Senate Finance, 5/14/26, 1:30pm

Krack, word out. Hit the glass instead of the— glass did not break. Let me try that again. Sounds better. We'll bring the Senate Finance Committee to order.

Today is May 14th. It is 2:06 in the Senate Finance Room in the State Capitol. Present today are Senator Steadman, Senator Keele, Senator Merrick, Senator Kaufman, Senator Cronk, myself, Senator Hoffman, I believe Senator— Olson will be on his way. We have one item on today's afternoon agenda, which would be HB 388, Bulk Fuel Loan Cap. This is the first hearing on the bill.

Mr. Paul LeBeau, staff to Representative Foster, will be invited to the table to introduce the— what the piece of legislation actually does. Senator LaBolle, Representative LaBolle, Paul LaBolle. Thank you, Mr. Chairman. Paul LaBolle, staff to Representative Foster and staff to the Finance Committee. Apologies, Representative Foster couldn't be here.

He's chairing Finance right now. So House Bill 388 doubles the loan cap on the bulk fuel loan program. Taking it from $750,000 to $1.5 million. It also eliminates the alternative minimum cap on pooled loans. In current statute, when you— when 2 or more entities pool together to take out a loan, it is the number of entities times the cap, or $1.8 million.

Whichever is less. The Alaska Municipal League wanted to see an encouragement of pooling to try and get lower prices with larger volume orders, and so that was our way of going about that. And if the committee would like, I could tell a little bit more about the bulk fuel loan program. Please. So that was established quite a while ago, and the way it works is that Communities take out a loan in May and that gets barged up and the— well, they take out the loan and buy the fuel.

The fuel gets barged up and throughout the year the fuel is sold and then they use the proceeds from that sale to pay the loan off over the year. And so when May comes around again, the fuel's been sold, the loan's been paid off, and they take out another loan. That's why it's called a revolving loan. And the main reason that we're looking at increasing the cap is because the cost of fuel has gone up so much that we thought, not only because of inflation, but because of the current fuel markets, it was warranted. The other thing that the bill does, it was amended in House Finance to allow the bulk fuel loan program to borrow against state funds and pay them back with the loan proceeds so those funds are made whole.

It didn't identify any specific funds, so that would be up to the conference committee to decide.

Thank you, Mr. LaBeau. Do any members of the Senate Finance Committee have questions on the concept of the bulk fuel loan program or the need for we're expanding, increasing the limits on the program. Senator Steadman. Thank you, Mr. Chairman. I was just wondering if we knew when the old limit of— or the current limit of $750,000 was put in, how many years ago that was.

Mr. LeBeau. Thank you, Mr. Chairman. I'm not sure exactly. I could give you the order of magnitude. It's about 16 years, but I believe Sandra Muller is online.

Senator Mohler, do— did you hear Senator Steadman's question?

Yes, Chair Hoffman, I do not have that information, but be happy to research it and get it to you. I'll have staff look at that, hopefully get it to you before the hearing is over. OK, we could get that for At the next meeting when this may come up, it is not the intent to pass this bill at this time. Further questions of Senate Finance members? Senator Keehl.

Thank you, Mr. Chairman. Maybe just a little update on the general status of the fund. What's the balance? What's the revolving capital in a given year? Do we have a significant amount of unsubscribed or is this going to need to be topped up right away to take advantage of the bill?

Ms. Mohler, did you hear the question?

Yes, Mr. Chairman, I did. Currently, to Senator Keele, the balance in the bulk fuel loan is approximately $20 million. We have had some loan requests and obligations, encumbrances for those loans coming in since our meeting with House Energy. So we currently have about $20 million. We've looked at the cycle of one, um, as loans come and are paid off in the cycle.

The lowest our balance has been, has been about $5 million currently throughout the last 3 years. That's our lowest balance that we've gotten. I hope that answers your question. Senator Kiel. Thank you, Mr. Chairman.

Very helpful, and I may be asking this in the wrong way. Can you give us a sense of what total volume of lending, how many dollars go out in a given year, just a ballpark? I know it will vary year to year, but is that the $20 million number, or do we end up loaning out— how much do we lend out each year? Ms. Moler. Through the chair, to Senator Keele, we typically lend between $18 and $20 million a year.

Our loan— our borrowers have reached as high as 78 borrowers. The last couple years it's increased. 3 Or 4 years ago it was about 50 borrowers. We do get repeat borrowers, as Mr. Lavoie mentioned. The nature of the program is to get a loan, pay off the loan with the collection of fees to the users, and then they have enough capital to show that they paid off the loan and able to ask for another loan.

So we have seen a slight increase in the number of borrowers. But that's typically the $18 to $20 million is what we loan out. Thank you, Ms. Moeller. Further questions? Senator Kaufman.

Thank you. Yes, I'm not sure if I missed this, but the cost of capital. So these loans, are they low cost, no cost? And what is the fund invested in and the return rate? Ms. Jifanji, I suspect, but just a little bit about the cost of capital and the opportunity cost for money lent from it.

Ms. Moller.

Thank you for the question through the Chair. To Senator Kaufman, the program currently has a range of 0 to 4% for the loan, for any loan given out depending on credit and if they are previous borrowers, have good history with us. The fund, I believe, used to be invested with the Department of Revenue, and recently in the last 2 years, I believe it has been transferred to the Permanent Fund Corporation. Okay, thank you, Kaufman. Thank you, Senator Kaufman.

Further questions of Senate Finance members? Seeing none, we will go to Senator Keel to review the fiscal note. Thank you, Mr. Chairman. House Bill 388 has two fiscal notes. The first is from the Department of Commerce, Community and Economic Development and the Division of Community and Regional Affairs.

They assign a zero fiscal note, no costs, no revenues, no new regulations. They do run some scenarios about potential capitalization on the second page, which I'll let members review for themselves as I go to the second fiscal note, which is from the fund transfers section of the budget prepared by the House Finance Committee. And that would be about a fund transfer to the Bulk Fuel Revolving Loan Fund. That is a zero fiscal note, although it would be a fund transfer that would probably provide additional capitalization if needed. Thank you, Senator Kiel.

Mr. LeBeau. Thank you, Mr. Chairman. In addition to the zero fiscal note that's up top, on the lower line, that's supplemental appropriations. You'll see an indeterminate icon. So it is an actual fiscal note, but it's for FY26 and it's indeterminate because we don't know how much money they will need to be capitalized by.

But we do anticipate some amount. That's fair. Mr. LeBeau, further questions on the fiscal note? Seeing none further— excuse me, Senator Kaufman. Yes, I'm just wondering if perhaps more transparency around the interest rates, not sure if it's called for, but it just seems like it's not apparent in the fiscal notes.

Can you restate that, please? Well, the fiscal notes, there's no indication of interest rates in any of this. I assume that the, the whatever rates there are would affect the capital cost. So I think it might be worth at least having it surfaced on the fiscal note. So, Ms. Mohler, can you take that under advisement Further questions on the fiscal notes?

Seeing none. Closing comments? Thank you, Mr. Chairman, members of the committee. Thank you. We'll set this bill aside.

That concludes the work of the Finance Committee today, and we have The meeting tomorrow morning at 9:00 AM. We'll see what the agenda is at that point. With that, we are adjourned.