The House Finance Committee heard testimony Thursday from nonprofits and contractors who described serious financial strain from delayed state payments, as lawmakers reviewed fiscal notes for a bill that would impose interest penalties when agencies pay late.

The committee took public testimony on House Bill 133, which would require state agencies to pay contractors, nonprofits, municipalities, and tribal entities within 30 days or face interest charges. The bill, sponsored by Representative Himschoot, aims to create what she called "prompt payment parity" between the state and its business partners.

Brenda Stanfill, executive director of the Alaska Network on Domestic Violence and Sexual Assault, told the committee that delays in state payments began in 2018 when her previous nonprofit employer went three months without payment. She was forced to set up a line of credit to make payroll, using fundraising dollars to cover interest and fees that could not be charged to the grant.

"This really is a matter of how departments prioritize their work, and by passing H.B. 133 you are letting all departments know that the expectation is timely payments," Stanfill said.

Sandro Scheibens, CEO of Wassman and Associates, an information technology consulting firm, said one state agency was five months late in payments last year. About 80 percent of his company's costs are staffing, making timely payment critical.

"We absolutely recognize that state agencies are oftentimes understaffed themselves and they run behind on a variety of activities," Scheibens said. "But I do think House Bill 133 will really help encourage agencies' timely payments."

Pat Branson, a board member of the Four Acre Group and retired CEO of Senior Citizens of Kodiak, said transit and senior service providers across the state face grant agreement delays and late reimbursements from the Department of Transportation and Department of Health. One transit provider's grant agreement extending from fiscal year 2024-25 to fiscal year 2025-26 was not completed until September 2025, more than 60 days into the fiscal year, preventing the provider from submitting reimbursement requests.

"One nonprofit has one half million dollars outstanding in receivables," Branson said. "Shutdowns are threatened and not being able to continue services to some of the most vulnerable Alaskans."

Stephanie Bergland, CEO of Thread, Alaska's statewide child care resource and referral organization, said it has been the exception rather than the norm over the last five years that Thread's grants and contracts are processed and paid on time. She said the Bright Beginnings chain, which operated five locations in Anchorage and Eagle River, specifically cited inconsistent late payments as one reason all five locations permanently closed.

Brittany Burkett, representing Presbyterian Hospitality House in Fairbanks, said delays in payments from the Office of Children's Services began in 2018. Kaylee Morton, billing director for the same organization, said the nonprofit once had $1.2 million in outstanding payments and was unable to hire new staff or expand programs.

Kyan Reeve, transit director in Ketchikan, said the city's transit system delivered over half a million rides last year but operates within a funding structure that is not functioning predictably. This year's operating agreement was not executed until eight months into the fiscal year, preventing reimbursement requests during that time.

After public testimony closed, the committee reviewed 15 fiscal notes from 10 departments. The Department of Health submitted six fiscal notes totaling more than $750,000, requesting three new positions and penalty funds for three divisions.

Pam Halloran, assistant commissioner for the Department of Health, said the fiscal notes reflect the department's current reality but not where it wants to be. For some divisions, the department requested penalty funds rather than positions because the general fund cost was lower. Federal funds cannot be used to pay interest penalties.

"These numbers reflect our reality and they surely do not reflect where we want to be as a department," Halloran said.

The Division of Public Assistance is paying invoices on average in 65 days, according to fiscal year 2025 data. The Division of Behavioral Health averages 46 days. Department Support Services averages 98 days, though Halloran said that division has experienced 100 percent staff turnover in the current fiscal year.

Representative Stapp questioned why the department would plan to pay penalties rather than hire staff to process payments on time. "The fiscal note says hey, it's just cheaper for us to pay interest than pay you on time," Stapp said. "I believe the objective of the bill is to sufficiently motivate the department to pay its bills on time."

Representative Shragi noted that adding up penalty costs across multiple divisions would exceed the cost of a single position. Representative Tomaszewski asked for information on vacancy rates in divisions that process payments.

The Department of Military and Veterans Affairs requested four additional staff for its grants administration section at a cost of $650,000. Angela LaFlamme, legislative liaison, said the division prioritizes payments to individuals through disaster assistance programs, which can create cascading delays for other grants. The division currently has seven grants administrators with no vacancies.

Several departments submitted zero fiscal notes, reporting they already meet the 30-day standard. The Department of Family and Community Services pays invoices in an average of 10 days. The Department of Commerce pays in under 18 days. The Department of Public Safety averages 10 days. The Department of Labor averages 34 days but said it can make internal adjustments to meet the 30-day target.

The committee did not take action on the bill. Chair Foster indicated the committee would review the fiscal notes and potentially bring the bill back for amendments.