestricted federal receipts,
the 4.59 thousand. The previous page shows that as statewide federal programs,
it doesn't say receipts there, and so I'm just trying to understand that 4,159, 000.
Through the chair representative handed so in section 5 it's listed as unrestricted general fund receipts, and that's the same title and
Section 6 it just essentially non matching general funds
So these these items in the statewide federal programs appropriation are not match funds. They're just
standalone programs. These were both funded last year in the capital budget, using eight
of reserve funds, which the governor vetoed every fund, every appropriation using that
eight of reserves. So these two are not related to the match issue.
These are just separate appropriations that the Governor wishes to make up.
So they're just unrestricted general funds unrelated to match in any way.
Okay. One clarifying just so I can say it in a way that my brain will stick.
Match money, but it is needed supplemental so that we can receive those receipts
Through the chair of abdomen has no relation to match. It is
Another item that the governor has identified as supplemental because the item was vetoed last year.
It has not needed to receive receipts. This is unrestricted general funds.
This has stayed general fund dollars. No no match no
Mean everything is receipts like receipts is in the formal title of under certain general fund receipts
But it's just general funds
Okay. Thank you
Thank you, Coach, your Joseph's sent through the chair to Mr. Alper.
Just wanted to go back to your introduction of the Fast Track supplemental, and you said
these are new items, I think I know what you meant, but I just want to make sure that we're
really clear for the public that may be watching.
When you say new item, you simply mean that these were costs that were incurred since the
passage of a budget, that are not included in the budget or that they were vetoed out
of budget.
Is that correct?
all of these items on here, fire, disaster, those are expenses that weren't in the budget,
ultimately after vetoes, but those costs were incurred nonetheless. It's not new forward-looking
spending, it's new spending since the effective date of the Budget or spending that was carried
out, maybe not again. New is, I think, a term that maybe is not only confusing me but potentially
the public. Can you put a little finer point on that, Mr. Alper? Through the Chair,
Thank you for saying that.
I think that's a very important distinction that you've made.
I mean, by the very nature, a supplemental request
that shows up halfway through a fiscal year
are things that are identified as costs that exist.
These have by and large happened already
and we simply need to pay for them.
We're not trying to find money to do something new
that I guess the transportation money.
We know the federal money is available,
but we need.
have this money to be able to acquire it.
But yes, these are not new things.
And you also said something important.
Post veto, a large portion of these disaster
and fire monies were in the budget
that the legislature passed last year,
but were, in fact, vetoed.
So now need to get put back.
follow up. Thank you and through the chair and then just to really be explicit about
All of these items all of those items were proposed in the governor's budget
These are his requests things that he would like to see funded in this year's Budget current fiscal years budget
Is that correct? Through the Chair to co-chair shraggy
I'll draw your and the other members attention to the rightmost column in his summary spreadsheet that it's labeled source
that points to exactly where in the various other appropriations or
other documents that these were referenced.
These all came from someplace else.
None of them are legislatively originated.
I'll leave for now, thank you.
And Mr. Alper, just to clarify on row number two,
the Medicaid match.
On Friday last, the OMB Director said twice.
That figure identified there will it will come as an amendment. I think
The sense I got was February 2nd or 3rd
Is that your understanding?
Mr.. Chairman the governor is required to send
Supplemental to the legislature on day 15 day. 15 is right around then. It's early next week
And yes, I heard the Sanders say the same thing that number
will be the number the report that we have in hand from the Department of Health is
that precise number. Mr. Painter has that number in his presentation later on this afternoon.
That's going to be talking about pending issues in the budget on a more broad sense.
So yes, we fully expect that that will be in
the next round of Governor's supplemental requests.
Okay, represent the staff.
Yep, thank Coach, you're just into the chair, Mr Alper.
Always a pleasure to see you here, Ken. We don't get to
see that often here at the finest table, so it's nice for you to
be here. With that nice city out of way, I'm going
to get down to business through the chair.
The intention of this, this is a finance committee bill,
obviously, that's a unique one, I understand,
the nature of the governor's structure for supplemental budget.
What is the, what is
the intentancy here for the timeline?
Would we refer to this as a fast track supplemental?
Like, What's our intention with this bill through
the Chair? If you know, maybe you have to defer to your
Boston co-chair, of course.
The mere fact that we pulled it out and introduced it with the expectation of moving it separately implies fast track.
But really, you're asking a policy question that's more properly addressed to the chairman.
That's okay, fault, Mr. Grotcher.
Yes, follow-up.
Through the chair to Mr Upper, where is the last fast-track supplemental appropriation this body passed?
Is that still in the Senate Finance Committee, through the Chair?
I think that it is.
That is where it ends.
So the reason I ask the question if I can follow up, Mr. Coacher, is oftentimes we refer
to things as fast track and sometimes it doesn't end up that way.
But I am relatively curious regarding this thing about the DOTPF federal match.
So with your indulgence, Dr. Cochier, if you could get Director Painter back up to the
stage here so I could go over that.
Do tpf federal match from representative step
Thank you scotch here to director painter I love the new mustache by the way, I just want to put that on the record, but I
Okay, so walk me through so I I'll refer to them as receipts because I you know
I know makes me happy to use the proper terminology walk. Me through exactly the
Total amount of the UGF or general fund state dollars that are needed to kind of to
Meet the federal match requirements. What is the total amount before we get into the 69 million from last fiscal year through the chair?
Mr. Painter through the chair of the staff so the total amount the governor had requested was
Something like night between the two federal programs something like 96 million
I think so I thing they have about 35 million
I'm rounding because I don't have that in front of me
But I I have a about thirty five million and this would bring that up
That math doesn't work out so
No, I thought they had about 30 so, so
I was under shooting how much they actually had requests did I?
Think between two programs it was over a hundred million
Okay, follow up Mr. Go chair. Yes follow-up. So how much money did the kind of fiscal
kabuki tying the ADA receipts to this fund source? How much was that in last
appropriation in total? Represent step to the chair? I understand that you want to mock the
sought to use ADA receipts to fund his dividend program.
And to the tune of, I think, approaching $100 or $200 million.
So it's not necessary, you know,
I took a class last week on civility.
You were there.
I just asked that you just ask things as politely as possible.
Thank you, Chair Joseph, through the chair.
I'll refrain from using the word kabuki.
It didn't mean it was in the attention.
I admit to as a reference to just unorthodox,
I'd think it would probably be a better terminology.
Through the chair, Director Painter,
getting back on track mentally here,
because I'm going someplace with this,
it's actually relatively important.
I am trying to figure out exactly the number here.
So how much money did we use from a fund source,
like the aid of money for this particular line item
in totality of, let's say, around the 100 million
through the Chair?
Through The Chair, after the staff,
I think I get where you go in question.
The ADA receipts were not actually used for match, they were used
for other projects, so the amount of the match requested
by the governor that was funded with other fund sources,
including re-appropriations, 41 million of that
was reappropriation of old projects.
Most principally 37 million from the Juno Access Project
and the 3 million
from...
an old earthquake project, then about a million of smaller projects.
So there's about that 41 million.
And then there was an additional 20 million, 21 million
of projects of match that was made up by old match,
which, you know, as DOT testified, that doesn't really do much.
It's mostly just signaling they have match on hand that they could use.
And there were about 7 million that were not funded at all
because the Senate version had come over to this body.
Funding with additional re-approps that were pulled out by this committee without replacing that with the additional match.
So in all, there's about $27 million of matching funds that
were essentially not funded by the legislature, kind of intentionally shorted one way or the other.
And then the $41 million is the hole that was created by The Vitos of the Other Projects.
of fault, Mr. Chair.
Thank you, Coach, you're just on through the chair
to direct your panel.
Okay, that's exactly what I was getting at,
because obviously the fund source uses
and the number being requested,
there's a bit of a discrepancy there.
So basically from the beginning,
we were a little short on the process
and through to the veto process,
it got more short and now that how we arrived
at that, this situation.
Would that be a fair assessment through
the Chair?
Through the chair reference step, yes, I mean, it was an intentional policy choice by the legislature to not fully fund match with the expectation that the department could use match they had on hand, which, you know, as they've testified, they can make it through FY26, even with a much greater underfunding than what was intended by
which illustrates the point that the legislature was making last year.
But again, it is a mix of things, a shortfall that was intentional,
and a short fall that not intentional caused by the vetoes.
Thank you.
Mr. Painter, when you say they made the argument that they can
run their program without even more funds,
you're not taking a position on whether.
That's what they've said multiple times in this building.
But you're not taking a position on the merits of what
they said vis-a-vis, whether, for example, contracts will be
let in an efficient way early in the summer.
People won't have to be terminated to lose their job pending
those contract lettings that you are not
taking any of that position.
You're just reporting what that said.
I guess there's a difference between underfunding by 26 million versus under funding by 70 million in terms of what the impacts on the ground are as well.
All right.
I don't see any other questions.
So we're going to go to invited testimony on this bill.
We're gonna start with Alicia Cressel and I apologize if I'm mispronouncing your name, Ms. Cresssel.
I see that you're there.
Can you, if you are?
Oh, sorry.
Unless you're a saboteur, you are really here.
Welcome, please put your name on the record and give us your testimony about who you
are and why you here are.
Thank you.
Co-chairs and members of the committee, thank you for the opportunity to speak today and
for taking up this issue so early in the legislative session.
For the Record, my name is Alicia Cressell and I serve as the Executive Director of
HEC represents more than 600 general contractors, specialty contractors
suppliers and service providers around the state. I appreciate the chance to
offer clarity on the timeline and operational realities surrounding the
state transportation match included in HB 283. Over the last couple of weeks you've
heard two messages. Industry has emphasized the urgency of securing the
DOT has stated that they have sufficient funding to operate through July 2026.
I want to be very clear that both of these statements are true.
DOT does have the ability to carry its current reduced construction program through
July of 20 26.
That program, submitted to Federal Highways, under STIP Amendment 2, reflects a scaled
In other words, the department is working with what they have, and under that constrained
plan, they can extend funding into July.
Now the difference between securing the match now versus waiting until later in the session
is not about whether or not DOT can function.
have the certainty and planning time
that is needed to maximize work
during the short 2020 construction season and beyond.
The project development process,
design environmental approvals, federal authorization,
advertisements, bidding and award,
follows a strict timeline.
When match arrives late,
those steps get compressed or deferred entirely.
You are introducing unnecessary risk
and disruption to this process.
When funding comes late, the construction industries and agencies can shift from planning mode into scramble mode.
To their credit, DOT worked extremely hard last year to push out projects after early delays in program delivery.
They did exactly what they said they were going to do. And they also secured a historic level of
August redistribution, which Alaska will benefit greatly from.
We all want to preserve that momentum.
Uncertainty around traditional match funding disrupts project sequencing,
contractor workforce planning, the availability of equipment and materials,
and the ability to secure the maximum amount of August redistribution.
Late funding can also remove flexibility from the current program,
which DOT did mention in Senate Finance this morning.
For example, if a project finishes up early,
DOT may or may not be able to pull another project off the shelf and put it out to bid.
which does often happen later in the construction season if the perfect circumstances allow.
Alternatively, if a project costs does rise unexpectedly, DOT may halt or delay another
planned project because it may not have the ability to rely on an unsecured match later
in a year.
Under a constrained budget, there is very little ability
and that ultimately harms industry and the economy.
DST has accurately described its ability
to stretch the reduced program through July.
What industry is describing is the opportunity cost,
the work that cannot be delivered
without timely match certainty,
the projects that can not be advanced,
and planning time that not can be recovered.
We all know that you have an incredibly difficult job to do, but there are very few
financial decisions that legislators will make that have this kind of guaranteed return
on investment that the 90-10 match has.
An early clarity on this match funding strengthens the entire system.
It gives DOT the certainty to plan and obligate funds efficiently.
It gives contractors the lead time needed to hire schedule and mobilize and it gives communities reliability
And about the projects that they depend on
Thank you again for the opportunity to testify and provide this context and comments today
Miss Russell quick comment for me and that is I'm relieved particularly in this day and age that we have truth tellers on both sides
And I appreciate you saying that that's helpful
Um, my question for you before we entertain other questions is, how long can you lay a
little foundation?
What is your business?
How long have you done this?
And have ever seen a match come so late?
Chair Josephson.
So I've been executive director of associated general contractors since 2018 and, uh, I
No, I have never seen match funding come this late. In fact,
I I believe the last time Alaska missed its standard funding
May have been around 1985 so it's been a number of years
This is unprecedented
unprecedented. Thank you represent valor thank you, and this is not a gotcha moment
I want to know your opinion on it through the chair
Could you tell me what you think the reason is for that?
Through the the reason is for what for the delay. I'm sorry.
I was following up on chair Josephson's question. All right through the chair representative allard
It's as a result of a breakdown of the budgeting process last year
Any other questions for miss Alicia cressel
Represent by no, thank you co-chair Joseph sin through. The chair. Thank you for being here
Obviously understand how important it is that we
be doing these types of work in Alaska, building capital,
putting people to work, puts food on families tables,
and keeps us very busy.
Also creates a stable environment
for bringing people into the industry.
So I absolutely support you guys 100%
and understand the Industry need.
Can you talk a little bit about the interactions
you're currently having with Department of Transportation
to get some level of certainty from them?
that we aren't going to have those disruptions.
I do understand that getting the money in your hands,
or in our hands as soon as possible,
to ensure that were getting those federal matches
is very important, obviously very concerning for you guys.
But can you talk a little bit about those conversations
that you're currently having if you can,
and what level of confidence you have that this session,
this section, or going into this summer,
Miss Crystal through the chair representative Bynum. Thank you for that question
Since for the past year DOT to their credit has offered public monthly tentative advertising schedule
Updates to the contracting community and the general public
Now, right now, we're pretty early on in the bidding process in terms of, you know, what
the outlook looks like for the 2026 construction season.
I can tell you that based on the last TAS update, it's what they're called.
There is a list of projects that is ready to go, and we hope to see those bid very soon.
So I think the next few weeks will be very telling on how that project delivery timeline
Follow-up reps and buying them for Mr. Chris. Thank you coach here, Josephson
You know my professional background I come from the hydropower business line and you know when we talk about
planning for projects
Years can be in the process
What kind of?
Forecast you need for your industries to be feel comfortable
That we're gonna be getting the work out there that you needed and proper planning
Are you looking at this six months going to be sufficient for you or do you need a much longer lead time?
Miss Crystal through the chair representative Bynum. That's really it depends
It really depends on the type of project where the project is located how complex it is
what the workforce needs are and so you know they could a contractor could turn
and burn on a project fairly quickly if they happen to already have equipment
and personnel mobilized out into an area or if it's on you
know the on-the-road system and they have the availability but certainly for
larger more complex projects that we tend to have in Alaska here just
based on our geographical complexity we certainly prefer
Follow-up represent by them. Thank you
Tell us a little bit about if you can what you think happens to the quality of projects and or
The cost of Projects when we don't have that lead time
Miss Crystal
Through the chair representative by no, I cannot speak to The Quality of those projects because we will always put out a really good product
But it certainly is becomes more challenging for the construction community, you know, we want
To do good work for the Department of Transportation. We want to do
good. Work for The State of Alaska and when you know project
timelines become constrained and the typical process isn't
followed, we don't have that lead time that can you challenge
the contractors and a DOT to try to find solutions that could
have otherwise been solved through you no longer lead
time and better planning.
Hi, Ms. Cressell.
Thank you for being here today.
Really appreciate it.
I have here before me a Meet the Match letter that was sent,
I believe, everyone's inboxes.
And content of the letter aside for a moment,
I'm most struck by the breadth of The Coalition.
It is behind this letter.
And it seems, I mean, some of these logos I've never seen
together seems quite remarkable.
Is it as remarkable as I think is it it is is a is an unprecedented have you seen a letter with this kind of?
Consensus on what is needed and the the need to advocate on this issue
Through the chair representative Schraghi. Thank you for acknowledging that that
That letter is remarkable and it was not a heavy lift
every
Organization that we reached out to and explained this problem to ones that
We even thought were kind of a long shot jumped on board immediately and for us that was really a signal that wow
This is a bigger issue than just the construction industry. We provide access to every industry to
all sorts of communities and
Projects across the state of Alaska this impacts everyone not just us
Follow up. Follow-up representing.
Can I interrupt for just a second?
I do.
Briefly.
Yes.
Thank you.
The letter that he has that is reading from the committee, I'd like him to put a copy
out to everybody.
Since he's introduced it on the record.
Okay.
Thank You.
Very well.
So through the chair,
I believe this was emailed to every legislator, but we'll make sure to get a
copy.
posted the basis for anyone that may be looking.
For those that don't have the letter in hand,
that's actually just going to remark.
I mean, the Alaska Chamber,
the Alaskan Miners Association, AGC,
your own institution, Alaska Trucking Association.
I see quite a few unions.
AFL-CIO is among others.
Juneau Chamber of Commerce, Fairbanks Chamber
of commerce, Alaska Bankers' Association AOGA.
I'm, I, this,
This is a heavy hitting letter, in my opinion,
and again, I've never seen something quite like it.
And I guess when I receive letters like this,
I wonder what the impetus was.
You don't see these very often.
And we had DOT here before us yesterday,
and I think my takeaway was that
there wasn't a lot of urgency or concern.
And so I'm trying to square that with this letter.
I presume from your remarks that the concern isn't that we don't have faith in DOT.
It seems to me that that must not be it based on the remarks it's been given so far.
So is it, what else is, I mean, the thing that makes the most sense to be is what's
been kind of alluded to a little bit is just the risk and uncertainty that all of your,
with regards to this construction season.
And we talk all the time about the importance of certainty
and reducing risk in our resource development sector,
just in terms of economic development,
business development for us to be successful,
we need to provide a low risk business climate.
Is that where this is coming from?
Concerning to you all that that is a major hurdle that requires not only your attention and advocacy
But for us to do something can you just help me understand why I have a letter like this in my in
My hands when DOT seems to think that we can wait until July miss crystal
Through the chair of representative Schruggi. Yes, it is all about the certainty that it provides to the industry and
the industries that are on that letter and
To the agencies that that support those projects
And follow up what are some of the impacts of that uncertainty like just give me some real tangible consequences
I mean our businesses deciding not to purchase supplies that they would otherwise be purchasing right now to ensure that
They have in hand when those projects come. What are some of those examples of maybe problems that would occur from that uncertainty?
Thank you through the chair
Representative Shraghi, that's a really great
Question so tomorrow actually Thursday
AGC releases its economic impact on the construction industry in Alaska and the Construction
dollar in Alaska's economy really has an outsized trickle-down impact both
directly and indirectly on our economy and so when you see the loss of a
construction dollar
in the state it means not only the lost of someone's paycheck but it's the
loss
of supplies that you would have bought with a local vendor it is the
loss
of you know groceries that are bought at a at the local grocery store
and and what those employees do without paycheck as well as
you know, how some of those materials are bought in Alaska.
So it is really an outsized impact on Alaska's economy.
We're not just talking about 700 million.
We are talking a lot more than that when you're talking
about Alaska economic impact.
Thank you.
Representative Stab?
Yeah, thank you, a coach of Justin, through the chair.
Thank for your testimony.
Actually, most of what I want to say,
a co-chair, Schrugg, you asked fairly eloquently.
I would just say going forward in the future,
You made a really good case, I think, about stability and reliability, and how important Alaska's
contractor sector is to really the lifeblood of our state in terms of ministry. If you had a message for the legislature in
terms like how we should want to prioritize your funding,
I mean you made comment earlier which I thought was really impactful where it was
A budgetary snafu or something like that that kind of put us in this
So what message would you want to tell us at the finance committee going forward of how we look at?
the importance of
Federal highway match and how he should appropriate money through that through the chair misscrestle
Through the Chair representative step, you know the message that I would send is
One, this is a situation that we haven't been in in a long time and there's a reason for that
And we would ask that. We not be in the situation again
moving forward and you know again providing stability to the contract and community to DOT
To the people who rely on construction related jobs is incredibly important. So thank you. Thank you
President Bynum.
Thank You co-chair justice in I
I'd be remiss if I didn't take the opportunity to
Reflect back on how we have been funding capital and recent years
Obviously, it feels like we're we are funding the minimum, the
minimum to get just the match.
Could you tell us what you would, what do you think Alaska would look like if we were
serious about actually investing in capital in the state, specifically going
beyond just a minimums of match, but really investing
in Alaska and investing and families, investing
in jobs and building the State.
For what Alaska would look like if we actually were serious about investing in capital
Miss Crystal through the chair representative Bynum
It's probably the same vision that all of you
Here have and why you serve here in the legislature and that is to have a prosperous Alaska to
Have you know development projects healthy jobs strong communities strong for interpretation
plans that connect those communities
And to be able to Have a workforce that can move
between various projects throughout the state,
whether that's a construction surface transportation job
or a job in oil and gas or the mining industry.
There's all, I mean, the transferable skills
that a jobs in the construction industry
has really has a lot of potential for their industries as well.
So we will build the infrastructure that also helped
to build some of those projects
that Alaska would love to see move forward eventually.
I will follow up with some by name from Ms. Krasan.
From what you're seeing in industry, if we actually did make that kind of investment, what would you think that would mean for?
Bringing families and working jobs into the end of the state
Obviously one of our concerns we see in our community
We talk about all the time education always gets brought up one on the problems we have with education is we
have declining enrollment in schools, so we did have this robust capital plan and play or capital not only capital Plan but capital funding
You envision seeing more families working work in age
families
With kids coming into our communities and making our community's drive
Miss cressel through the chair representative bynum absolutely, you know the average
wage of construction worker in Alaska is over a hundred thousand dollars a year and that is a living that you can support a family on and
That's a number that we're very proud of we have an 82 percent Alaska local higher rate. We want to see that number even more
And so you know the economic opportunity that comes with a construction job is incredible
Thank you very much. All right, we'll thank you miss cressel. we are going to move on to our second invited testifier
This time I'll check to she's here. I don't think she is again. Thank You miss Cressell.
We'll go to Rebecca Logan CEO of the Alliance
It says she's in Anchorage, so I expect her to-
I'm here.
Good afternoon, Ms. Logan.
Good evening, Chairman Josephson and members of the committee.
Can you hear me?
We can just identify yourself and provide your testimony.
Well, for the record, my name is Rebecca Logan,
and I am the CEO of The Alaska Support Industry Alliance,
which is a professional trade organization
that represents Alaska companies who provide support
to oil, gas, and mining operations around our state.
Our current membership is well over 500 companies, and those member companies employ about 35,000 people.
And many of my members are also members of AGC.
So it should be no surprise that I'm here today to support House Bill 283.
Federal transportation programs provide Alaska with such a significant and reliable source of infrastructure funding each year
with the only requirement to access them being a state match.
And when we fulfill that obligation, we unlock roughly nine times that amount in federal
investment.
And, you know, if you think about it, there are very few state expenditures that deliver
that level of return.
And this is not a new approach, as you all already know.
Alaska has relied on this partnership with the federal government for decades to build
and maintain our roads and bridges and ports and airports.
And it's a proven model that works when it provides stability and we act on time.
And again, that's why the Alliance supports the request in the Governor's Supplemental
Budget.
It's a strategic investment that will allow approximately 700 million in more funding
to go into Alaska.
And that funding supports construction jobs and engineering and design work, material
suppliers, local contractors, and small businesses across the state.
The test is important as the dollars themselves is as you heard Alicia testify the timing.
Our construction season is short and it's expensive and is unforgiving.
Our agencies and our contractors and communities need predictability well in advance to plan
projects, very importantly to secure labor and the equipment and to sequence work efficiently.
Failing to meet that federal match or waiting until the last possible moment puts hundreds
of millions of federal dollars at risk and disrupts project schedules and workforce planning
increases in costs due to inflation and remobilization.
Approving the match now sends a clear signal
that Alaska is serious about fiscal responsibility
and infrastructure investment
and the efficient use of our limited construction window.
So, in closing, meeting the federal transportation match,
it's smart, time-sensitive investing
and acting quickly provides a certainty needed
to plan projects, line up materials,
and fully utilize Alaska's short construction season.
If you read the Fairbanks Daily Newsminer Day, you would have seen a column from Meg Nordell
of Jim's construction on this topic where she ended by saying predictable investment
allows employers to plan and hire, it supports apprenticeship programs and career pathways
and gives young Alaskans a reason to train here, work here and stay here.
So that predictability certainly matters and you asked Alicia to give you an example of
funds weren't appropriated in a timely manner and it just reminded me of a situation last
summer where I was in Fairbanks and listening to three young people talk about how they
had come to Fairbank, they were in one of the union halls and they had planned on having
a very busy, productive, earning summer working on road construction due to some of
And those young people were now working,
they were all working at one job
and looking to find another job.
And we all know what we need to do
to make sure that we maintain our young
people here, that keep them here.
And so having these predictable industries
that provide predictable and stable jobs
is just so important to us.
And with that all, and my testimony
and thank you for the opportunity.
Thank you, Ms. Logan.
I think if you're testimony, any questions for Ms Logan?
Co-chair shruggi
Thank You chair josison through the chair
Thank you so much for being here miss Logan really appreciate you weighing in and for joining this coalition on this issue
You know we keep hearing about the importance of certainty and being able to plan and to
the long lead times for your industries and
Again, I'm thinking back to the testimony we received yesterday.
Is it your perspective as the CEO of the Alaska Support Industry Alliance that if we were
to delay until, say, May to provide this funding, would that have an impact, a material impact
Yeah, I think Simon. I agree with that also. When you have a very short amount of time
to plan, one of the things that happens in Alaska, and I've seen this in 16 years in
the oil and gas industry, when projects and work go away, so does the support industry.
So if you don't have the lead time to plan for that,
it's really, really challenging to make up
those differences of workforce and having
the appropriate equipment in a short amount of time.
One follow-up of M.A.
Yes, follow up.
Coach R. Schragge for Ms. Logan.
Yeah, thank you, Coach or Josephson, and through the chair.
We face difficulty, excuse me, a difficult budget climate
this session.
I think it's going to be difficult for us to make progress in a lot of areas, let alone
to support our industries.
When I thing of the opportunities that are before us, one of ways that I view we could
most impactfully support, our resource development and construction industries would be to meet
this match and provide early certainty to our construction and resource-development industries,
Probably in the top three in terms of things that we could do to support industry and resource development this year
Miss Logan. I
Would and that's why you see, you know, we typically
And we have that as one of our legislative priorities this is the alliance
And that probably the first time we weighed in and something like that
but clearly was shared membership with AGC and with so much of the work that we do dependent
on a strong construction industry and the transportation system then the supply chain.
It's critical for everybody and that's why you saw such a diverse group of people signing
on to that letter.
At the 50,000 foot level it's a policy about stability and at the 5, 000 foot levels it
is about the things that have to happen here literally on the ground to support our industries.
A question from Mr. Stapp from Ms. Logan.
Thank you, Coach, you're just through the chair of Ms Logan, Ms
Logan I always great to hear from you big fans of the Alliance and all that you wonderful
folks there do.
I think you hit the nail on the head again with your response to representative, coach
or sharagi about stability.
I'm curious if the alliance had any concerns last fiscal year when you saw the legislature
tie the match funding to a fund source that was not general funds to the chair.
Ms. Logan.
We had a concern about what was going to happen.
And last year we had the luxury of, I just didn't even use the word luxury because that's
disrespectful to people who didn t have work that they were planning on.
There was a lot of work on the North Slope last years, so a lotta my members who
didn' t had to work in the construction industry that would normally plan on they had work
So we had a concern that things might not go well.
A fault in the school chair.
Follow up.
Thank you, Coach, you're Justin.
Through the chair to Ms. Logan.
Would you fair to kind of elaborate on that concern?
I mean, did you feel like the legislature
was prioritizing your stability last year when that event
happened or not through the Chair?
Ms Logan?
I honestly have to say I don't remember if I had that feeling that thought at all at that point
It was just more about wondering how things we're gonna end up unless about worrying how we got there
Thank you
All right, I think we are gonna now move on to our last test fire
We have a second important part of the hearing and I have hard stop at 325
So we will go to first we gonna thank Ms. Logan appreciate your testimony
We are going to go Scott Vieira also in Anchorage
Mr.. Hello in here. Yes
My name is Scott beer. I'm the director of business development for North Star Terminal and Steve Gordon. We're sorry
I'd like to say hello to the chair vice chair
Scott Scott
Scott they interrupt you
Can you do your darndest to speak right into whatever microphone or device? I'll take it off speaker. That's better. Thank you
It's much better you bet. Okay, as I was saying, I'm calling from Anchorage,
but we operate eight facilities throughout Alaska, Dead Horse, North Pole,
Delta Junction, Anchorage Seward, Homer, Valdez, and Dutch Harbor. And we support
the oil and gas mining and construction infrastructure projects
throughout Alaskan. We also employ a few thousand longshoremen to support
And I appreciate the opportunity to testify in strong support of HB 283 with swift passage of this bill.
Specifically, the approximately $70 million needed for DOT and
PF to meet the required state match for federal transportation funding.
This state's match is not optional.
I mean, it will unlock roughly $700 million in total construction investment this summer.
If the legislator does not, the legislative company, this group does
not act quickly and fast track and pass this bill.
These federal funds may be delayed or even lost.
So, say we go, we move forward. The legislator approves this.
Then the project has to go to the DOT, be re-approved
for the engineering, then go out to bid. There's another three or five
And then they got to get, you know, everybody's got
to source some materials for the project.
And many of these materials need to be procured out of state
and transported to Alaska.
So in Alaska, we all know time is the enemy
in our construction season is short.
I mean, this funding is fundamentally about jobs
and workforce stability.
And after last year's initial project delivery challenges,
let's say, getting those projects out quick.
was to say the least the challenge but it created loss and delay as a significant
project and many contractors had to reduce their workforce by 20 to 50% and
some are still on the verge of closing their doors and without certainty
continuity these skilled operators and mechanics and blue collar workforces are
forced to leave Alaska for steady work in the lower 48 I mean that would be a
support the oil, gas and mining projects and once their families leave Alaska,
they're extremely difficult to replace and that would be weakening multiple sectors of Alaska
economy and many of your constituents believe and we don't want that and 700 million dollars
through the DOT construction season would support approximately 25 to 30 major projects
airports, this should bring dock and marine system projects affecting almost everyone's
district.
Those projects would probably generate about 4 to 6,000 direct jobs and a significant
secondary economic activity and transportation, materials, lodging, housing, local businesses
across Alaska.
I mean this is the smartest investment Alaska can make and as you know we've met the match
failing to provide the full match with delayed projects,
increased costs, most importantly,
we will lose jobs and we can last the workforce.
And that would hurt us significantly
if the LNG pipeline comes to fruition.
One of the reasons I'm testifying today
is our civil side took a big hit last year.
We had to reduce 30% of our workforce
and I respectfully urge the committee
to support HB 283, ensure DOT and PF receives the full
uncompromised state match as quickly as possible.
Alaska, we can't afford to lose construction jobs
two summers in a row.
More importantly,
we cannot afford
to loose our workforce to the lower 48,
because once those workers leave,
getting them back is far more difficult
and far less costly.
I appreciate your time.
and consideration. Thank you.
Thank You, Mr. Vira. I hope you'll entertain some questions. We'll start with Representative
Bynum. Yes, thank you, co-chair Josephson. And thank
you for testifying today.
I was hoping you could again remind us again of the trades that you're representing and
how many work and jobs does that actually bring in here into Alaska?
That's the first part of question. The second part
of The Question is a follow up or basically a replica of
talking about if we actually had a real robust capital program in the state of Alaska,
how do you think that would actually impact your ability to be providing those working jobs
that are paying families and keeping families here in Alaska? A couple questions.
Roger, that's good. Go ahead. I'm sorry. So how many jobs? Well, so we have an off-doc division
So our on-dock division, our water side ain't good steward,
Homer Valdez and Dutch Harbor, they do project cargo,
they're longshoremen.
So there's a significant amount.
I think we had a total of like 5,000 W-2s last year.
90% of those are long-shoreman.
So all the project, cargo and in addition to the tourism
business.
That's also included our off dock division. We've got, you know, 40 cranes a bunch of drill rigs big hammers
We do large infrastructure projects, whether it's military refineries DOT
Anything of that nature. So we'll have, ya know probably 60 70 core guys that we keep on and then when we we
we
Basically bring a a Bunch of people in to say we've that these projects sitting in front of us
we'll bring in another 40 to 60 guys to produce them on the slope for the oil and gas or
we would wrap in our summer in the summer season. We would have them
on civil projects if we had the big projects out there, not the scrape and
paves and payment type scenarios that kind of were made out last minute. Thank God they came
out because it did save some jobs, but the reality of it is the significant projects
And if this pipeline hits I mean we want to keep the people here
Please remind me what the second part of that question was. I'm sorry
Talking about
Through the chair the the 2nd part the question is really talking about having a robust
financial
Investment from Alaska in our capital program and what that would actually mean for long-term stability
For the for the People you represent
And then we're going to wrap up.
I would say, you know, obviously it's going
to bring more more people.
We need to
bring up people from the lower 48.
One of the main topics that
AGC, I said on the board for AGc, we had
all the,
you
know possible governor candidates come
around.
And our biggest problem,
I think everybody at the table is how are we
going
From the from education or you know, I should say high school or college into the trades
What is their plan to do that?
Well, the more projects that we have the More it entices people to go out and earn these hundred thousand plus dollar a year job
So the money we had the Moore job that's going to produce and the secondary
Funds just keep rolling out
to the communities and what have you, but you know,
that allows us to buy more equipment, create more people
and create and work jobs and families until the school's up.
So it's just a snowball effect and we need your help.
Okay.
Thank you Mr. Vera.
We are going to hold this bill.
I want to clarify the record just little bit.
It'll help the members.
Our first test fire, Alicia Cressell, if it wasn't known as the executive director of the associate general contractors.
Our second, I think, may clear, Rebecca Logan, that she's executive officer with Alaska Sport Industry Alliance.
And our last testifier, Mr. Vieira, is in business development for North Star equipment services.
We're going to take about a 30 second at ease and set up for Mr Painter.
I thank all the test fires.
We will hold House Bill 283 for the time being.
Back on record, second on our agenda today is an overview by the Legislative Finance Division.
With us from the division is our own Alexi Painter, Legislative Fiscal Analyst, Mr. Painter.
Please come forward, put yourself on the record and begin your presentation.
We will get as far through this as we are able to, and please begin.
try to go quickly or just see how we go and see where we are to the will of the committee I suppose.
Let's see what we can get done. All right, so I'll skip the outline and just go right into it.
So some of The Recap I think you guys heard from OMB but
You know, when the legislature adjourned last year,
we had a projected budget deficit in FY 25
and a surplus in the FY26 based on the spring forecast.
The vote to fill that FY25 deficit
from the Constitutional Budget Reserve failed.
So that meant that the budget deficits
would first come from a draw
from The Alaska Industrial Development and Export Authority
and then the remainder from
the Higher Education Investment Fund.
And there was no source for any potential FY26 deficit,
which is obviously addressed in the bill
that was heard earlier in this hearing.
Building the FY 26 budget,
the legislature accepted about $43 million
of the governor's 80 million UGF increments,
so about half of them.
They added $44.5 million of increases
that were not proposed by the Governor
and then made $34 million
of budget reductions.
All in all, we ended up with a budget that was other than, and this doesn't include the K12 impact of the legislation that has passed, but essentially we end up
with the budget. That was a little bit smaller than the governor's request because the denied increments were,
and the cuts were less than they things that were added.
The legislature's budget fully funded the K-12 formula, and most of the statewide items are the exception of school debt reimbursement and community assistance fund.
The legislatures budget also funded, the fire suppression fund and disaster relief fund at their five-year average, okay, slide four.
So you heard an extensive conversation on vetoes yesterday, so I won't dwell on those, but to recap, there were some veto's in FY25.
And then including the re-appropriations for DOT match.
and the ADA portion of the deficit fill language leaving the rest to come out of
the higher education fund. In FY26 the vetoes included 103 million from the
operating budget, 14.3 million in the capital budget.
The largest of those veto was the K-12 foundation formula and
the legislature overrode that veto. And other veto's included funding from
the fire suppression fund, disaster relief fund and major maintenance grant fund
enacted FY26 budget had a projected surplus of 130 million based on the spring forecast.
And does that include a veto dollars that came back?
Yes. Okay. So that's all in 130.
Right. And that includes the override as well.
All right. Hanan, then, Galvin.
Thank you, Coach, or Josephson. Mr. Painter, I want to just affirm because
during some questions a little bit ago, there was reference that sort of implied that the DOT match
And I want to affirm that the reappropriation money, that 62.2, is general fund money.
Even though it's in a re-appropriatation.
Through the Chair Representative, Hannah, it is the original fund source of those appropriations had been UGF, and then they were appropriated to a project.
But they are UGF, they can be used for anything,
they're just appropriated two existing projects.
Thank you.
Thank you, co-chair Joseph sentence for the chair
Director painter the I seeing and
Two different numbers for The veto for that the k-12 foundation formula, so what we received
Visa v this spreadsheet
This line 25 has the veto number at 15 50.64 million and this is at
Is that because of the
More clarification that came out later
Through the chair episode of Galvin the legislative finance division and office of management budget disagree about the effect of that veto
I wrote a memo to the
Legislature that was posted on a website and emailed around with our
May June newsletter June news letter about that
I'm sorry. I missed that if I may follow up
Would you please clarify what was said in the newsletter because I did not read that?
So the short version through the chair is it's kind of academic now because the veto is overridden, but
the legislature had reduced the funding into the estimate for the into
the public education fund due to funds that were anticipated by the administration to be spent on
could not statutorily be spent because there's a provision that says that the pre-K funding can
only go out by three million per year. And so the legislature essentially reduced that amount
so that it down to the statutory level. The office management budget had not reflected that change.
And, so, they were using an estimate that did not incorporate that
change essentially. So, our view was that if the veto had stood, the impact would only be 45 million
Projections 50 million, but essentially that's just a disagreement about how to count that pre-k money
But it's now academic academic because they were right now. It's all restored. Yeah, thank you very much
Let's go to slide five
so and then after we adjourned the special session I
would note that during session and
When the governor signed the budget there was significant skepticism about the $68 price in the spring forecast prices had gone down after the Spring forecast
The governor had issued an unofficial revenue forecast when he signed the bill that used $62 a barrel, which turns out to be fairly close to the fall forecast.
And the legislature had been aiming, the Senate aimed for $64 a barrels.
I think conference committee ended up at something like $66 a Barrel or something.
But essentially everybody was aiming under the spring forecast because of skepticism about that $68 price.
And, in fact, the fall forecast does reduce the projected FY26 price to $65.48, and it
reduces projected revenue by $181 million, so that's actually more than you'd think
just that $2.5 million price because of reduced production, increased expenses,
and also reduced corporate income tax.
So that changes us from having $130 million surplus now to a projected $51 million deficit
before any supplemental appropriations.
Tough times it's like six more about sort of FY 25. I was asked to talk a bit about a
Bit more history on the current year. So one of the things we've touched on is vacancy rates
This is using omb's data
We actually calculate a little differently than oMB using the same data
But I want to highlight the trend that
Last session, I think I highlighted in a presentation, maybe it wasn't in this committee, that the trend on hiring was getting better.
The vacancy rate had dropped by over 2% over the course of between the beginning of fiscal year 25 and where we were around when we adjourned.
The governor announced a hiring freeze in May in response to the lower oil prices, and we can see that between that and potentially other factors since it may have started a little earlier.
the vacancy rates rose again.
So the vacancies rates did begin to rise.
They seem to be potentially going back down in December.
But we have seen that that trend we had seen
where vacancies were getting better
had started to go the other direction
which coincides with the hiring freeze.
It's like seven.
Oh, sorry, there's a-
Rifson, Tommy Shepsky.
Thank you, Coach, your Joseph, through the chair.
Do you have a dollar figure?
Associated a rough guess on what that number represents the vacancies for the state
Through the sheriff's of Tamashovsky not really and I'll kind of talk in the next slide about the
The how much laps there was and where it went
So I get to that sort of yeah, so in FY 25 given the vacancy
It should be no surprise that there were some laps.
There's sort of, there's a waterfall in the budget each year for
what happens with various lapsing dollars.
Some of these items in FY 25 were the usual items.
The legislature also inserted an additional item.
So, every item but the school major maintenance grant fund is kind of a usual
item for this laps waterfall.
The school Major Maintenance Grant Fund was an attempt by the legislature knowing
vacant positions we can use some of that lapse and carry it forward to put into the major maintenance grant fund
However, that didn't quite work because a combination of less match or less
Laps than I think was perhaps anticipated
due to either
The positive trend in vacancy rates through most of the year where you know we were looking at
prior the first half of the year and vacancy rates were higher than they ended up for the full year but also a
Lot of that vacancy funding ends up going to contracts to do the same work or overtime for other workers
less of it ends up lapsing than you'd think. A fair amount did lapse, but it went mostly
into the group health and life benefits fund. 23.1 million dollars went into that fund,
what that fun does is it's used for the Alaska care, which is the state's health care program,
health insurance for state employees and retirees, specifically to the
Alaska here has been relying on these lapsing funds in lieu of increasing the
rates to the full actuarial in need. There was intent language in the FY26
budget directing the Department of Administration to begin increasing
the rate to avoid this problem but in FY25 those before that had happened and so
they used $23 million. That still leaves $1.6 million that they were not able to
be carried forward and use laps in FY26.
I would note that in response to that
in 10 language, they still did not increase the rates
to the full actuarial in need.
They increased them by 6.4%,
the same amount in the FY25.
They did increase employee premiums,
but they did an increase employer costs.
And as a result, there's still heavily relying on laps.
The estimate is that, in a FY 26,
they'll need, or
FY26, I don't remember the number I was talking about,
my head is still over 10 million FY27,
it's I think 18 to 26 million,
and they project that without policy changes,
they could be using $27 to $50 million of laps a year.
So, the current structure where Alaska care
is sort of eating up all of our laps,
means that when we have these vacancies,
essentially it just goes to subsidize Alaska Care
because the rate that the Department of Administration
is charging is not sufficient.
So, apologize for the digression, but I do think it's important to know where tens of millions of dollars are going that we expected to go to school major maintenance grant funds.
I'm noted on the last slide, the Governor vetoed $25 million for that fund.
The legislature had set up so that those funds could first come from laps, and then if there was insufficient laps they'd come form the general fund in FY26.
The remaining amounts, I think is about 8 million, came from the FY26 budget, but no additional funds.
And again, given that the lapse was going into the group health and life benefits fund,
there wouldn't have been enough lapse to make that full amount anyway.
So it would have essentially added to what we now have as the FY26 deficit.
There was none needed for some of these other accounts, and then 5 million for central services.
the rate smoothing appropriation.
And so if you're wondering where the laps went,
none of it went to the Constitutional Budget Reserve.
So that deficit that was projected in FY 25,
it was about $188 million.
The actual transfer was $129 million in the higher ed fund.
That reduction is entirely because of revenue coming in
slightly above forecast.
None of is because lapsing appropriations
because every dollar of general fund
laps was used for the waterfall.
Representative Stapp.
Thank you, Chair Justin, to the Chair,
to Director Painter.
Okay.
So a couple of questions here, through the chair.
First would be, when's the last time that
employer contributions for last care was raised?
Do you know, or do I got to go after
due wait for that?
Through the Vice President Stap, they've been
raised every year, but not to
the full actuarial amount.
Follow-up, Mr. Coachear?
Representative Scott.
I thank you.
Is there ever a kind of a given rhyme or reason that we are not using the full actuarial amount for the contribution rate?
Other than that, we just like the fact that
We can capitalize it through labs through the chair. Through the Chair Representative staff the response to the intent language was that the
Department intends to take what they call a conservative stair-stepped approach where they would increase by 6.4% and increase the employee cost
again
I think relying this heavily on laps is a problem, and that they should increase the rates more to avoid that problem.
$27 to $50 million is more than we can expect, but I
think they're wary of just adding to the budget.
Essentially because it would add significantly to the budget a few shift to that. Cool follow-up
Yeah, I think coach you're just into the term director for yeah
I mean obviously that's the only rhyme reason I could make sense of employee contributions going up and not employer
Contributions right because you don't put that in the Budget, but second kind of thought on this director painter would be
I mean, I feel like we struggle with OMB on a disconnect in their labs reports, right?
Because every year that I've looked at their lab's reports they almost always project
zero lapses even up till the end of the legislature.
And then obviously we know we have vacancies above the factors so we now we're going to
lapse money.
And I felt like I have to run to you every
year and help me calculate with your human computer brain, is there any way that we can
Begin on the same page here. They own be so we have some idea because I know they're gonna lapse
Money they do it every year their positions are unfilled, but they never admit they are going to lapse anything
Mr.. Mr. Painter through the show represents up. So
You know when we do laps calculations where we're looking at the vacant positions and
You can sort of make a lapse calculation from that. I think I
you know, what the experience shows in FY 25 is that not everything that you would expect lapses
to laps may end up actually lapsing versus getting reuse for another purpose by agencies. So,
you now one example is, and I'll get to this kind of in another slide, but you
know both the Department of Health and Department family and community services
have language allowing them to transfer money between appropriations.
So when they lapse in one place, they use it to fill a hole somewhere else.
family community services, they actually still didn't have enough money, even with
using all their laps and moving it over, to fulfill what they owed for the Pioneer
home payment assistance. So when we under fund items like that in the budget,
they use their lapse.
transfer it across appropriations and so then what we can project will lapse doesn't because
it gets used for another purpose and that would be an example of that and
that's the challenge. We can try to improve our lapse projections but you know as I think
director Sanders correctly pointed out when we talked about this that it's not necessarily
going to actually materialize as lapse just because it is available because the original purpose did not.
It was not fulfilled.
Yeah, final follow-up.
Final follow on it.
Thank you, Joseph, and to the chair, Director Painter.
Regarding the $10 million in authorization,
Lapsing Authority, Department of Health, DFCS,
how do we communicate that?
I mean, that's a lot for DSCS.
A lot of cross-appropriation authority.
And the fact that you had to use all of it
is really concerning to me, because that
what we're going to spend on the Pioneer Homes.
Like what, in your opinion, like what is the best way
to try to solve that problem?
So we have a more clear understanding
what our projected expenditures would be through the chair.
Mr. Painter.
Through the Chair, Representative Sab,
you know, that's a difficult one because it's hard
to project the need for the pioneer homes
because depends on their residents
and their population changes.
So if they're.
It's sort of a difficult policy choice for the legislature and governor.
If you put extra money in there to build in a margin of error, that money might end up
lapsing.
If put not enough without building in margin and error then they can have to transfer.
So what's in the governor's budget now?
I think they've said that in FY26 they probably are projecting to be short based on their
getting to project what the population might look like in a year is difficult, but I would say
that the way to avoid that is to give additional money in the budget. It's just obviously that
comes from somewhere else if we have limited limited resources in this budget, thank you.
Representative Biden, I think you could share justice and you know,
I know we got a lot of material to get through here. But since we're talking about it,
You know, for me, when we look at these practices where we have all these open positions,
we know we've opened positions.
We know that next year we'll probably have open position, and we fund these, I don't
have a problem with funding open, but what I find problematic and I think what Alaskans
find problem is that we do have this water falling, where all this money left over from
fill shortfalls as we go and then we get to this process for the new budget coming up
and we do the same thing over. Can you tell us a little bit about how long this
practice has actually been happening in the budgeting process?
Mr. Painter. Through the chair, I'll be able to invite you.
It's been a very long time that we've used, had some sort of lapsing waterfall.
It is relatively new within the last five years or so that there has been planned use
of labs versus, you know, the way the group health and life benefits fund is set up is
Health claims or you know, a new drug on the market that's very expensive and so pharmaceutical costs go up
So they have to pull laps unexpectedly
That's kind of the intended use of The fund where it's used occasionally because of something coming up
This planned use is a New practice within I think since the COVID pandemic has been where they've had this planned usage
And that that has not been a historical norm
Quick follow. Thank you
So if we just said, we all agreed here that we know there's cost, but we don't like this process.
Let's stop doing that process, what would the consequence be?
Mr. Peanut?
Through the Chair, Representative Bynum.
So, if you don t put money into the Group Health Life Benefits Fund, because the legislature
can t set the Alaska Care Rate, that the Department of Administration does, essentially that fund
Even more next year that sort of happened with the University of Alaska where they they also self-insure and last year
There was kind of an extra ten million dollars or so in their health care
The rates that we had to pay to make up for a previous shortfall
So it would be an end up being something like that if we just shorted them from laps
Couldn't we do the chair? Could we? Just resolve that problem through the supplemental process?
Mr. Painter
Through the chair of representative on I'm not quite sure what you mean about a supplemental directly into the fund rather than using laps or I don't
Correct. Mr. Bine
corruption and by no
Through this your restaurant on yes, we could instead of using lapse just put money directly in to the fun
Thank you
The downside of that versus a rate is that the rate would charge all fun sources when we just deposit money in the Fund to be all general funds
Thank You go to slide eight
So more about history
So there's been some overspending of appropriations as well so in FY 24 legislative audit
Identify the Department of Corrections over spend its UGF appropriations by 8 million
The office management budget changes change some of the practices and how they
report
Actual expenditures in a way that makes those now more apparent so an FY 25
We can see that both Department Of Corrections and Department Family and Community Services over spent their UGF
based on audited figures that's 12.6 million in FY 25
and 0.7 million and FY or in DOC, 0,7,000 in DFCS.
And so these are expected to come to the legislature
in future ratification request,
which is kind of permission to bless their overspending.
So again, where we see overall less lapse,
some of that is that there's also kind
of the over spend that has to
come out of somewhere from the general fund.
Okay, slide nine.
Okay so going on to the supplemental,
we've just heard a lot about this,
so I'm not gonna go into this
since we already went over this.
I would just note the fire suppression
that next week the governor should come out
with a updated number that includes spring costs
and potentially refines that amount
from the earlier disasters.
And then the Governor's disaster language
is essentially a
fix dollar amount. The issue with a fixed dollar
amount as if oil goes down more than is projected or
you know some estimated to be appropriation turns out to
be more then the estimate it doesn't get covered
by that language. So going on to the revenue forecast.
realize the clock I've been looking at for time has stopped, so I shouldn't look at that one for
time. But the fall revenue forecast shows lower oil prices in both FY26 and 27 and the spring
revenue forecasts. It shows a lower production FY 26 but higher production of FY27 than the
previous forecast. You can see that in the tables on the right. Lease expenditures which are
the lower price projection, a lot of the all of
the companies are now projected to hit the floor.
There's a 4% gross floor, some companies go below the
floor because the gross value reductions can actually,
as they call it, say, pierce the floors.
So if you did a calculation of
the total production and then a
4 percent gross, you'd get a higher number
than the actual projection because of
the some company's paying below
the four. So not all these lease expenditures actually are.
going against a revenue because they just bring us to the floor and no more.
Petroleum corporate income tax projections are down more than you'd expect just based on price
and that seems to be based upon kind of global factors from what Department of Revenue has said
and the result of that is that the revenue is lower than in FY26 and 27 by more
suggest. You know when you look at the sensitivity table so that the Department
of Revenue prepares the actual reduction of revenue is greater than what the
sensitivity tables from the spring would have suggested.
Slide 11. So another factor in our revenue picture is the National Petroleum Reserve Alaska
revenue and I'm going to spend a couple of slides on this because I think it's an important issue.
6 or FY 27 revenue picture in the long-term revenue projection the amounts are pretty significant
So federal royalties from leases in The National Petroleum Reserve, Alaska
Historically have been split 5050 between the state and federal government. There's federal law that requires the State
give priority to use of
these funds for the subdivisions most directly or severely impacted by the development.
And those are communities within the North Slope that are impacted my NPRA development that was litigated about 40 years ago.
And when the state did not have kind of a grant program for that.
And the result of that litigation was the creation of the N PRA grant programs that's in statute.
based on what actually comes in the
Communities then go to the Department of Commerce submit grant applications and then the grants go out to those communities
So HR one or the one big beautiful bill act or OB BBA, whatever you want to call it change that royalty split to 70 30
For it leases issued after July 2025, but that change wasn't effective till I've until 2034 and so
over the fall
We in Ledge Finance and the Department of Revenue talked a little bit about whether the HR1 also changed anything about the requirement that those be split with the, or prioritized to the local governments.
And so I requested a legal opinion from legislative legal back in November that essentially confirmed, that in that alleged legal's opinion, HR 1 did not amend the revenue sharing requirements.
In their opinion, there's still a requirement that we share with communities first.
And then, talking to the Department of Revenue,
there seem to be some, maybe ambiguity about whether starting an FY34, that was the case or not.
But there, leg legal didn't see any reason why there'd be any ambiguity before 2034.
I mean, I see there's a question, but I have another slide on the same topic,
so I'd rather get through that if I could before we do questions.
It's good to slide 12 and take up questions from the rest of the stamp in the hand.
Then in The Fall Revenue Sources book, there was a change where none of
NPRA revenue starting in FY27 is classified as federal revenue, now it's classified
as general fund revenue and then amounts restricted for the permanent fund and
public school trust fund. And the governor's capital budget does not include the
typical appropriation of the N PRA grant program. His operating budget
does however include language that's in there every year that appropriates any
grants is appropriated first to the permanent fund up to 25% of total revenue, then to
the public school trust fund, up up half a percent, and then the PCE endowment.
So the governor is calling this UGF, but is still putting it in these funds.
So none of it is actually reducing the deficit, which...
OMB's fiscal summary, initially, I'm not sure if they changed it now, did not reflect those
appropriations. And so their fiscal summer in our view was off by $9.6 million because they
did NOT show the amount going into PCE that they said was UGF. Our reports in lunch finance still count...
the NPRA revenue is federal revenue because that's what legislative legal's belief is and we go by
their interpretation and so we kind of have a difference between our fiscal summary and OMBs of
that 9.6 million UGF and then the other amounts and this table on the bottom shows the kind
of cumulative impact of that difference so when you ask alleged finance for a long-term look at
NPRA revenue as federal revenue for all the years whereas the official revenue forecast counts a portion of it is UGF
And so that means we just have a difference of opinion about how that's going to go and we're relying on advice from our legal counsel
so with that I'll pause for the questions
On outside legal council or on our Legal Council legislative legal, but they've already given you an opinion right
So we believe that it's federal. Yeah based on that opinion representative step
Yeah, thank Coach or Justin to the chair to a director painters a couple of items
I
Would love to get my hands on that legal opinion if you could share it. I don't know if it would be okay
Approved into a give it to committee that approval chair sounds like it's all right follow up. Mr
Follow-up. Yeah. Thank you. Coach. You're just sent through the Chair director painter
We I had some questions obviously for room B when they presented this before me.
I really do not like this
for a lot of reasons I
I, in the revenue sources book, it shows the fund source of the
imperative money is unrestricted general funds.
That's not my interpretation.
I'm glad you have a legal memo that says the same interpretation, and I
am really curious as to the argument if you could maybe articulate it to
the best of your knowledge from the administration on how they arrived at
this conclusion.
I could not follow the logic through the chair.
Mr. Painter.
Through the Chair Representative Stapp,
I have not seen any legal analysis,
so I really can't speculate about the reasoning.
Okay, thank you.
Representative Hannon.
Thank you, Chair Josephson.
First, Mr Painter, just so it's on the record,
because we're going from a 50-50 split to a 70-30,
so can you affirm who's 70, who is 30?
Mr. Painter through the sheriff's I'm handed 70% to the state
Which would be first the communities and then the State and the 30 for the federal government
Thank you follow up and now my question is that is
Oh and be using a
70 percent take from that
Starting now in fy 26 or not until f y 34
Through the chair of some hymn
Department of Revenue is assuming that the 70-30 does not start until FY 34
Representative Galvin
Thank You co-chair Josephson through the chair. I'm actually going to compare I have a question about page 8 and
12 together so you said that in the statute this is with regard to the NPRA
revenue I appreciate that that the lapsing funds first go to permanent fund and
public school trust fund etc PCA is this assuming that I guess what I'm asking
is does that mean we don't have any guidelines or anything in statute when
Right, we have $8 million of an overspend from DOC.
Through the Chair, I'm going to give them to the NPRA Lapsing Funds.
It's not general funds that are designated.
Just the NPRA funds are designated for those purposes and statute, not for general over spend.
Is there anything in statute that helps us recover when we do have an overspen from GF?
like this, you know, this particular, it sounds like it's been,
it was 8 million and this time it, 12.6 million
from straight out just overspend from DOC.
So do we have anything that says if we
have extra funds that didn't get spent over here,
it goes there, is there anything
that helps recover this whole?
Mr. Painter. Through the chair, Representative Galvin, when there's an overspend that's been
identified, you know, usually through the audit process, it comes to the legislature as a
ratification, which essentially is us blessing retro, retroactively the spending in order to
to clear the out of finding. Thank you. So, Mr Painter, if,
Newark, for example, and other impacted villages would have an enormous windfall of capital
dollars for projects within their boundaries.
Mr. Sherman, yes, assuming they can spend all the entire mountain.
Yes.
Okay.
All right.
I think we're ready to go to slide 13, but probably try to get through half the deck.
All right, Mr. Chairman. So slide 13
Illustrates the percent of market value draw calculation. This is our largest source of revenue, so I think it's worth the slide
We talked so much about oil, but this is again our large sources general fund revenue
So in FY 26 the POMV draw is based on the balances from FY 2324 that results in about 3.8 billion
You notice that in FY 27, we're dropping FY 20 which is 64.9 billion and then adding FY 21 81.1
or adding FY 25, which is 84.7 billion.
So the result of dropping that low year,
adding a high year means that the POMV draws
is going to increase by nearly $200 million,
which definitely helpful for the FY 27 budget situation.
But as this table can kind of illustrate,
we should not expect that to continue
because there was such a huge
jump in FY21. And so we've been seeing the last few years, the POMV draw going up by more than is sort of over, you know, long term
expectation because we're incorporating that big jump. This is our last year incorporating
that Big Jump. We're not getting Big Jumps again unless we have an amazing market one of these years. So,
you when we were looking at the budget, FY27 is going to be easier than FY28 for a number of reasons because FY 28, we
Okay, let's go to slide 14.
So, Mr. Chairman, the next few slides go through the adjusted base, which is sort of our process of taking last year's budget and getting to a clean starting point for the Next Year's Budget.
So we take last years budget, and then we remove one time appropriations, add statewide decisions such as policy adjust or salary adjustments and formula changes that are needed to maintain services at a status quo level.
And a couple of years ago, working with all the management budget,
we modified our rules a little bit to include the formula changes,
to try to really make it clear what's a policy choice by the governor
versus what a formulaic change.
So if the student count changes that's not the Governor cutting education.
It's just the Student Count is different or increasing education if it goes up.
And so now with these rules, it's easier to see his policy choices.
more complex sometimes to go through and one thing I would note is that when we have a
formula item that's funded at a partial amount like the PFD, we carry that formula forward
into the next year's adjusted base because otherwise if you start with statute, then every
year the adjusted based would say we need to pay the municipal property tax exemption that
we haven't paid since the 90s. We just go based on the current policy from the previous year.
There is a minor error in this slide where the amounts for the Department of Law, Statehood Defense and the DECP FOS amounts are reversed.
We'll correct that in the other bodies version of this presentation tomorrow.
But the totals are fine.
So a lot of these items originated in FY 25 or previous years and are carried forward.
And the amounts here represent the balances that were carried forward rather than the original amount.
So essentially the first step to getting to the clean starting point is we remove $31.6 million of one-time or expiring items.
Okay.
I think we're going to stop there.
But you said in slide 15, statehood events and DECP has are reversed.
Yes.
So we should make that.
Mr. Chairman, yes.
And I'll get a corrected version to that committee.
Right, and you've you said you noted the PFD in LFD's
Definition has an adjusted base of a thousand dollars. Mr. Chairman, that's correct. Okay
All right, I think that we've made it halfway through this deck
Mr.. Painter. I'm glad you live in Juneau and work across the street
We will have of my staff find a time that is convenient for you. That's important to complete this important document
With that, that concludes our business for today.
Our next House Finance Committee meeting is scheduled for tomorrow, January 27th at 1.30.
At that meeting, Department of Labor and Workforce Development will give two presentations.
First, they will get their FY27 departmental budget overview.
Second, it will present on the statewide 2026 Jobs Forecast and Unemployment Insurance Financing Metrics.
With this, we will adjourn this meeting at 3.27, thank you.