I call this meeting of the House Finance Department of Labor and Workforce Development Committee to order to let the record reflect that it is 4.33 p.m. on Wednesday, January 28th, 2026.
Present today, we have Representatives Hall, Representative Carrick, Rep. Freer,
Rep., Sadler, Re. Nelson, and Representative Vynum and myself, Chair Schragge.
As we start, please remember to mute your cell phones as I do the same myself.
I want to thank our LIO Moderators using quickly for helping us with behind the scenes work for our committee today.
During today's meeting, we will discuss the goals and expectations of the subcommittee,
and hear from the Department of Labor and Workforce Development with an update on their fiscal year 26 budget,
and an overview of Governor's proposed fiscal years 27 budget.
On the subcommittee process, the Department of Labor and Workforce Development Finance
Subcommittee will work with the members, and during the meeting times of the House Labor
and Commerce Standing Committee, after today's meeting,
the Subcommittee is meeting as needed on Fridays at 3.15 pm with our expected close-out date
being the last week of February. Representative Fields,
Representative Hall and I are working together to set up the schedule,
I look forward to working with each of you.
My goal is to have a collaborative, informative,
and productive process that is no longer
than it needs to be either.
I encourage members to become a welcome representative
collome.
I encouraged members become familiar with their binders.
The binder's include data and resources
from our nonpartisan legislative finance division.
Let's see, the legislative fiscal analyst for the labor budget is Valerie Rose, and thank
you Valerie.
I was looking for you back there, behind all the heads here in the committee, who will
be available for questions during committee meetings and throughout the process.
I highly recommend setting up a meeting with her to go over the graphs and the subcommittee
Lastly, to my left here, we have my staff, Caroline Hamp, who will be the subcommittee aid and your point of contact with my office.
Now, if we could, let's begin our main presentation today,
which can be found in the back of your committee binder.
Please let me know if you are unable to find it,
and we will take a brief at ease.
But not seeing anyone as of yet,
we'll go ahead and welcome up our presenters today
from the Department of Labor and Workforce Development.
We have Commissioner Cathy Munoz,
as well as Administrative Services Director Dan DeBartolo.
Thank you to both of you for being here today.
You're at the testifiers table. Thank you. Please put yourselves on record and when you're ready, begin with your presentation.
Thank you, Chair Schoggy and Co-Chair Hall.
Thank so much for the opportunity to present today
the Department of Labor's budget.
My name is Kathy Munoz for The Record.
I am the Commissioner of the Alaska Department
of labor and workforce development.
And with me in the audience, I have Lisa Flores,
the Budget Manager, Director Paloma Harbor,
the Director of The Division of Employment
and Training Services.
Director Charles Collins, and Director of Workers' Compensation Division.
And Kim Colvig, our Legislative Liaison.
Did I get everybody?
And we have the other directors online,
and that would be the director Tanya Keith of the Labor Standards and Safety Division,
And do we have anyone else online?
Director Ortiz.
And Director Ortees from ABTEC, from the Vocational Technical Center in Seward.
So, to begin with, we have six divisions, and some of you have already heard our presentation,
so I'll try to alter it a little bit and make it interesting for you.
It's nice to see you for the third time, Commissioner, today.
We'll do our best to keep it brief and to the point, but the Division of Employment
and Training Services, I introduced the director, she's here with us today, oversees 14 job
including a new satellite job center
that we opened up in Kotzebue.
We, I made a trip up to Utiavic in Katzebu last year
and recognized that
we really needed a presence in kotzebew
with all the mining activity and so on there.
So anyway, we reopened a satellite location there
and we have other job centers throughout the state.
Under the Division of Vocational Rehabilitation, we have nine client service offices including
here in Juneau and throughout the region and also in the northern part of the state.
The Department of Labor oversees federal and state grant funds, so we distribute those
funds through a competitive grant process through program called STEP, and that's the
Step is funded through a portion of the Employment Security Tax,
and we have 37 step grantees.
Those go out to union and non-union training programs
around the state, all the way from the Arctic,
all of way down to the southern southeast.
And we also administer the TEVET program.
That's the vocational education program,
similarly funded, through the portion
Those recipients are named in statute.
There are nine non-state recipients that are administered
through the Department of Labor.
In addition to that, the funding also goes
to the University of Alaska, to Avtech, and to Galena.
The funding that goes to,
the state programs goes directly to programs
and is not administered, excuse me, by the department.
We also administer seven construction academy grants.
And as I said earlier, we have the Alaska Vocational Technical Center in Seward.
Next slide.
I was asked to highlight some of the accomplishments or highlights of FY 2025.
Some of these programs we'll be talking about in the budget presentation when Director Dan
DiBurtolo speaks.
But in a nutshell, I'll go through the five highlights that are listed here.
We've expanded AFTEC programs.
We expanded the Industrial Electricity and Plumbing program at Aftec.
industrial machine program, machinist program and our programs are doing very well.
We have excellent staff, highly trained staff that are coming from industry that
are instructing in the classroom.
We also have a new director, Dr. Corey Ortiz, who came to us from the University of Alaska.
He was the career and technical director at UAS prior to coming to ABTEC and he's doing
great.
He and his wife love, Seward, and they're doing very well up there.
by, who is the recipient, I'm going to have to look at my notes, USA Today,
I am sorry, AFTEC has been recognized a number of ways but just recently received
this designation as well.
Secondly, I'd like to highlight the diversionary program of the Alaska Occupational Safety and Health program.
Alaska is one of 26 states that operates a state plan program under federal OSHA.
At two years ago we implemented a diversionary program, so we have more than a full year
of operation, successes under the program.
And what it does is it allows a business that has received a first time citation with financial
for a violation within the previous,
has not received a, a
violation
within
the
previous five years.
If they've received a new citation, then they can work with us to make the safety improvements to the business and then have full financial penalties waived.
This is the first of its kind in the nation, and it's been very successful.
The philosophy is that we're trying to build collaboration between the department and the regulated community while improving safety.
Thirdly, we launched the Office of Citizenship Assistance.
It has been in operation now for about a year.
We've served more than 250 legal immigrants with a variety of services from
Employment direct employment to training
We offer digital literacy English as a second language conversational English
We do referrals legal referrals for immigration related questions
we help employers understand the
requirements of hiring legal visa
These are holders, excuse me, and other legal immigrants.
And that office is staffed by three individuals.
It's in the Anchorage area, but we do outreach around the state.
The next item I'd like to highlight is under the mechanical inspection division.
This is the division of labor standards and safety.
We've made a number of improvements to our certificate of fitness process with the goal of expanding the number
of licensed electricians and plumbers in the state.
So we've implemented things like third-party testing,
provisional licensing, we have increased reciprocity.
We've done a number of military credit.
We, you know, a person that comes from a military background
can apply their technical skills in plumbing
and electricity toward certification requirements.
Our certification for journeymen, electricians, was up by 133%.
So we've certified more than 400 journeyman electrician and more
than four hundred trainees under the certificate of fitness program.
And finally, I'd like to highlight the work of the workers compensation division.
through a variety of different efforts, the especially the work of the Medical Services
Review Committee working closely hand-in-hand with the medical provider community.
In the publication of medical costs, a green on what a reimbursable cost would be within
the workers compensation system.
We've been able to drive cost workers' compensation systems costs down since 2008.
Premium costs for instance in Alaska are down by about 38%.
Let's see, 10 years ago, Alaska was the most expensive jurisdiction in the country, and
now we're somewhere in middle of the pack, which is a big improvement.
With that, I will turn it over to Director Dan to take you through the rest of presentation
unless there's questions.
We do in fact have one question or comment, not sure which, but Representative Carrick.
Thank you to the chair commissioner actually answered it before we got to it
Okay, I was gonna ask about lowering workers compensation system costs and that was system cost or if that
was in reference to
The potential for are the unfilled positions in around the state including in Fairbanks
But you answered the question
Those are, through the chair, the system costs are related to workers compensate the whole system.
You know, bringing the medical costs down, premium costs, are down etc.
We have a request which we'll talk about in the budget to restore money that was swept
out of the WISCA, The Worker Safety Account, which funds the workers' comp division.
That money was swept and not returned to the WISCA account.
So it's left a hole in the budget and it made funding of the positions that you're referring to
difficult. But we will get into that later in this presentation.
through the chair, Commissioner Munoz.
Can you remind me why those funds were swept?
There was legislation that we passed that led to that
and I genuinely cannot remember which bill it was that.
So it happened at a late hour
at the end of a legislative session,
a cycle to your cycle,
and those fund were swapped and not returned.
A lot of accounts get more swept at
the very end session.
And it was, you know, they were not restored.
So it left a, a hole in that, in the budget.
Just to be clear, Commissioner,
you're talking about the routine annual sweeping of fines
for which there's not a three quarters vote
to restore the suite.
Correct.
Thank you.
Any additional questions before we allow them to proceed?
I'm not seeing any.
Please.
Thank you.
Chair Schraghi and members of the committee.
I, for the record, my name is Dandy Bartolo.
I'm the administrative services director.
And when we were introducing folks earlier,
Commissioner realized we also have Director Deuter online
who is the director of vocational rehabilitation.
I didn't want to miss one of our directors, sorry about that.
So I know all of you saw the slide last year.
I've updated numbers for you, but I want
budget in relation to mission.
Now, our mission is simple to provide all Alaskans safe
and legal working conditions and advanced opportunities
for employment.
As an organization, we are structured
in six major divisions or RDUs.
And here, a budget is split, as I said,
on function of mission, so if you start all the way
over the left for leadership and support
that represents 10% of our total budget,
that was represents the commissioner in her office,
administrative office, our physical functions, HR, those kind of things.
And then earlier today, you got to, many of you had to meet with Dan Robinson from our
labor market information group.
They're also in our group along with technology.
And we recommend anyone get out and check out our trends magazine if you haven't seen
that recently.
Moving to the next section, Protect Workers, which represents 15% of our budget,
Orange is yellow here.
And we have worker safety, licensing, and compensation
functions in this area.
Next to that is income replacement and purple, about 18% of our request for FY27,
and that has functions such as unemployment insurance and disability determinations.
And then all the way to the right is our largest function in workforce development,
representing 57% percent of the budget request.
This has our vocational rehabilitation services, job centers, our technical vocational education,
organizations. And that would represent the entirety of our mission budget.
All right. I can move to the next slide and let's proceed. Okay. When we were
having discussions ahead of out overview, we are asked to give a snapshot of
our
current FY26 implementation status.
So I want to talk about some of the items we have here.
And I'd love to leave with Avtech,
which the commissioner spoke about, some,
and regarding our industrial electricity program
and employing programs.
I wanna note one error.
That I'm going to own on item two under fund source. We actually requested ugf funds for a supplemental under that
But late in session when we realized we're gonna be able to spend through all our step funds with otherwise laps
That was changed to step so the correct fund Source at the end should be step Valerie Rose pointed that out to us between meetings here
So thank you Valerie
But
Regarding the expansion director de partola. Can you can you please?
Restate that clearly. I think we may have a little confusion on the committee. Yep. Okay
I'm sorry item number two. Oh, I remember one and two are related for last year, which is for
expanding industrial electricity and the plumbing programs
portion of our request last Year was a supplemental because we needed to purchase equipment to expand specifically the
industrial-electricity program from 15 seats to 30 seats
Our original request sent out the door was UGF, and that artifact remade in this table, I apologize.
And you're referencing line two here?
Line six hundred and sixty thousand?
Yes, exactly, six-hundred and 60 thousand.
Was not UGF funds, it was eventually approved as step.
And we presented that in house finance today as UGS, so I'm correcting that for the record, is indeed step?
Thank you.
The 182.3,000 was for personal services cost for a second industrial electricity instructor.
That search is still underway.
It is to get somebody with that skill set down to sword, requires a pretty extensive
search, and that is ongoing.
The work that's more substantially on its way is the actual purchase of equipment on
line number two for that supplemental.
Pivot to the next slide to show a picture on this item, and then I'll come back, please.
So that 660,000 in supplemental went to largely equipment, as I said, for expanding the Industrial
Electricity Program.
The image on your far upper left is the building is where we are going to put to
in the upper right-hand corner is some of the work that's already being done to expand those
classrooms and those spaces. So that is work in progress, not quite far along as we'd like it.
However, the larger picture dead center lower is our active industrial electricity lab which is
currently temporarily occupying the heavy diesel space. This photo was taken just a few days ago
space here. Eventually, all that equipment you see will move over into that new building
up at the top of the page here, but we did want to let you know that that
equipment was purchased with those supplemental funds and we are well underway.
Very good. Please continue. Yes, so I will pop back one slide to slide five.
Item number three for the Alaska Workforce Investment Board.
Last year we received an increment for 3,100,000
in federal receipts for a refugee support services grant authority.
The RSS grant has been managed historically by a Catholic community services here in Alaska,
but under the new federal administration they indicated that they would prefer state entities
and you can still partner, obviously,
with an entity like Catholic Community Services.
So that funding or that authority while in place,
we have not received the funds from the federal government
as of yet, we're still waiting for them
to go through their budgetary process.
Do you have a timeline on when you might have
a determination on that and see those funds released?
Well,
Once we get through the budget process going on right now with the federal government,
the word is we are going to have much more clarity over the next several months when
those funds may be deposited.
We have Adam Weiner, our special assistant of the commissioner, has been working closely
on this program.
He's on the phone as well if you have deeper questions at this time.
I don't think so not at this time unless other members have an interest in digging in. I'm seeing that shaking so okay, please continue director. Oh
Thank you. Chair shawky. We were also asked to talk briefly about
items that were under implementation but were not funded last year and so that would take us through
items four and six through six. The first one the Alaska Safety Advisory Program or ASAP
was stood up under Executive Order 135 from the governor. It used to be called the
Alaska safety advisory council or ASAC and our responsibility under the labor standards
health and safety conference every year, but the actual additional work with ASAC was done
by volunteers in the community.
The executive orders said we want a more organized structure.
Please bring that all under Labor standards and
safety, including some additional duties that were laid out in EO 135.
And that led to this increment request last year of 290,000, which was ultimately not
approved.
and safety conferences. We do not have the resources we were hoping to for people to work
on some of the other EO items. Any questions on that item?
I'm seeing any. Please continue Director. Thank you.
The next two items I want to preface past at the end of session in May 2024. And this
Following the conference committee when budgets were determined and a number of items had financial impacts
but were not able to be captured right because we are past the the Conference Committee deadline and so what happened is last session
We said for the first item item five for mechanical inspection. There was a change that
For the certificate of fitness fee collection where we went from
two years to six years on the interval for collecting fees that had a negative impact
on what we would collect in fees for that program. And we asked to fill that hole because we're
in the process of trying to modernize.
the certificate system out of a much older technology.
Now, can I just clarify, Chair, on that point,
the trainee card used to be two years.
We went from two to six years,
the legislation changed it to 6 years
and as a result of that, the fee,
we didn't get the revenue because it had been a two year.
approval now, it's six-year approval. So the reason that we made that change, though, is that
we were unable to count hours that had worked on a lapsed COF for the trainee.
So, the Trainee would come to the office ready to take the journeyman test,
and we might have to discount, you know, 800 hours or 1,000 hours, which was a horrible thing to do.
And so we've tried to find a solution
and this was the solution that resulted
and that became a part of SB 204.
Yeah, thank you for the reminder commissioner.
I do vaguely remember that change
and just understand the revenue hit
as you're collecting just once per six year period
as opposed to three times,
which would obviously create a hole.
So please continue,
thank-you.
Thank you, Chair Schraghi.
So the division director there told us
over time a 28% drop in fee revenue for COF over
time and so they believe that will be a compounded problem and where that might
rear its head we appreciate that we're able to get 85,000 capital for buying
software to improve our licensing issuance but the actual cost of maintaining that
system and some of that newer technology they lack that in the budget and
Yes. And so the also I mentioned with that late passage in May of 2024 of the item six which is
at the time SB 147 and that was for the stay at work program or they call it SAW.
That program had a fiscal note associated with it but again did not get funded and so we asked
for funding for a position that would help run that program for workers' compensation last year.
That was not approved. Now Director Collins tells us they are working to implement some portion of
But as we'll talk about here in a few moments, workers' compensation as a whole has a structural funding issue, and they're operating in 30% vacancy.
And so they were not, they haven't been able to do all of their statutory work to the level that it's expected,
including this work under the state work program.
So those are considerations we will be looking at, I'm sure we're going to be diving deeper in workers's compensation, as you go.
Okay, thank you, Director.
I'm going to advance then two slides past the photos.
All right.
So when we look at our.
budget from FY 25 authorized to FY 2027 governor.
One thing I always like to point out
about the Department of Labor budget
is we are not highly UGF dependent.
You can see from the blue portion of our graph,
we're currently at 13% of total budget for UGF
and our largest portion being federal at 50.5%.
and other is nine percent and the UGF as well is significantly used towards
matching funds in divisions like the Division of Vocational Rehabilitation so
there's not a lot of discretionary UGF in our budget but this year we do have
one request on the table to be talking about in a moment as a one-time item
that kind of boosts that ask up and is reflective of why you're seeing a 12.2
The DGF increases during this time can be largely attributed to a changes in step and TVAP and those increases
Very good
Representative Kirk sorry, thank you through the chair
Mr. Departolo are their concerns for the Department about some of those federal match program funds or federal funding in general for Department of Labor's
perspective
Representative character through the chair, you know, we had some concerns during the first shutdown in
October and we have heard anecdotally about some potential changes in the way some of our programs be funding moving away
From traditional formulas to block grants for instance, but none of that is
currently materialized. And so I want to say that while they're debating that this week
to hopefully pass another extension or a full budget going into the next fiscal year, we've
been keeping our fingers crossed that there isn't going to be significant changes. The
federal government passed a series of mini buses, one of which was the labor HSS.
Bill that
Largely flat funded our programs and the funding that's out there
As compared to the previous fiscal year, which when I discussed that with some of our our program directors
We see that in the current environment potentially as a win, right?
The question is how that money will be distributed if any of it will help back a claw back and that is not
entirely clear at this moment in time
Director Di Bertolo, we talked briefly earlier today about some of the challenges in actually realizing our federal receipt authority.
Can you speak briefly to some those challenges and the collectability of those federal receipts?
Thank you, Chair Schraghi.
So, what is often painted as a picture about a budget when the public is listening us today and everyone looks at these graphs.
They see a large purple bar or they see an authority
that for our FY 27 governor proposal is 98 million dollars.
And the reality is depending on what ETA, excuse me,
the Employment and Training Administration does,
depending what changes are made
with our unemployment insurance distributions,
which can happen mid-year.
We had a 10% cut.
Just two years ago.
And we have to pivot at a moment's notice.
And so we are keeping our eye on that, obviously.
But I can tell you, in our House Finance meeting today,
Representative Tom Chesky specifically
asked the question about the federal dollars.
And I told him, if I showed you what
we're collecting actuals versus what we budgeted for,
you'll sometimes see a 4 million gap, maybe 9 million
gap 12 million gaps.
And that's not that we were being harmed
in that particular moment.
lack sometimes predictability in our programs of what we can expect in the next year.
And we know for sure our costs are growing up.
Personnel services costs simply don't drop unless you reduce positions.
And so we've seen contractual increases.
We're trying to do more with our program and so that is absolutely a challenge.
It teeters and we'd obviously want to come to you quickly if we were concerned about that. Thank you, please continue
Okay, I'm gonna advance to the next slide then
And I'd like to talk about our FY 27 operating budget requests
I like lead with the subcommittee with one point. I know you all have our subcommittee book with The Blue Pages
And here there are two items
of changes that are statewide items.
One deals with the IT study implementation that's happening
in all departments, not just ours.
Another has to do with returning positions
from shared services in Alaska from DOA.
Because there's a statewide item and not specific request
from us, I'm not covering them here.
But during subcommittee,
I am happy to answer questions about that.
That's fine.
Thank you.
Alright, so looking at this slide here, both slide one A and one B are related.
It's the state training and employment program appropriation.
And like we have done for T-VAP, we are requesting to move the funds that we distribute to grantees
into the language section.
Once a quarter our state actuary projects for us what we anticipate to bring in revenue for tea
weapons and step and halfway through a fiscal year we could find out that we have 500,000
a million dollars 1.5 million available and we weren't able to fund all the competitive grants
for applying for those step money.
Some people are left out in the cold.
It'd be great to get some of those dollars out the door.
However, when the money is in
the numbers section, you are giving us a finite authority
as a legislature of what we can spend.
And so in a language section we could say,
hey, additional authority came up.
OMB, are you all right with us increasing this authority?
And the implication is that we would be allowed
to increase that.
in the moment so we can get those trading dollars out the door and that is what 1A and 1B would do.
Under 1a the workforce investment board is the competitive grants that go out throughout Alaska
in 1 B workforce services. They distribute those funds to individuals will come to
apply for those money monies at our locations. Great. Any questions on that from members?
That all sounds very good and rational. Thank you. Okay, thank you and so I would like to
draw your attention to our only financial ask for this session and that is for worker's
UGF request for FY 27 for maintaining workers compensation operations when we
say maintain it's really because since we're currently working at a 30%
um vacancy rate because of a lack of funding um we want to at least get back
to a normal operating state next fiscal year this fiscal
year we are doing our best internally without other divisions finding places
we can scrape money but let me explain how we got here
on this a little bit. The Whiska Fund, workers safety and administration compensation account.
Now I'm just going to say whiska. That historically has funded 99% of operations for workers'
employers who pay workers compensation insurance premiums 2.7% of those
premiums are diverted from the Division of Insurance to us to fund the program.
Now here's the interesting part and I...
brought this up before I believe this committee but over the last 10 years Alaska has become safer.
We have lowered our premiums to employers and hence we have lower the revenue coming in.
Simultaneous to that we've had a classification study because we couldn't hire hearing officers
as they were underpaid as related to other people in that profession statewide and so there was a
not to mention with commissioner mentioned the sweep of the funds that
happened in 2001 where we had no buffer to fall back on. So what we're asking
for here is hey we would like want at least a portion of that swept funds back
as a one-time item and we came up with this number based on what
we anticipate our projected cost to be an FY 27 instead of asking for the whole
Director de Vortolo it strikes me as odd that
Funds diverted from employers would be sweepable. Would you like to opine on that? Oh
Cheers ragged, I don't know about opining, but I can't tell you
That the decision on what funds are sweep-able and not sweep a bolt
was probably a fairly lengthy process that has undergone between the Department of Law,
Office of Management Budget, an exercise on the executive branch side where while we
provide input, the final decision has come down that this fund is sweepable or it's not sweep.
And unless specific legislative action is put in place to make a fund not
It's simply, you know, the sweep applies.
And so I understand the optics, obviously,
in that somebody pays a insurance premium.
And that goes to run a program in directly supportive workers' compensation.
There is a relation there.
And then those funds get swept.
back to the CBR, yes and so that is there's different schools of thought on
that but right now unless we change that in statute that's that the way it is.
Thank you. I'm not seeing any questions right
now please continue. Okay thank you so I did want to point out our estimated
for FY27. This, as a reminder, is completely in statute. The recipients, the percentages,
we get the calculation of the projected revenue from our actuary. We plug it into a formula
that basically spits out these numbers and we make sure everyone in the chain knows what
in language, this estimated distribution, which was based
on a projection in November, it could shift.
Somewhere around Valentine's Day, we'll have a new projection
available that we can share with OMB and if they want
to update that for FY 27, you're looking at FY27.
We have an FY 26 number.
If we wanted to up date that, that can be done
because of language and we could put more money on the street.
give everyone a shot of what's going on at TVAP currently.
Great.
And I believe that brings us to your last slide.
Our last line is our thank you very much to the subcommittee for hearing from us.
I understand we'll have more focused topics over the next month.
Thank you for seeing us today.
Wonderful. Are there any additional questions before we wrap up from committee members?
I'm not seeing any.
So with that, this does conclude our official business
in the subcommittee meeting today.
I do want to just take a quick moment on a personal note
to thank members for their patience and understanding.
We've got a lot of young families in my office,
and sometimes there are some childcare issues.
So you may have heard some.
sounds coming from the corner of the room throughout the committee hearing
appreciate everyone's understanding and patience there
and with that enjoy the rest of your evening we are adjourned at five
thirteen p.m.