Committee hears bill to require prompt state payments to nonprofits, municipalities and Alaska Native organizations

The Senate Community and Regional Affairs Committee heard Senate Bill 129 on April 1. The bill would add prompt-payment requirements to state law for grants, contracts and reimbursements to nonprofit organizations, municipalities and Alaska Native organizations, and establish timelines and interest penalties for late payments.

Sen. Scott Kawasaki (Fairbanks) introduced the bill and said it is intended to address long-standing delays that force providers to borrow or use reserves to cover payroll and other costs. “There are businesses, there’s individuals, there’s companies that always rely on having that sort of, face to face with a person who’s actually staff,” Kawasaki said, urging parity for non-profit and tribal partners.

Jenna Calhoun, staff to Sen. Kawasaki, read the bill’s sectional summary. She said the proposal would amend AS 36.3 (as read in testimony) to require state agencies to pay contractors for satisfactory services and to establish timelines for interest on late payments; it would amend AS 36.30 article 4 (as read) to cover grants and reimbursements for nonprofits, municipalities and Alaska Native organizations; and it would add a subsection to AS 37.05 requiring an agency to pay at least 20 percent of a grant within 10 days and specify how the remainder is paid. The measure would take effect immediately, testimony said.

Witnesses said delayed state payments are widespread and sometimes last months or more. Carol Treem, intergovernmental affairs manager for the Alaska Municipal League, told the committee that all 165 municipal members receive state payments and that delays can cause cash-flow problems, higher insurance and borrowing costs, and difficulty making payroll. Treem cited community assistance payments and a range of state and federal programs that flow through the state including the Community Development Block Grant and Secure Rural Schools.

Laurie Wolf, president and CEO of the 4Acre Group (listed in testimony as the 4 Acre Group), said her organization’s survey of Alaska nonprofits found multiple examples of payments delayed three, six, nine months or longer and delays of hundreds of thousands to more than a million dollars per organization. “Delayed payments have become a normal and even acceptable practice for nonprofits,” Wolf testified, and she said organizations lack a single system to track delayed payments across state departments.

Stephanie Bergland, CEO of THRED (testimony identified the group as the statewide childcare research and referral organization), described how delayed reimbursements disrupt child care programs that operate on thin margins and that the timing of grant amendments and quarterly reporting can produce situations where programs must report spending state funds they have not yet received.

Chief Procurement Officer Tom Mayer, appearing online, told the committee that his office establishes contracts but does not itself make payments; Mayer said some delays referenced in testimony appeared to involve grant processing and distribution within operating agencies rather than contract-writing at procurement.

Sen. Merrick asked whether staffing shortages were the cause. Kawasaki and witnesses said agencies report significant vacancy rates that complicate payment processing; Kawasaki pointed to fiscal notes that anticipate agencies would adapt processes to avoid interest obligations if the bill were enacted.

The committee took no vote. Chair Merrick said the measure would be set aside for further consideration and follow-up on technical questions and fiscal notes.

Why it matters: Testimony described operational and service-delivery risks for municipalities and nonprofit service providers when state payments are delayed, including cash-flow strain, higher borrowing and insurance costs, delayed services and program disruption. The bill outlines timelines for payment and interest penalties intended to create stronger incentives for timely state payment.